The Financial Markets Authority (FMA) served up its first shot of new institutional conduct regulations in a consultation paper handed down last week.
Under the proposal, businesses governed by the just-passed Financial Markets (Conduct of Institutions) Amendment Act – or COFI – will have to abide by six ‘standard conditions’ covering: ongoing requirements; notification of material changes; regulatory returns; outsourcing; business continuity and technology systems; and, record-keeping.
The standard conditions set the basic layout for COFI compliance, a regime that will add new licensing requirements for banks, insurers and non-bank deposit-takers.
COFI passed into law early in July after more than two years meandering through parliament.
Last-minute amendments to the legislation reduced the potential impact on third-party distributors of products offered by institutions that will be covered by the law.
The FMA also emphasises the point in its mooted ‘outsouring’ standard condition.
“We would not expect typical distribution arrangements where a third party is involved in distributing the financial institution’s relevant services and associated products to consumers to be an outsourcing arrangement,” the consultation paper says.
“Outsourcing of activities unrelated to the market service of acting as a financial institution, such as office cleaning, is not covered by this condition.”
Overall, the proposed COFI standard conditions are in line with other FMA-licenced sectors – such as financial advice – and are unlikely to provoke much resistance.
However, Clare Bolingford, FMA banking and insurance director, encouraged interested parties to provide feedback “to ensure our regulatory proposals are fair and appropriate”
“The standard conditions for financial institutions are especially important given these businesses play such an important role in New Zealanders’ everyday lives,” Bolingford said.
COFI is due to come into force early in 2025 with the licensing process expected to start in mid-2023. Submissions on the proposed standard conditions close at 5pm on Wednesday September 7.