There’s an upcoming compliance deadline for financial organisations in New Zealand.
The Financial Markets (Conduct of Financial Institutions) Amendment Act (CoFI) was passed in 2022, and firms have until 31 March 2025 to comply.
CoFI’s driving force is the ‘fair conduct principle’, which, according to the Financial Markets Authority (FMA), means consumers “get the financial products and services they need throughout their life, when they need them, and have trust and confidence they will do what they should.”
To help you prepare, this article summarises:
- What the CoFI regime requires
- Who needs to comply
- How to comply
- Immediate steps to take
What is the CoFI legislation?
CoFI follows reviews from the Reserve Bank of New Zealand (RBNZ) and the FMA, which concluded banks and insurers lacked adequate systems and processes to ensure customers were treated fairly. It introduces a legislative framework for delivering improvements, bringing New Zealand in line with other countries including the UK and Australia.
CoFI includes measures to ensure financial organisations are:
- Accounting for consumer interests
- Acting ethically, transparently and in good faith
- Helping consumers make informed decisions
- Ensuring their products and services are likely to meet consumer goals and requirements
- Not putting unfair pressure on consumers or using tactics that exert undue influence
Under CoFI, the FMA has new monitoring and enforcement powers, including the ability to impose penalties for non-compliance.
Who needs to comply with CoFI?
The CoFI regime applies to registered banks, licensed insurers and licensed non-bank deposit takers whose services are received by a consumer in New Zealand.
As of 31 March 2025, all these organisations must have a financial institution licence to continue operating. The licence shows that they comply with the fair conduct principle when providing relevant services to consumers, meaning they meet standards in areas such as culture, governance and risk management.
How do you comply with CoFI?
There are two critical angles to consider when planning CoFI compliance:
- Policies and governance – To get a financial institution licence, you must have a Fair Conduct Programme. (The FMA sets out guidance for establishing and maintaining a programme.) It must be in writing and include effective policies, processes, systems and controls to ensure compliance with the fair conduct principle. And it must be approved by the board before you apply for the licence.
- Customer insight – Because CoFI is about ensuring you always treat consumers fairly, you must understand your customers’ experiences at every step of their journey.
What should you do now to prepare for CoFI?
- Designate a CoFI sponsor – Because CoFI touches every aspect of the organisation, you need someone with a bird’s-eye view who can design the programme. Different people can take over implementation and monitoring, but you need a design approach that transcends organisational silos.
- Audit policies and processes – The Fair Conduct Programme doesn’t need to be net new. Existing policies, processes and controls can be updated to meet CoFI requirements, but you need to know where the gaps are.
- Analyse customer journeys – To implement your Fair Conduct Programme, you must delve into customer journeys and identify areas where you risk contravening the fair conduct principle. This means you must orchestrate data from all your disparate systems to gain a comprehensive view across touchpoints and a single version of customer truth. This is also essential for ongoing monitoring so you can quickly identify and fix ongoing issues.
Yes, change is required – but tech is there to help
CoFI compliance requires a cultural and operational shift. It also requires new technology to provide visibility, coordination and monitoring. But it’s possible to do this without undertaking a massive technology project or changing your underlying technology stack.
Our expert teams can guide you through the compliance process and independently review your implementation plans to ensure they meet the required standards. For more information on CoFI compliance, get in touch.
