Countdown to CoFI: FMA works to complete licensing

The regulator says it is on track to approve 77 licence applications under the incoming Conduct of Financial Institutions (CoFI) regime which takes effect at the end of March.

Monday, March 10th 2025, 6:00AM

by Kim Savage

The regulator says it is on track to approve 77 licence applications under the incoming Conduct of Financial Institutions (CoFI) regime which takes effect at the end of March.

Banks, non-bank deposit takers and insurers must all be licensed under the Act, which requires them to have a programme in place for treating customers fairly and bans targets-based sales incentives. Distribution of products is also covered by the fair conduct principle, meaning intermediaries’ role needs to be documented and everyone is expected to work together when issues of fair conduct arise.

Of the 77 total applications received, 3 are still being processed, says the FMA but all are expected to be completed by the end of the month. The current number of licensed institutions is below the 100 initially estimated when applications first opened in 2023.

Institutions are taking their compliance seriously, says Tim Williams, Chapman Tripp Partner and Financial Services Regulation specialist, who has been helping clients prepare for the new regime.

Institutions have had to carefully analyze and identify any gaps against the minimum standards and develop new policies, processes, systems and controls, he says. The preparation work has also involved evaluating incentives, keeping additional records, allocating new responsibilities, new board reporting, as well as reviewing communications and product documents.

“Distribution methods also needed to be evaluated against the minimum standards and products and services needed to be assessed against consumers’ perceived objectives as a group.

“These activities required a thorough and well managed internal process review and a practical interpretation of the obligations required to meet the fair conduct principle.”

Tim Williams says the complexities of the ban on incentives have taken some institutions by surprise and led to discussions with insurance advisor industry groups and the FMA to ensure questions are answered ahead of time.

“The CoFI regime will be at the heart of all future inquiries and proceedings relating to consumer law enforcement against banks, insurers and non-bank deposit takers.

“Financial institutions have been right to take their compliance with this new regime seriously, and will need to continue to meet the expectations that arise from their fair conduct programmes and the increased legal requirements under the CoFI Act.”

Tags: CoFI FMA