Conduct of Financial Institutions Amendment Act (CoFI)
The Conduct of Financial Institutions Amendment Act (CoFI) is a New Zealand regulatory requirement aimed at improving the conduct and culture of financial institutions. The act introduces new obligations for financial institutions to prioritize fair customer outcomes and manage conflicts of interest.
Key Aspects of CoFI
- Fair Conduct Programme: Financial institutions must have a Fair Conduct Programme (FCP) in place, which outlines their approach to prioritizing fair customer outcomes and managing conflicts of interest.
- Conflicts of Interest: Financial institutions must identify and manage conflicts of interest that may arise from their business activities.
- Regulatory Requirements: The act sets out specific requirements for financial institutions to meet, including the need for a FCP, conflict management policies, and customer outcomes prioritization.
Consequences of Non-Compliance
Penalties for breaches of CoFI include enforcement action, fines, orders for compensation, suspension or cancellation of licenses, and reputational damage.
Preparing for CoFI
To prepare for CoFI, financial institutions should:
- Designate a Responsible Person: Agree internally on who will be responsible for designing and delivering the implementation program.
- Conduct Meaningful Conversations: Allow time for meaningful conversations about what CoFI seeks to achieve and the shift that their organization needs to prioritize fair customer outcomes.
- Understand Minimum Requirements: Understand the minimum requirements for a Fair Conduct Programme and identify existing policies, procedures, and controls that need updating or revising.
- Establish a FCP: Establish a FCP and prepare a high-level plan to implement and maintain it.
CoFI Readiness
PwC offers a Four Step Model to approach CoFI readiness:
- Assess Current State: Assessing current state of conduct risk framework, policies, and practices.
- Develop Uplift Plan: Developing and preparing a CoFI uplift plan that is workable and business stakeholders buy in to.
- Draft FCP: Drafting a Fair Conduct Programme that allows robust, efficient, and transparent governance.
- Assess FCP Readiness: Assessing FCP and licence application readiness.
PwC’s specialist resources will be available at each step to support clients. This may include leading elements of their uplift programme, reviewing amended documents to check that they contain all the elements needed, or providing real-time Subject Matter Expert guidance.