COFI and Culture: which way might new FMA rules go?

CoFI rules (the new "Conduct of Financial Institutions" law and licensing regime) will affect over 100 registered banks, licensed insurers, and licensed non-bank deposit takers (e.g. credit unions and some finance company lenders) who operate in or through New Zealand.

Firms will need to be licensed by the FMA to provide financial services to consumers beyond the end of March 2025

A cornerstone principle requires these financial institutions to put fair treatment at the heart of their business.

Each institution must treat consumers fairly – the “fair conduct principle” and give meaning to that by setting up, then maintaining and implementing a fair conduct programme.

The legal “fair conduct principles” are given meaning in new subpart 6A, s446C of the FMC Act 2013:

  1. pay due regard to consumers’ interests;
  2. act ethically, transparently, and in good faith;
  3. assist consumers to make informed decisions;
  4. ensure financial services/products provided are likely to meet the requirements and objectives of your likely consumer group
  5. not subject consumers to unfair buying pressures, tactics, or undue influence.

Sounds easy, right, when you say it as a high-level principle?  Well, now devise a detailed programme to demonstrate how you will do it!

Like other laws (e.g. Health & Safety at Work) ALL REASONABLE STEPS will need to be taken by firms, to comply with the programme and also specific regulations (e.g. outlawing target-based sales incentives and remuneration incentives, especially if leading to customer churn and commission taking).   How do you go about proving all suitable steps were taken…?


Ø Can be an Intensive and Intrusive Application process

Ø Do you need a licence? (coverage…) Would it be prudent anyway, for building a regulator relationship?

Ø Fit and proper persons? Who, and how to demonstrate it?

Ø Standard conditions of licence – these elaborate (significantly) on the detail of obligations in the Act itself

Ø Regulations from MBIE rolling out considerable more detail.

Ø Proactive, ongoing supervisory role: FMA has more teeth than insurance sector has been used to (RBNZ prudential oversight)

> YOUR FAIR CONDUCT PRINCIPLES PROGRAMME will be tested and scrutinised!

The Regulator Speaks:

FMA Executive Director of Regulatory Delivery (Clare Bolingford):

“It is important that consumers get the financial products and services they need throughout their life, when they need them, and have trust and confidence they will do what they are meant to. The overarching requirement for institutions to ‘treat consumers fairly’ is paramount throughout the lifecycle of a financial product.”

“It applies when institutions are designing products and at the point of sale, where financial institutions should think about whether the product is right for the consumer rather than selling to just anyone. And it remains front of mind post-sale and throughout the customer relationship, particularly when consumers need clear information or when dealing with a claim or complaint.”

“It’s important for firms to allow sufficient time to prepare their license application and consider the contents of their fair conduct programme well ahead of 2025 – we encourage firms to start that work now and submit their licence application as early as possible. We’re here to help with the process and answer any questions.”

Institutions need to establish their fair conduct programmes before they submit their licence applications, but they don’t need to be fully implemented until the regime comes into effect.”

Gary has been presenting and advising over the summer on major new CoFI rules, fair conduct and bank/insurer cultural habits towards their customers
  • Presentations 2022-23 to the NZ Insurance Law Association, LegalWise lawyer training CPD, individual banks and insurance companies
  • Explaining critical new rules, fair dealing principles, and licensing regulatory regime
  • Unpacking aims of the law to ensure conduct and client-care obligations of financial services providers remain fit for purpose (and FMA’s regulation of financial markets is ever-tightened).



  • AUSTRALIA’s Hayne Royal Commission of Inquiry – 2017/18
  • RBNZ and FMA conduct their own mini (non-Royal) Inquiries
  • leading to the joint Retail Banks Conduct and Culture Review Findings 2018, and Life Insurer Conduct and Culture Report 2019
  • MBIE reacts in 2019 – Financial Markets (Conduct of Institutions) Bill, passed into law 2022 as major changes to the Financial Markets Conduct Act 2013
  • Staged implementation over 2023 to 2025 – new Licensing Applications window opens 25th July 2023
COFI and Culture: which way might new FMA rules go?
Tagged on: