16 Sept 2020 – Treasury published the pre-election economic and fiscal update. https://www.treasury.govt.nz/news-and-events/news/2020-pre-election-economic-and-fiscal-update-published-today

16 Sept 2020 - MBIE released a statement that the Government planned responding to the retirement income policy review this year, but is taking further time to consider New Zealand’s retirement settings in light of the impacts of COVID-19. https://www.mbie.govt.nz/about/news/update-on-government-response-to-retirement-income-policy-review/

17 Sept 2020 – Minister of Commerce and Consumer Affairs, Hon Kris Faafoi, released a statement that the  Government is working on how New Zealand’s retirement income policies and settings can best support Kiwis in light of the COVID-19 economic recovery, with the help of the Retirement Commissioner’s latest review. https://www.beehive.govt.nz/release/economic-recovery-guides-govt-response-retirement-income-policy-review

4 Sept 2020 – The FMA released a consultation paper on the proposed Auditor Regulation Act (Prescribed Minimum Standards and Conditions for Licensed Auditors and Registered Audit Firms) Notice 2020, intended to replace two previous notices proposed to be revoked. Submissions close on 21 Sept 2020. https://www.fma.govt.nz/compliance/consultation/consultation-prescribed-min-standards-conditions-licensed-auditors-registered-audit-firms/

2 Sept 2020 – FMA issued a warning that it is aware of a case where scammers have been impersonating the FMA while operating a scam relating to money remittance services. https://www.fma.govt.nz/news-and-resources/warnings-and-alerts/fma-impersonated-in-suspected-money-remittance-scam/

3 Sept 2020 – Deloitte issued a paper commissioned by Partners Life exploring observations made in the RBNZ Bulletin, which provided commentary around the profitability of New Zealand’s life insurers, the value for money of life insurance, and life insurers’ ability to meet minimum capital requirements.

https://www2.deloitte.com/nz/en/pages/financial-services/articles/deloitte-issues-paper-life-insurance-sector.html#

3 Sept 2020 – The Commerce Commission announced that it has signed a multilateral framework enhancing international cooperation on competition enforcement with the Australian Competition and Consumer Commission, the Competition Bureau of the Government of Canada, the United Kingdom Competition and Markets Authority, the United States Department of Justice and the United States Federal Trade Commission.

https://comcom.govt.nz/news-and-media/media-releases/2020/commerce-commission-signs-multilateral-framework-enhancing-international-cooperation-on-competition-enforcement

3 Sept 2020 – FMA update released which included the following new material:

• The release of three short videos for consumers about getting financial advice featuring Investor Capability Manager Gillian Boyes together with a related Spinoff article. Related weblinks at
• World Investor Week 2020, starting Monday, 5 October.

Related weblinks at https://www.fma.govt.nz/investors/getting-financial-advice/ and https://thespinoff.co.nz/money/12-08-2020/everything-youve-always-wanted-to-know-about-financial-advisers/

31 Aug 2020 – Government released its response to the EQC inquiry. https://www.beehive.govt.nz/release/government-response-eqc-inquiry-released

31 Aug 2020 – MBIE advised that the Fair Trading Amendment Bill was discharged from the Economic Development, Science and Innovation Committee (the Committee) on 12 August without a report from the Committee. This means that the Bill as introduced will move onto the second reading stage. MBIE expect the second reading to take place after the election. Submissions and MBIE’s advice to the Committee are available at https://www.parliament.nz/en/pb/bills-and-laws/bills-proposed-laws/document/BILL_93552/tab/submissionsandadvice

12 Aug 2020 – Banking Ombudsman announced that banks will begin sharing information about customer complaints via an industry-wide dashboard that is available from today.

12 Aug 2020 – The FMA released updated guidelines for Financial Services businesses under Covid-19 Alert Level 2 & 3 lockdown conditions.

As parliament winds down this week, the last three days have seen a number of regulatory releases, many with potentially significant implications. A list follows, together with relevant links. Probably the most important is the conduct Bill update, which is the last item below. 

4 Aug 2020 – Following completion of the AMP Life sale in June, RBNZ released a document outlining the structure of the new operating model, key elements of the new structure, and exemptions and conditions applied to it. https://www.rbnz.govt.nz/regulation-and-supervision/insurers/regulation/amp-life-sale

4 Aug 2020 – Financial Markets Infrastructure Bill reported back from the Parliamentary Select Committee. https://www.parliament.nz/en/pb/sc/reports/document/SCR_99780/financial-market-infrastructures-bill

5 Aug 2020 – Commerce Commission released two reviews into an October 2019 security incident and accepts all findings and recommendations. The security incident arose from the theft of computer equipment belonging to one of the Commission’s external providers in a burglary and, as such, may contain lessons for commercial enterprises more generally on managing and mitigating such risks. https://comcom.govt.nz/about-us/strategic-planning-and-accountability-reporting/security-incident-october-2019

5 Aug 2020 – MBIE commenced consultation on the options for establishing a consumer data right in New Zealand. A consumer data right would give individuals and businesses greater choice and control over the data held about them by businesses such as banks or utility providers. It also allows individuals and businesses to securely share data held about them with a trusted third party. Submissions close on 5 Oct 2020. https://www.mbie.govt.nz/have-your-say/options-for-establishing-a-consumer-data-right-in-new-zealand/

6 Aug 2020 – MBIE released an update on development of the CCCFA regulations, advising that the regulations have now been split into two tranches with the first tranche to be made before the election and the second tranche to follow later this year. The first tranche of regulations relates to:

• responsible advertising standards for lenders
• the information to be disclosed at the start of debt collection
• disclosure requirements when a contract has been varied
• amendments to existing regulations relating to disclosure of information about dispute resolution services and financial mentoring services.

The remaining regulations relating to affordability and suitability assessments will be finalised over the coming months. The intention is for these to be made soon after a new government is formed. Both tranches of regulations, and most of the remaining provisions of the Credit Contracts Legislation Amendment Act will come into force on 1 October 2021. However, the provisions which enable the Commerce Commission to receive applications for certification will commence in June 2021.

6 Aug 2020 – The FMA released the results of a survey of KiwiSaver members relating to member recall of sighting the inclusion of projected retirement lump sum in annual statements for the first time and the proportion of members thereof taking some additional action. https://www.fma.govt.nz/news-and-resources/media-releases/kiwisaver-statements-members-take-action/

6 Aug 2020 – Parliament went into recess ahead of the election.

6 Aug 2020 – MBIE advised of a short consultation, closing on 12 Aug 2020, seeking views as to whether the Addendum to the Responsible Lending Code related to Covid-19 and due to expire on 30 Nov 2020, should be extended. The RBNZ is also considering whether its Covid-19 related guidance to facilitate banks offering loan deferrals, due to expire on 27 Sept 2020, should similarly be extended.

7 Aug 2020 – The Financial Markets (Conduct of Institutions) Amendment Bill was reported back from the Select Committee. The final report can be accessed at https://www.parliament.nz/en/pb/sc/reports/document/SCR_99944/financial-markets-conduct-of-institutions-amendment-bill

You can read the revised draft law and the explanatory notes from MBIE in the documents below. 

Download Final-report-Financial-Markets-Conduct-of-Institutions-Amendment-Bill-203-2

Download Explanatory note for industry - Changes made to FMCoIA Bill at Select Committee

Insurance and industry associations representatives shared their views on CoFI during the select committee hearing held on 10 June 2020. Participants included, Cigna head of legal Michael Burrowes, AIA general counsel Kristy Redfern, Financial Advice New Zealand CEO Katrina Shanks, Partners Life chief legal, risk and conduct officer Rebecca Sellers, industry expert David Whyte and Anna Black Fidelity Life chief risk officer.

Michael Burrowes head of legal said that the bill was a good idea but was rushed and complex. Michael and AIA general counsel Kristy Redfern both suggested that the bill be delayed. Kristy highlighted that unlike Australia, New Zealand had time to get the bill right. She also warned that the reform was affecting the mental wellbeing of advisers, which could lead to New Zealanders becoming even more underinsured.

“Michael Burrowes, head of legal at Cigna, said the bill was a good idea but there had been a lack of consultation with the industry for what would be a substantial and important regime. The result was rushed, complex and lacked the appropriate clarity and detail.

He and AIA general counsel Kristy Redfern called for the bill to be delayed until FSLAA had bedded in.”

“Redfern said changes to commission rules in Australia had affected the availability of advice and given that New Zealand was underinsured already, that outcome should be avoided. She said the threat of significant reform was affecting advisers’ mental wellbeing. “It’s more important than ever that any additional regulation is fit for purpose and doesn’t create unintended consequences and anxiety.”

She said, because there was no evidence of widespread misbehaviour New Zealand had time to get the bill right.”

Katrina Shanks shared Financial Advice’s concerns as well as saying that it was hard to understand the implications of CoFI as a lot was left to regulations. Katrina also highlighted that that unlike other sectors, the power to prohibit incentives was very strong. Similarly, David Whyte said that it was unclear if advisers were caught by providers’ fair conduct programmes.

“Shanks said Financial Advice NZ had six main concerns: the bill’s power to regulate sales incentives, no definition of “fair”, confusion over whether financial advisers are included in fair conduct programmes, the definition of intermediary, the claims process, and the timing of the bill’s enactment.”

“David Whyte, speaking on behalf of a group of sector participants including Financial Advice New Zealand, the TripleA Advisers Association and Wealthpoint, said the drafting was confusing because it was not clear whether financial advisers were caught by providers’ fair conduct programmes.”

Rebecca Sellers, chief legal, risk and conduct officer at Partners Life highlighted that incentives played an important part in the livelihoods of many advisers. While Anna Black Fidelity Life chief risk officer said that the outcome of CoFI needs to increase customer trust and ensure sustainability

“Partners Life chief legal, risk and conduct officer Rebecca Sellers said incentives played an important part in the livelihoods of many businesses and were a matter of substantive policy that should not be delegated to regulation – though committee member and Labour MP Duncan Webb asked AIA how the rules could be kept up-to-date with a changing industry if they were not in the regulations.”

“Anna Black, chief risk officer at Fidelity Life, said the outcome of the bill needed to increase customer trust and ensure sustainability of the industry over the long term. “Pausing is appropriate.”” Click here to read more

In other news:

Commerce Commission: The Commerce Commission:  announced that it has finalised the criteria it will use to assess whether a lender is “fit and proper” under the Credit Contracts and Consumer Finance Act

Partners Life: Partners Life sponsored the filming for Fight For Time, a story of the Pink Dragons

FSC: FSC 2020 Awards will be held at the FSC Generations Conference Gala Dinner

FSC: Generations Conference earlybird tickets now available

FSC webinar: Introduction to Generations webinar

FSC: FSC’s partner Voices of Hope will be the charity partner for the 2020 Conference

During the Financial Advice NZ webinar, Minster Faafoi spoke about his commitment to ensuring that the conduct bill progresses while also highlighting that he is conscious of the importance of having enough lead-in time. During the webinar, the Minister spoke of how the Government understands that commissions are a legitimate way of paying advisers and as a result, the Government isn’t seeking to ban commissions, instead is looking to end target-based incentives. 

“In a webinar with Financial Advice NZ, Faafoi acknowledged that concern and said he did not want the conduct regime to add another layer of complexity of regulation on top for advisers.

The bill in its current form also allows regulations to dictate remuneration structures, which some industry participants have expressed concern about.

Faafoi said Government recognised that commissions were a legitimate way of paying advisers for their “important work” because consumers were generally unwilling to pay for financial advice. He said the Government was aware that commission structures were the way the sector had operated for decades.

“It is not the Government’s intention to ban all commission.” Click here to read more

It would be a great relief to advisers and insurers if it could be clearly discerned from the Bill that the power to ban commissions is reserved. At present the definition of incentives in the law can be read as including all normal commission payments, which is unnerving when long-term decisions need to be made. 

In other news:

Suncorp: Kate Armstrong joins Suncorp’s NZ boards

Suncorp: Suncorp earmarks further NZ$2 million for hardship fund

FMA: Transitional licensing continues at a “steady rate” despite COVID-19 delays – FMA

AIA: AIA new business value slips 27% after coronavirus disruption

Sharon Corbett, Manager Financial Markets Policy, at MBIE has made the following announcement: 

The Minister of Commerce and Consumer Affairs has agreed that the start of the new financial advice regulatory regime set out in the Financial Services Legislation Amendment Act 2019 will be delayed from 29 June 2020 to early 2021.

The new regime is important for promoting consumer confidence in financial advice and the Minister remains committed to seeing the changes through. For now, however, it’s important the financial sector focuses as much as possible on supporting its customers as well as its own staff and their families.

The exact revised date of the new regime will be communicated in due course, well in advance. We expect the new commencement date to be in March 2021 at the earliest. 

The transitional licensing application window will be extended until the same date in early 2021 and the new Code of Professional Conduct for Financial Advice Services will also come into force on that date.

The existing regime under the Financial Advisers Act 2008 will continue to apply in the meantime until the new regime commences.

We are still working through all the flow-on implications from this delay and the necessary legal mechanism to effect this change. We are aware that market participants are at varying levels of readiness for the new regime and that the delay will impact everyone differently.

The FMA has confirmed that transitional licensing will also remain open and the FMA licensing team will continue processing applications as resources are available and in time for the start date of the new regime in early 2021. Those who have already had licences approved or who have already submitted a transitional licensing application will not need to reapply – please see the FMA announcement and FAQs which will shortly be updated.

The disclosure regulations that were due to be made this month have now been delayed so that the commencement dates of those regulations can be updated. We hope to make these regulations available within the next couple of months.

We will be in touch when we have more details to share. We’d be grateful if industry associations could please pass the message onto members.

Thank you for your understanding in these challenging times and we hope that you are all staying well.

Kind regards

Sharon 

Sharon Corbett

MANAGER, FINANCIAL MARKETS POLICY

COMMERCE, CONSUMERS & COMMUNICATIONS BRANCH

You can check out the other details of their view at this link: https://www.dentons.co.nz/en/insights/alerts/2020/february/20/financial-law-insight-financial-markets-consultation-tsunami-to-herald-in-the-new-year

Parliament recommenced this week with first reading being completed on 12 Feb for three Bills relevant to the financial services sector:

• Financial Markets (Conduct of Institutions) Amendment Bill completed first reading, referred to the Finance and Expenditure Committee with report back due by 23 June 2020. (see more details in the blog post below).
• Fair Trading Amendment Bill read for the first time, referred to the Economic Development, Science and Innovation Committee with report back due by 12 August 2020.
• Financial Market Infrastructures Bill read a first time, referred to the Finance and Expenditure Committee with report back due by 12 August 2020.

Dates for closure of submissions on each are yet to be announced, but the likelihood of enactment before the election can potentially be gauged from the report back dates.

Consultation on the legislation being proposed for insurance contract changes is expected later this year.

My compliance guru, Rob Dowler, advises me that he has completed drafting his submission on the Conduct Bill some time ago while awaiting the call for submissions. He advises that his key submission points will be:

• Why is a “conduct licence” being introduced rather than simply legislating requiring compliance with the proposed conduct requirements?
• Why restrict the application of the legislation to licensed banks, insurers and non-bank finance companies? Why not capture all financial service providers? In fact, why not capture all commercial enterprises?

Good points. I know that quite a few industries share some of the information asymmetry that makes financial services a sector where the utmost good faith needs to be shown when dealing with customers: many technology companies offer similarly intangible services that have a lot of hidden complexity and are not fully understood by consumers.