The Financial Markets (Conduct of Institutions) Amendment Bill has been introduced to Parliament by Minister Kris Faafoi. The Bill introduces a licensing regime regulated by the Financial Markets Authority (FMA) for conduct by registered banks, licensed insurers and licensed non-bank deposit takers (the specified financial institutions).
The Bill is available online, alongside our earlier note on the consultation documents that led to the Bill.
At this stage, the scope of the new regime is intended to cover registered banks, licensed insurers, and licensed non-bank deposit takers, and to apply broadly to all services and associated products provided by those specified financial institutions. It will, however, also be relevant for other financial businesses and intermediaries who deal with them.
The purpose of the Bill is to improve the conduct of the specified financial institutions in respect of services and products provided to consumers, thereby reducing the risk of harm to those consumers. To achieve this, the Bill makes amendments to the Financial Markets Conduct Act 2013 (the FMC Act), amongst other enactments, to ensure that the specified financial institutions and their intermediaries comply with a principle of fair conduct and associated duties and regulations.
To address these issues, the Bill:
The exact timing for implementation is not yet clear. By its terms, most of the Bill will come into force on a date or dates specified by Order(s) in Council, but no later than two years after the date of Royal assent. The deferred commencement allows regulations to be made to implement the Bill.
The Bill allows regulations to be made to apply the licensing requirements to different classes of entities at different times (up to four years after the date on which the Bill receives the Royal assent). Licence applications will be able to be made before the regime is brought into effect.
The Bill also 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 Bill is an important step towards enshrining in legislation a deep commitment to good customer outcomes for customers of banks, insurers and non-bank deposit takers, through a new licensing regime.
There is much work to be done, however, to assess how the Bill and the regime will operate in practice and it may require some refining. For example, the Bill should be carefully considered to determine whether there may be unintended consequences where the specified financial institutions compete in some markets with other financial businesses. Licensed non-bank deposit takers and registered banks may, for instance, compete with non-deposit taking lenders (such as finance companies who raise their capital in the wholesale markets, or peer-to-peer lenders).
The complexity and interaction of the consumer/retail threshold will also need careful review, especially for those specified financial institutions that offer a range of products and services across different market segments.
If you have any questions about the Bill or how it will relate to your business, please contact one of MinterEllisonRuddWatts experts.
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