The Financial Markets (Conduct of Institutions) Amendment Bill limped through its second reading last week almost 11 months to the day since the COVID-interrupted process began.
After a short, half-hearted debate that spilled over two days (not including the June 10, 2021, session), Labour pushed through COFI to the next stage with the support of parliamentary allies, the Green and Māori parties: National and Act opposed the bill.
But given the long interval between go and whoa, it’s not surprising most MPs – only nine spoke in the concluding round – were a little hazy on the COFI details.
As Labour MP, Duncan Webb, noted: “I must say, I thought to myself, ‘It seems such a long time ago since we considered this bill’. I was looking at the select committee report, and to see that we had such luminaries as the Rt Hon David Carter and Fletcher Tabuteau on the select committee at the time—so we’re going back a bit.”
The second reading was, at any rate, a dead rubber with speakers mostly confined to brief, bland statements issued along party lines.
While most of the proposed legislation should remain intact, the government is expected to introduce a supplementary order paper (SOP) for the final phases of COFI’s journey through parliament that addresses industry concerns about how intermediaries will be treated under the law (the subject of two consultation papers last April).
In a previous report, David Ireland, Denton Kensington Swan partner, said some firms had already introduced what might turn out to be overly conservative intermediary policies ahead of the final COFI law.
During the second reading, Labour MP Ingrid Leary underscored the intermediary question as one of “big areas” the COFI culture should address.
“… we’ve seen this around employment law, where there are grey areas of whether people are employees of a company or a firm, or whether they’re subcontractors. The legislation tidies this up and, basically, requires all intermediaries to be treated as though they were employees of the company for the purposes of making sales,” Leary said. “So that means that the firms have an onus to do criminal record checks on their intermediaries, they explicitly set out the expectations of good conduct, they have robust policies and processes for dealing with misconduct, and they monitor the outcome for consumers.
“Also, they encourage the disclosure of commission to consumers so that they can mitigate risk, so that means that intermediaries need to be transparent about any commissions that are coming their way.”
National finance spokesperson, Andrew Bayly, however, noted institutions with multiple in-house and external intermediary relationships will struggle to comply with COFI, as it stands.
“But because you’ve got third parties beyond that, the difficulty of practically managing [intermediary oversight] is a really significant issue. So that is one of the things, the practicality of doing that,” Bayly said.
“There’s also issues with how the obligations relating to the intermediaries are going to be overseen by MBIE [the Ministry of Business, Innovation and Employment]. So some of those arrangements—and the clarity around how that process is going to take place leaves somewhat to be desired and is rather unclear.”
The anticipated COFI SOP should address some of these concerns.
Parliament has scheduled COFI at 19th on the latest order paper for its house committee do-over behind a swag of other more urgent legislation such as the Animal Welfare Amendment Bill, the Plant Variety Rights Bill and the Organic Products Bill.