Legal and regulatory update for the life and health insurance sector

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


Legal and regulatory update for the life and health insurance sector

1 Sept 2020 – The FMA advised licenced Managers, and Supervisors, of Managed Investment Schemes (MIS) that, as result of the enactment of the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act in January 2020, overpaid PIE tax can now be refunded in some circumstances, and the FMA is encouraging MIS managers to consider updating their PDS with relevant wording before the end of January 2021.

1 Sept 2020 – Treasury advised that the Government has extended the Emergency Notification Regime in the Overseas Investment Act for another 90 days until 28 Nov 2020 to manage investment risks arising through Covid-19. https://treasury.govt.nz/publications/media-statement/ministers-retain-temporary-overseas-investment-screening-rules

1 Sept 2020 – The Ombudsman quarterly Review Winter 2020 was released. https://www.ombudsman.parliament.nz/resources/ombudsman-quarterly-review-winter-2020

2 Sept 2020 – FMA released an investor guide to bonds. https://www.fma.govt.nz/investors/resources/bonds-guide/

2 Sept 2020 – Following the earlier decision by Financial Services Council to postpone its Sept 2020 conference, Good Returns today reported that Financial Advice NZ is a recipient of funding via MBIE’s domestic event fund for its planned conference, with a decision due this weekend whether to go ahead with an in-person Auckland event. https://www.goodreturns.co.nz/article/976517427/financial-advice-nz-conference-gets-funding.html


Legal and regulatory update for the life and health insurance sector

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


Legal and regulatory update for the life and health insurance sector

27 Aug 2020 – MBIE issued a reminder that the “Covid-19” safe harbour for company directors from their insolvency related duties will expire on 30 Sept 2020 as planned.

28 Aug 2020 – Minister of Commerce and Consumer Affairs, Hon Faafoi, diary for July 2020 released, with the following potential financial services sector related meetings noted:

  • 1 July 2020 - Meeting with Christians Against Poverty (Aimee Mai and Michael Ward)
  • 1 July 2020 – Meeting with Vero (Marie Hosking, Adrian Tulloch and Helen McNeil)
  • 2 July 2020 – Meeting with AIG (Toni Ferrier and Bhairav Shah)
  • 22 July 2020 – Phone call with FMA (Mark Todd)
  • 30 July 2020 - Meeting with FSC (Richard Klipin and Rob Flannagan)
  • 30 July 2020 - Meeting with ‘Buy Now, Pay Later’ providers (Shaun Quincey, Neil Simons, Michael Saadat, John O'Sullivan, Julian Grennell)
  • 31 July 2020 – Meeting with Insurance Brokers Association of New Zealand (Melanie Gorham, Tony Bridgman and Barry Hellberg)

28 Aug 2020 – Good Returns reported that on 27 Aug 2020 MBIE released submissions made on the exposure draft of the disclosure regulations applicable to Regulated Financial Advice.


Legal and regulatory updates for the life and health sector

17 Aug 2020 – MBIE advised that the expiry date for the addendum to the Responsible Lending Code relevant to Covid-19 has been extended to 31 March 2020, to align with the extension to the term of the mortgage deferral scheme to the same date, with updated guidance released today on this extension by the Reserve Bank.

17 Aug 2020 – The FIU posted on its website information on the Basel AML Index, which ranks the risk of money laundering  and terrorism financing of countries around the world, a resource that may be useful when assessing risks of the countries that NZ AML/CFT regulated entities deal with. https://www.dia.govt.nz/AML-CFT-Independent-ML-TF-risk-country-rankings

17 Aug 2020 – Dissolution of Parliament postponed until 6 Sept 2020, with Treasury consequently announcing delay in the publication of the pre-election economic and fiscal update, to be completed between 7 & 21 Sept.


Planning for the new disclosure regime - what to do:

With the publication of new disclosure regulations, each transitionally licensed Financial Advice Provider must now develop a process for implementing these to take effect from 15 March 2020.

This change means engaging with systems people, reviewing websites, reviewing statements of services, and reviewing statements of advice. Outlined below is a more detailed process for designing and implementing a new disclosure procedure. It is significant.

The core work involves:

  • Identification, review and development of the disclosure content required:
    • To be publicly available on the Financial Advice Provider website, and
    • To be delivered to consumers
      • When the nature and scope of advice is known
      • When advice is given
      • When a complaint is received
    • Determining how the required disclosure is to be given to a consumer (verbally or in writing, while noting that a consumer can always request written disclosure)
  • Development of an implementation plan to ensure introduction of the disclosure changes as and when required (15 March 2020)
  • Development of a compliance and compliance assurance plan to provide comfort to the Financial Adviser Provider Governance Structure (e.g. Board) that the legal disclosure requirements are being met, or, in the event of a failure, any such instances of failure are identified and remedied.

The regulations also contain further information on other matters that should be considered, such as:

  • The requirement to consider materiality when considering what should be disclosed
  • When information must be given about a person as well as about the Financial Advice Provider
  • When reference to publicly available information will be sufficient to fulfill the disclosure requirement, rather than having to specifically provide a disclosure direct
  • When reliance can be given to past disclosures already completed until or unless a material change occurs

If you would like to discuss how Chatswood Consulting Ltd may be able to support you during this change, please call.


Legal and regulatory update: several big updates including the latest on conduct law changes

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


Unpacking the new disclosure requirement

During Financial Advice NZ’s webinar Sharon Corbett and Rose Wang from MBIE discussed the new disclosure requirement. The regulation will be split into three sections. Adviser businesses will be expected to state on their websites the necessary information prospective clients need to choose the right financial adviser. More information will need to be provided when the nature and scope of advice is known. And lastly, more disclosure will be required once the advice is provided. Commission or incentives that advisers or FAPs are paid will be part of the information that needs to be outlined. This is expected to alert clients of potential conflicts of interest.

“The regulations have three parts: The information about a financial advice provider that needs to be on its website to ensure that consumers could choose a FAP that suits their needs, more information given when the nature and scope of advice is known, and a final tranche of disclosure when the advice is given.

As part of that, advisers are required to disclose any commissions or incentives they receive that a reasonable client might think might materially influence their advice.

If the adviser was paid a salary but their FAP received commission that would need to be disclosed if a client might think it would be a factor.”

The goal of the new disclosure regulation will be to give customers all the necessary information that they need in a more efficient way. The change focuses on the type of information disclosed as well as timing.

“Corbett said the focus was on moving away from a tick-box exercise where clients were given information they might not understand or have time to process, to one in which information was given in a clear and useful way at the right time to help clients make good decisions. She said disclosure too early was often forgotten or disregarded and disclosure given too late could risk leaving the client feeling locked in with an adviser.”  Click here to read more

In other news:

FSC: Generations Conference will be held at The Cordis Hotel, Auckland on Tuesday 8 and Wednesday 9 September 2020

FMA: FMA advised of its intention to recruit a new Director of Investment Management to lead a new team responsible for designing, delivering and communicating the FMA's approach to the Investment Management Sector

Next-level client insight service targets NZ advisers


Daily news update: overview of main points from CoFI select committee hearing, and more stories

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


Webinar with Minister Faafoi

Minister Kris Faafoi will be available to discuss FSLAA and CoFI with members. The webinar will be held on 19 May at 10 am.

"Commerce and Consumer Affairs Minister Kris Faafoi will speak to Financial Advice New Zealand members in a webinar on Tuesday, 19 May, at 10am.

As members will know, he’s the minister behind the Financial Services Legislation Amendment Act (FSLAA) and the Financial Markets (Conduct of Institutions) Amendment Bill (CoFI), which is before a select committee. Once the COVID-19 restrictions hit he agreed to extend the transitional licensing application window part of FSLAA to early next year (most likely March), with the new Code of Professional Conduct for Financial Advice Services to come into force at the same time.”" Click here to register

In other news:

Financial Advice webinar: Bring in the Experts

Covid-19 coronavirus: The fishhooks in the govt's 'interest free' small business loans

Behaviour change puts dampener on recovery optimism

Guide to taking part in a rights issue

MBIE: Cash Flow Forecaster