COFI bill plans further crackdown on sales incentives

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The Financial Markets (Conduct of Institutions) Bill (COFI) will be given extra teeth to crack down on sales incentives, according to the man who is driving it through parliament.

Thursday, June 23rd 2022, 8:10AM 6 Comments

by Eric Frykberg

The Commerce and Consumer Affairs Minister David Clark made this clear as the bill went through its committee stages in the House last night. (Tuesday)

The law was approved on party lines with Labour, the Greens and Te Pati Maori voting in favour, and National and Act voting against.

The COFI bill would impose tough codes of conduct on financial institutions such as banks and insurance companies. But a plan to impose similar rules on intermediaries such as mortgage advisers was watered down after an outcry over “needless and expensive” regulation that was compared to reinventing the wheel.

In speaking to the bill, Clark said there would not be many regulations attached to it at this stage, but there was definitely a need for some.

“A big gap currently is a lack of regulation regarding sales incentives such as overseas trips as a reward for selling a certain amount of insurance policies,” Clark said.

“These kinds of incentives create a strong conflict of interest, especially as a person is nearing their sales target.”

Clark said consumers had to be protected from this kind of sales pressure, so regulations against it would be put in place. However the details were still being worked on.

Elsewhere in his speech, Clark repeated details of amendments to some parts of the original bill. These emerged in a Supplementary Order Paper (SOP), and gave advisers and other intermediaries some relief from heavy-handed controls which they said were unnecessary because the FAP process already had these matters in hand. .

Clark also defended the need for controls on an industry that he said was under-regulated before. And he rejected a common charge against the Government: that it's tangling up the business sector in endless bureaucratic clutter.

He argued that the COFI klaw was not a superfluous addition to existing legislation.

“This bill is the final piece in the Government response to misconduct issues in the banking and insurance sectors,” Clark told the House.

“This piece of legislation sits across the top, it's an umbrella-type regime if you like.
“It slips across things like the FSLA, the CCCFA, the Fair Trading Act, the Consumer Guarantees Act, which are responsible for specific parts (of consumer protection).
“This is the regime that sits across the top of those laws, and if there is compliance with those other regimes, that can be brought as evidence of compliance with this regime.”
During the debate, the bill was slated by the National Party. Clark's counterpart, Andrew Bayly, said the law was a solution looking for a problem and he quoted from evidence given to a parliamentary select committee.
“The Reserve Bank and the Financial Markets Authority were clear that there was no evidence of systemic wrongdoing in New Zealand. They found isolated cases but there was no systemic issue.”
Bayly said instead of passing this law, the Government should have got the CCCFA legislation right. But instead, it was passing a “plethora” of legislation that would only impose huge costs on everyone.
Todd McClay also attacked the law, saying cases of fraud alleged by the Government did not justify this bill.
“Fraud is already against the law and you cannot make it more against the law with legislation like this.”
Despite these arguments, a clause by clause vote on the bill passed the Houe.

Tags: CoFI

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