The government introduced the financial institution conduct licensing legislation last night in a move that will impose tough new conditions on a wide range of entities.
According to the explanatory note, the new Financial Markets (Conduct of Institutions) Amendment Bill, covers “at this stage… registered banks, licensed insurers, and licensed non-bank deposit takers and to apply broadly to all services and associated products provided by those institutions”.
Entities caught under the proposed law must introduce a “fair conduct programme” that is “aimed at ensuring that the chain of distribution of services and products is captured”.
“That requirement is aimed at ensuring that institutions take responsibility from the top down,” the note says.
For now, the proposed law exempts financial advice providers and institutions acting on behalf of other entities from some of those requirements.
“Those restrictions, however, do not limit a financial institution’s obligations to have processes providing for appropriate control of or supervision over their intermediaries, including financial advice providers,” the bill says.
Among a number of new obligations the legislation “contains a regulation-making power to prohibit or regulate certain activities related to the offering or giving of sales incentives in connection with a relevant service or associated product”.
“These regulations may apply to existing incentive arrangements and those entered into before the commencement of the regulations, but cannot apply to any incentive that is paid, is payable, or to which a person has become entitled before the commencement of the regulations,” the government document says.
The legislation will come into effect no later than two years after receiving royal assent with a four-year transition period allowing different entities to enter the regime separately.
Introduced by Commerce Minister Kris Faafoi, the bill was “designed in response to recent reviews that have identified that certain institutions, particularly banks and life insurers, lack focus on good outcomes for customers and have ineffective systems and controls to identify, manage, and remedy conduct issues”.