FMA gives finance firms conduct guidance

Financial Markets Authority CEO Rob Everett wants consumers to feel they their expectations are validated through a new conduct guide aimed at the financial services industry. Photo/Supplied.

Financial service providers have been told to put their customers' interests first in a new guide outlining how the regulator wants to see firms behave.

The Financial Markets Authority's has today released a conduct guide aimed at senior management in a bid make it clear what its expectations are under the new Financial Markets Conduct Act.

The act comes into full force on December 1 after the final stage of licensing fund managers is complete.

Rob Everett, chief executive of the Financial Markets Authority, said the guide aimed to make it clear what the regulator would be looking for should it have a reason to investigate a financial services business.

"What we are trying to do is, once the implementation is done, if you are licensed...these are the sorts of things we would be looking for."

Everett said it hoped by making its expectations clear that less poor conduct would appear.

The alternative was to "wave a big stick" when problems did occur but this was often too late for the aggrieved customer and could result in the poor behaviour cropping up in other places as well.

Everett hoped it would mean that "some of the things that have happened in other jurisdictions don't happen at all" in New Zealand and it had looked overseas to see what other regulators had done.

The guide was also designed to make it clear that boards and senior managers were responsible for the conduct and culture in the entire organisation and would be held to account for all staff.

"Boards have to think 'we own this' and don't blame the sales person."

Everett said it hoped the guide would help confirm consumer's expectations of the kind of treatment they would get from financial service providers.

Those include putting a customer's interests first and being clear about a person's remuneration.

We hope it will embolden consumers to feel their expectations are reasonable.

Rob Everett

The document is open to submissions until October 1.

Everett said it hoped to generate discussion on the document which would allow firms to get a better understanding of how to apply the conduct expectations in practical terms.

"This isn't supposed to transform the industry instantly but make it clear the mindsets and approach we want to encourage."

What the FMA wants to see:
• Whether the provider has the skills and experience to competently provide the right service or product to the customer, and can meet professional standards of care.
• Whether the cost of the product or service significantly reduces the provider's ability to meet the customer's needs, by significantly reducing the return they get from it.
• Whether the customer's interest and the provider's business interests are clearly aligned, and any arrangements with associated parties are transparent.
• Regardless of the appearance of alignment, whether the provider will actually act in the customer's interest, and has the attitude and behaviour that produces good conduct, from the leadership down.
• Whether the provider will act with integrity, fulfil their responsibilities and obligations, and act honestly and fairly.
• Whether the provider has checks and balances to support good conduct, and identify and address poor conduct (including complaints and disputes resolution).
• Whether the provider can convincingly demonstrate all of this in a clear, concise and compelling way.