Fair Conduct Programmes – Guidance for small institutions

The Financial Markets Authority – Te Mana Tātai Hokohoko (FMA) has released guidance to help smaller financial institutions comply with the Financial Markets (Conduct of Institutions) Amendment Act 2022 (CoFI). In particular, how they can establish, implement and maintain the fair conduct programmes required by CoFI from its March 2025 commencement.

The FMA has published the guidance in response to calls from Commerce and Consumer Affairs Minister Andrew Bayly  for it in both his recent annual letter of expectations to the FMA and his earlier speech at FSC Outlook 2024. The guidance supplements the existing FCP guidance note and financial institutions licensing guide issued by the FMA.

Who should use this guidance?

Smaller financial institutions will find the guidance helpful, particularly those that:

• are looking to establish a new financial institution business or are applying for a new financial institution licence; and
• have a flat organisational structure due to their size (i.e. where management is closely involved with the day-to-day operations of the business).

Our view

We think the guidance is a useful addition to the material available to smaller financial institutions to prepare for CoFI. The March 2025 commencement date for COFI is rapidly approaching and so additional clarity on FMA's expectations are welcome. We think smaller financial institutions will also benefit from FMA's approach of providing practical suggestions rather than providing commentary on  technical requirements.– Some of those suggestions are:

• engaging existing staff to put together ideas for the fair conduct programmes;
• adding fair conduct principles to existing staff manuals; and
• reviewing fair conduct programmes annually or where specific trigger events occur (such as the launch of a new product).

This non-technical approach is sensible given the expected changes to CoFI under the Government's current "fit for purpose" financial services reforms which include proposals to reduce and simplify minimum requirements for fair conduct programmes.

(For more background on this consultation, see our recent article.)