What the new CoFI regime means for financial institutions

The Financial Markets (Conduct of Institutions) Amendment Act 2022 (CoFI Act) received Royal assent on 29 June 2022, introducing a new regulatory regime for the conduct of retail banks, licensed insurers and licensed NBDTs (Financial Institutions) providing services to consumers in New Zealand with a focus on treating consumers fairly (CoFI Regime).

The CoFI Regime is a result of the Financial Markets Authority (FMA) and Reserve Bank of New Zealand Conduct and Culture Review undertaken in November 2018, which found that New Zealand had significant weak points when it came to regulating the conduct of Financial Institutions.

Implementation and licensing under the CoFI Regime

The CoFI Regime is set to come into force in early 2025 and will apply to certain relevant services and associated products provided by Financial Institutions.  Once it comes into force, the new regime will seek to implement the fair conduct principle by requiring Financial Institutions to (amongst other matters) pay due regard to consumers’ interest, act ethically and in good faith and not subject consumers to unfair pressure or tactics or undue influence.

Financial Institutions that are caught by the CoFI Regime will need to obtain an FMA licence, and to establish, implement and maintain a fair conduct programme to operationalise the fair conduct principle during the life cycle of a customer’s journey.  Information about a Financial Institution’s fair conduct programme must also be publicly available and published on an internet site maintained by, or on behalf of, the Financial Institution.

The FMA has signalled that they expect the industry to take compliance with the CoFI Regime seriously and they will be actively engaging with the industry to ensure that affected Financial Institutions are prepared for the new regime when it comes into force.

The regime is intended to be an outcome-based regime; assessed from the perspective of the customers’ experience (as a whole) and allows for a tailored risk-based application of the broad fair conduct principle to different business models.

Application for the new FMA licence is anticipated to open around mid-2023.  For more information on the proposed standard conditions for licences, click here to read the FMA’s consultation paper.

Financial Institutions are expected to have their fair conduct programme established at the time of their licence application, but do not need to have fully implemented the programme until the CoFI Regime is fully in force.


Intermediaries are not subject to obligations under the CoFI Regime.  However, Financial Institutions will be responsible for ensuring that the fair conduct programme is operationalised across all distribution channels, including through intermediaries.

Treatment of Incentives

The CoFI Regime also sets out the requirement for Financial Institutions to comply with incentives regulations.  While draft regulations are not available yet, MBIE has confirmed that prohibitions on value or volume sales target-based incentives will be introduced and they will apply to employees (except senior managers and executives), agents and intermediaries.

Next steps

The FMA will be issuing further guidance on the application of the fair conduct principle and intermediated distribution once it has completed its current engagement on the CoFI Regime with the industry.  We expect to see draft guidance issued on these matters in late 2022 / early 2023.

If you would like our help with getting your business ready for the FMA licensing application or implementing a fair conduct programme, please contact our Banking & Finance professionals.

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