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Industry should ignore Nat pledge to scrap CoFi: KPMG

The National Party's pledge to scrap the Financial Markets (Conduct of Institutions) Amendment Act 2022 (CoFi) “threw a spanner in the works” but businesses should regard it as an opportunity to improve their business, according to accounting firm KPMG.

Wednesday, September 27th 2023, 6:00AM 5 Comments

by Jenny Ruth

Writing in KPMG's latest quarterly report on the performance of financial institutions, KPMG's risk consulting director Kate Stewart and colleague Malcolm Bruce say CoFi “actually provides opportunity for financial institutions to do what's right for their business, as well as the customers they serve.”

The announcement by National leader Chris Luxon at the Financial Services Council conference last month “created a level of uncertainty into what has been a well-accepted regulatory change,” say Bruce and Stewart, who joined KPMG from the Financial Markets Authority (FMA).

The CoFi legislation “essentially brings banks, insurers and non-bank deposit takers into a regulatory regime that would provide protections for consumers that don't currently exist in New Zealand's regulatory landscape,” they say.

“It's hard to argue institutions should not treat their customers fairly, nor that they should have customers at the heart of the way their businesses operate.”

They note the industry has been “pretty slow” at getting ready to apply for licences and to implement any changes needed for compliance – the Act comes into force at the end of March 2025 but licensing opened in July this year.

The KMPG writers note that CoFi is principles-based rather than a set of rules, and argue that institutions should be using it to “really think differently about CoFi as not just a piece of regulatory change, but as an opportunity to build in fair treatment for their customers at the design stage,” they say.

That would make firms “compliant by design, which can assist in demonstrating what they're doing for customers as well as provide benefits for their institutions.”

Some institutions are full-steam-ahead in preparing for the changes, but others “have pushed the pause button” but face “a major risk” in delaying further work on CoFi.

Without CoFi, the industry faces the major risk that the FMA will launch more court action.

The KPMG writers note the FMA “has used the powers they already have in the Financial Markets Conduct Act” to tackle misleading and deceptive conduct and “enforce against the most egregious examples of what were frankly a sloppy and careless approach to customers.”

Implementing CoFi requires institutions to do some “deep thinking” about what “fair” really means and to have “tough conversations” about existing policies or processes, they say.

Tags: CoFI

« [The Wrap] FSC should take a position on CoFIFinancial Advice NZ CEO hangs up her boots »

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Comments from our readers

On 28 September 2023 at 11:27 pm Murray Weatherston said:
I wonder if KPMG would be prepared to publish how much revenue they have made from FIs over the last 12 months consulting on CoFI?
On 29 September 2023 at 10:25 am JeffQV said:
CoFI is a totally unnecessary piece of complexity that would do nothing to protect the consumer and would only add to the costs of the provider (therefore the consumer). Good riddance.
On 29 September 2023 at 6:34 pm JPHale said:
JeffQV, so what would you suggest given the big end of town has shown to be the problem for consumers?
On 29 September 2023 at 7:06 pm Murray Weatherston said:
@JP
Here's a weekend challenge for you.
How about you make a list of all the times you know a BEOT FI has caused a problem with a brief explanation of what the problem each time was.
Maybe I and other sceptics of the need for CoFI will see the obvious errors of our way when we see the list and agree to enrol for re-education /sarc.
On 3 October 2023 at 7:20 am JPHale said:
:D Murray, I have better things to do. Maybe read a few of my articles on FI behaviour.

I’m sure in the investment space things have improved and there's less concern than there was. But there's been plenty of FI type stuff in the past.

Activities of banks and insurers, not your usual product set, have been hugely problematic and still continue to be.

In the mortgage and insurance space we have seen with reporting its not advisers but the FI’s. GR has covered the fines handed out to them recently.

Do we need CoFI? Yes. Have you seen the impacts, maybe not.

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