It will clarify the way in which financial institutions monitor their own intermediaries, such as mortgage advisers.

The law in question is the Financial Markets (Conduct of Institutions) Amendment Act 2022 (CoFI), which sets standards of conduct of registered banks, licensed insurers and licensed non-bank deposit takers.

It charges them with an obligation to treat consumers fairly, and will be in force by 2025.

It will be implemented by the Financial Markets Authority (FMA), which will ensure that financial institutions comply with a fair conduct principle to treat consumers fairly, and establish, implement and maintain a ‘fair conduct programme’.

But the new law will not just reach 'across' the finance industry, but reach 'down' to intermediaries such as the brokers who handle its products.

That is because with banks shutting down branches, a mortgage adviser can sometimes become the 'face' of a bank or finance company as far as many ordinary customers are concerned.

So the FMA is proposing guidance that covers arrangements where financial institutions distribute products and services through intermediaries such as advisers.

In a consultation paper, the FMA outlined its general expectations, saying the overall purpose of the guidance is to ensure intermediary arrangements are designed to promote fair outcomes for consumers.

“These arrangements need to clearly assign roles and responsibilities, and include processes for monitoring their effectiveness,” said the FMA’s Executive Director Regulatory Delivery, Clare Bolingford.

In its statement, the FMA said advisers needed to comply with the FAP regime as well as the Financial Markets Conduct Act 2013.

It said the CoFI requirements were complementary to these needs, with “broadly consistent overarching policy objectives.

“The policy intention is that the dual regimes create a shared responsibility between financial institutions and FAP licensed intermediaries for fair treatment and outcomes for consumers.”

Feedback on the proposed guidance can be provided until 14 April 2023.

The FMA consultation paper can be found here.