A series of announcements today provide us with the expected update on the proposed new conduct regime for financial institutions. Here are the important links. Summary is below.
In summary, the regime will involve the following:
- Create a licensing regime for banks, insurers and non-bank deposit takers (such as credit unions) regarding their general conduct. These institutions will be licensed by the Financial Markets Authority.
- Require licensed institutions to meet a fair treatment standard (for example, to pay due regard to the needs and interests of customers and treat them fairly)
- Require licensed institutions to implement, effective policies, processes, systems and controls to meet the fair treatment standard. Regulations will specify what these policies, processes, systems and controls must include.
- Outline what obligations financial institutions have in relation to remuneration and any other sales incentives, and how they must manage the risks those incentives create.
- Prohibit sales incentives based on volume or value targets (e.g. soft commissions such as overseas trips, bonuses for selling a certain number of financial products, leader boards, and performance management based on the volume of sales). This prohibition will apply to banks, insurers, non-bank deposit takers and their intermediaries.
- Make licensed entities accountable for sales to consumers by the entities contracted intermediaries who are not financial advice providers (non-adviser intermediaries include car dealers, retailers selling add-on finance and insurance, and travel agents or airlines selling travel insurance).