The Financial Markets (Conduct of Institutions) Amendment Bill (COFI) has passed its third reading in parliament.

It imposes new rules on banks, insurance companies and non-bank deposit takers.

It requires these institutions to hold a market services licence as a financial institution and implement a written programme that complies with the principle of fair conduct.

As reported earlier by Good Returns, the law also bans sales incentives based on volume or value for staff selling certain types of financial products.

The final law also waters down originally-proposed controls on intermediaries such as advisers who have their own licensing arrangements under the FAP programme.

The law was highly controversial as it was going through parliament. Critics accused it of duplicating existing legislation and not even being clear about the problem it was supposed to be fixing.

But the Minister of Commerce and Consumer Affairs David Clark said it would make sure that financial institutions put customers before profits.

“This work comes at an important time as the Government supports Kiwis through the current cost of living crisis,” Clark said.

“It will help to ensure they’re not unknowingly paying for services they do not need, or taking on debt they cannot afford.”

Clark said the new regime would help tilt the balance back towards the consumer by protecting them from bad behaviour that could leave them vulnerable.

He said reviews by the Reserve Bank and the FMA had found banks and insurers lacked focus on good customer outcomes, and had insufficient systems and controls to deal with “conduct issues”.

But the National Party which opposed the law, said neither institution had found systemic misconduct in New Zealand, only specific incidents, which were well covered by existing law.

Clark said the FMA would work with financial institutions to ensure they were prepared for the new regime, with licensing applications expected to be open from mid-2023.