The Financial Markets Authority (FMA) says it will provide more information in the New Year about how advisers will be affected by tough new rules on financial conduct.

In the meantime, it is making clear that advisers will not remain untouched by the new Financial Markets (Conduct of Institutions) Amendment Act (CoFI), which was passed last year.

That is despite the fact that the CoFI law is not explicitly aimed at advisers.

It instead tells banks, insurance companies and non-bank deposit takers (NBTAs) that they will have to acquire a Financial Institution licence to keep on operating from early 2025.

Applications for such a licence will be considered by the FMA from July 25 next year.

Financial Institutions will also be required to develop a Fair Conduct Programme (FCP).

This will require them to pay due regard to consumers’ interests, to act ethically, transparently, and in good faith.

It will also require financial institutions to assist consumers to make informed decisions, to make sure appropriate financial products are available and to avoid using high pressure tactics on customers.

CoFI was passed after FMA and the Reserve Bank found a regulatory blindspot regarding financial institutions, although opponents said this was not causing any problems.

But the Act was passed and is being implemented gradually.

A swathe of documents were released this week which pushed that process forward.

One of them made clear that under the new law, large financial institutions will keep an eye on advisers who do work for them under contract, even though advisers are not the law's main target.

“The CoFI Act requires a financial institution to have regard to ….... the types of intermediaries that are involved in the provision of its relevant services and associated products,” one of the FMA documents said.

This clause would cover “ the nature of that involvement and their legal obligations in connection with their involvement (such as obligations related to giving financial advice).”

Under this principle, an FCP would cover a variety of channels used to deliver financial services, including intermediaries such as advisers.  It goes on to say a FCP should cover a number of ”interlinking” processes.

This appears to bring advisers into a state of partial cover by the CoFI law. 

But in many cases, advisers are the first port of call, and even the major contact point, for a person who ends up borrowing from a large bank. As a result that bank could end up being judged by the public according to the behaviour of an adviser.

An early version of the CoFI legislation wanted to resolve this problem by proposing intensive supervision and even training of advisers to be done by financial institutions.

This was pared back in the bill that finally passed through Parliament.

But the final version makes clear that advisers will still have to meet the codes of conduct that are imposed directly on large financial institutions.

The FMA document due out in the New Year will give more information on how this is to be achieved.