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National criticises new conduct bill

11 Jun, 8:08am by Staff reporters

The new bill to regulate conduct of financial institutions started its second reading in Parliament yesterday and was immediately criticised by the National Party.

Minister Poto Williams started the second reading of the Financial Markets (Conduct of Institutions) Amendment Bill yesterday outlining the changes and why new regulations were needed.

However, National MP Nicola Willis immediately criticised it as "...a compliance heavy, box ticking exercise".

Willis said her party opposes the bill but acknowledged the fact that "...financial institutions, banks, insurers and the like should have controls in place to ensure they are focused on the best interests of their customers".

Williams said 59 submissions were made on the bill and the majority supported it. However, the Ministry of Business, Innovation and Employment is current undertaking a second round of consultation with Williams stating there would be further amendments to the bill.

The minister said the bill fills a legislative gap and it is important to ensure consumers are treated fairly.

She said there can be an imbalance of power between institutions and customers. "It is vital that New Zealanders can trust these institutions."

Institutions will be expected to have a "fair conduct programme" to ensure customers are treated fairly.

"The select committee has recommended that minimum requirements for fair conduct programmes be clarified and included in the bill. This is in response to submitters feedback that leaving the detail of conduct programmes to regulations would leave the regime uncertain."

Under the bill the minister will have the power to make regulations related to incentives. Cabinet has already banned value or volume based incentives and the minister will have a list of matters that have to be considered.

Also intermediaries, such as financial advisers, will not have to comply with an institution's conduct programme.

Some concerns were raised that this regulation making power was too broad. In response, the minister said the group of intermediaries this power extends to has been narrowed.

MBIE is currently consulting on intermediary provisions for the bill "...to ensure the intermediary obligations are right sized and will work in practice".

The second reading of the bill was interrupted by retiring MP Nick Smith's valedictory speech and will continue from 2pm, Tuesday June 22.

To view the bill, click here.

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