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Compliance Training for Financial Institutions in New Zealand: A Guide to Preparing for the Conduct Regime

The financial services sector in New Zealand is gearing up for significant changes with the introduction of the Conduct Regime, which comes into force in early 2025. At its core is the Fair Conduct Programme (FCP), a crucial component of the regime that requires financial institutions to obtain a conduct licence.

Understanding the Fair Conduct Principle

The FCP must be designed to ensure compliance with the fair conduct principle, which requires financial institutions to:

  • Treat customers fairly by paying due regard to their interests
  • Act ethically and transparently
  • Assist customers in making informed decisions
  • Ensure relevant services meet customer needs
  • Not subject customers to unfair pressure or undue influence

Implementing the Fair Conduct Programme

To prepare for the regime, financial institutions must:

  • Design policies, processes, systems, and controls that support compliance with the fair conduct principle
  • Provide initial and regular ongoing training for employees on the fair conduct principle, relevant services, and processes and procedures that support compliance
  • Ensure their FCP is suitable for each institution’s business, meets at least the minimum requirements set out in the Conduct Act, and is implemented and maintained

Obtaining a Licence

Financial institutions will need to:

  • Demonstrate how they have considered the factors mentioned above
  • Ensure their FCP is approved by their governing body before applying for a licence
  • Have assurance processes in place to assess the effectiveness of their FCP and maintain it throughout the regime’s duration

Timeline and Preparation

Applications for licences will open on July 25, 2023, and while the regime won’t come into force until early 2025, timing is still tight. The Financial Markets Authority (FMA) expects financial institutions to have a plan in place to prepare their FCP now to meet the requirements.

Key Takeaways:

  • Financial institutions must prioritize compliance training to avoid last-minute scrambles
  • Institutions should not wait until the deadline to implement their FCP, as this will put them at risk of non-compliance
  • The Conduct Regime is a significant challenge for financial institutions in New Zealand, and it’s essential to be well-prepared to meet its requirements

By prioritizing compliance training and preparation, financial institutions can ensure they are well-equipped to meet the requirements of the Conduct Regime and maintain their reputation as fair and ethical service providers.