Financial Markets Conduct Amendment Bill

I seek leave to present a legislative statement on the Financial Markets Conduct Amendment Bill.

ASSISTANT SPEAKER (Greg O’Connor): Leave has been sought for that course of action. Is there any objection? There is none. That legislative statement is published under the authority of the House and can be found on the Parliament website.

Hon SCOTT SIMPSON: I move, That the Financial Markets Conduct Amendment Bill be now read a first time. I nominate the Finance and Expenditure Committee to consider the bill. At the appropriate time, I intend to move that the bill be reported to the House by 20 October 2025.

I’m pleased to be progressing another bill from the package of financial reforms that I’ve mentioned earlier this evening. A strong financial services sector is crucial for a healthy and growing economy, and it’s crucial to help New Zealanders save, borrow, and invest. It can play a key role in the Government’s going for growth plan, and, as I’ve said previously in this House, successive reforms have made the laws around financial services too complex and this has placed a huge compliance burden on businesses. This bill is another step towards cutting this red tape. It will simplify and streamline conduct requirements for firms, give the Financial Markets Authority greater power, and remove unnecessary compliance costs. By updating the Financial Markets Conduct Act and the Financial Markets Authority Act, the bill will ensure that financial markets conduct regulation is fit for purpose.

The bill has a number of key elements: firstly, adjustments to the conduct of financial institutions—sometimes referred to as CoFI—regime. The bill makes changes to this regime, which came into force earlier this year. CoFI sets out financial institutions’ obligations for treating their customers fairly, otherwise known as fair conduct principles. This involves setting minimum requirements that these firms must meet. Most people agree that the overall intent and framework of CoFI is sound. However, feedback from some corners has made it clear that some requirements are overly prescriptive, are causing unnecessary duplication with other regimes, and are not being flexible enough. This could reduce the products or services available to consumers, or add additional costs being added to them and passed on.

The bill simplifies these minimum requirements to address these concerns, including training and supervising staff, maintaining clear communication and transparent pricing for customers, resolving complaints effectively, and meeting existing requirements under legislation like the Credit Contracts and Consumer Finance Act (CCCFA), some of which may be removed. These changes will make it easier for firms to comply with their obligations and reduce compliance costs, while still making sure that they treat customers fairly.

Secondly, the Financial Markets Authority—or the FMA—has a siloed approach to issuing conduct licences to firms. Now, this can result in multiple licences for a single firm. Just as an example, there is a firm that holds four separate licences from the FMA. This means separate application processes and separate, ongoing compliance costs. The bill requires the FMA to issue a single licence to firms. All current licence holders will have their existing licences automatically consolidated into a single one. This will reduce administrative burden as they will not need to apply for this or pay a fee.

Thirdly, more effective monitoring. This Government is committed to ensuring the FMA has the regulatory tools and powers to do its job effectively. The bill will give the FMA the power to inspect a firm’s place of business without notice, to monitor compliance, and to act quickly to reduce potential harm to consumers. These inspections are standard around the world. It isn’t a new power in New Zealand—the FMA’s predecessor, the Securities Commission, had this ability. The FMA also already conducts on-site inspections with the consent of firms. This bill enables the FMA to take a more proactive role to monitor compliance where this may be needed, and only at a reasonable time and in a reasonable manner. The bill also adds a new rule that licensed firms must get approval from the FMA before major ownership changes. This lets the FMA check how the changes might affect customers.

Lastly, there are some smaller, technical changes that the bill makes aimed at cutting red tape and improving the operation of the legislation.

In conclusion, this bill delivers much-needed reforms to financial service conduct regulation. Most importantly, both businesses and consumers will be better off thanks to these changes. Businesses will see less compliance burden and costs while still being held to account to ensure that they treat consumers fairly. I’m confident these changes will make a real, positive, and excellent difference for Kiwis in their day-to-day lives and in their interactions. As such, I commend this bill to the House.

The question is that the motion be agreed to.

Mr Speaker, thank you for the opportunity to take a call on this bill, one of three that is designed by the Government to reform some of the rules which protect consumers in our financial system. This bill is one that Labour opposes because it weakens the intent of the conduct of financial institutions regime—that is, CoFI—before it has really had a chance to bed in and take effect.

We are going to consider it very carefully at select committee. But what we’re very aware of is that this is going through in a package of reforms where the Government has made a very big call to tip the balance in favour of the big banks—two of them that are in court now—and to take away those rights that have been accrued by consumers over a period of time.

So we agree with consumer advocates and those who have been commenting on the bill in the public that this sort of regime only works when people buy into it: when the institutions buy into it, when the people operating within it buy into it, and when consumers buy into it and have trust in the Government to play an even hand and be a fair referee in playing off between the rights of consumers and the way that the financial institutions, effectively, use their power to resolve disputes. It’s in that context, where the Government is asking people to look at this regime and say, “Yes, we are taking away some of those rules of fair play that are in consumers’ favour now, but we still want you to believe that this is about improving things for you.”—that deserves a level of scepticism, because this bill is tilted in the interests of financial institutions, ahead of those New Zealanders who deserve a fair deal when they deal with their bank or their insurer.

The CoFI Act was passed to fix real problems. There was a period of time when if you were walking down the main street in Manurewa, there were three loan sharks on the main street—three institutions that were offering loans with rates above 30 percent, which in some cases, effectively, were above 50 percent, related to goods. Those were unreasonable loans. They were loans that people were getting themselves into very easily in New Zealand, and in no country that we like to compare ourselves to was there a comparable market for credit where young people, vulnerable people, and single mothers, as my colleague Reuben Davidson has spoken about—people who already had large debts—were then taking on these sorts of consumer loans that could end only in hardship for them and their families.

It’s on that backdrop that we are very, very careful to tilt the balance away from consumers in this. The New Zealand market is only now recovering from that. I’m really proud that Labour’s interventions in the market meant that those loan sharks are gone. Every electorate MP will know where they were in their electorate. They are not there any more because of this law, and it’s that law that we are tinkering with tonight.

The role in creating CoFI after the financial conduct authority and the Reserve Bank found that those systemic problems in the banking and insurance sectors did exist was about products designed with customer outcomes in mind. It was also about the sales incentives that rewarded volume over value and it was about the weak internal controls for managing risk and conduct within those institutions, and these are the sorts of powers that we need to be very careful of because we change. This bill would change the requirements around staff training, conduct monitoring, and programme reviews, which risks undermining the cultural change that happened in the market at that time and which is still working its way through the system.

We do support efficient regulation, but not at the expense of customer protection. Removing those key guardrails under the guise of simplification puts people at risk of poor advice and exploitative sales practices. The banks and the institutions will come to select committee and they will say, “This is not something that we do.” It’s not something that they do, because it is illegal now. They did it before it was illegal, and this was something that the Labour Government and the National Government at the time, prior to the Labour Government taking office, wanted to focus on and were proud to be on the side of consumers about.

The proposed changes risk turning CoFI into a compliance exercise—a tick box—rather than a framework that ensures people are treated fairly by their financial institutions. Those are the questions Labour will be asking at select committee. We do not support this bill.

I rise to speak on the Financial Markets Conduct Amendment Bill. As others have noted, this is one of three bills that we are potentially debating tonight, which is part of a broader reform package by the Government. It’s a pretty mixed bag of a reform package by the Government. On the one hand, as we saw in the previous debate, they’re basically handing out a gift to ANZ and ASB by nature of retrospective changes, and in this case, it has a series of changes to minimum requirements for fair conduct programmes, which, again, is a mixed bag. We do think this one does deserve further scrutiny in the select committee and we’re comfortable supporting it to select committee, but we do think that necessary changes are needed for us to feel comfortable supporting it at later stages.

This bill does some concerning things, such as reducing the level of prescription for requirements relating to training employees, as well as removing the requirements to regularly review the effectiveness of fair conduct programmes. I think these changes do feel unnecessary, particularly in relation to making sure that the workforce in some of these places are well equipped and trained, but, at the same time, we also do think there is scope to unpack at the select committee the issue around communicating the price of services or products, and this needs to be worked in such a way that there is genuine accountability, as well, and that some of the reforms in this bill do not become a tick-box exercise, as the previous member mentioned.

In the Greens, we do think the Government should consider broader reforms holistically, and it’s not just about serving to big business with one hand and then doing a few reforms here and there for the consumers. We’ve got to look at the environment that the Government is creating when it comes to whether they’re leaving consumers better or worse off as part of those broader reforms.

These three bills should be debated separately and scrutinised separately at the select committee stage, but at the same time I think they all are, one way or another, interconnected, and if we are not able to see that the Government is genuinely working to tilt the balance towards consumers as opposed to some of those big institutions, we would have no option but to oppose this bill as well, as we did with the previous one. It’s really important that the Government does not just give lip service to addressing the cost of living, when some of these bills actually end up doing the very, very exact opposite of that.

We, once again, encourage people to submit, particularly people who have been failed by some of the institutions that these bills are addressing, and particularly in areas where predatory companies are proliferating still and are taking advantage of consumers. Whether you’re working full time or are maybe currently unemployed, your contribution matters equally, despite what other members of the Government have said in previous debates. With that, I’ll end my call, and I look forward to this bill receiving adequate scrutiny in the select committee.

Thank you, Mr Speaker. I rise on behalf of ACT to speak on the Financial Markets Conduct Amendment Bill. Well, the financial services sector is certainly getting a bit of attention tonight, isn’t it? We do actually have, obviously, three bills on the Order Paper. We’ve got through one of them, this is the second one, and there is a third one, as some other members have pointed out.

Actually, all of these bills have been on the Order Paper since they were first introduced on 31 March, so—just to make sure that everyone at home understands—these haven’t just appeared in the last few days. They actually have been on the Order Paper and introduced in the House for some time, and so this really is just a natural part of us finally getting to this business. I’m very pleased that this bill will be coming to the Finance and Expenditure Committee, a very hard-working committee which I am lucky to be a member of.

This particular bill is really quite simple. It is part of these three bills, and, as the Green member Ricardo Menéndez March rightly identified, they are actually interconnected. I’m sure that by having them all in front of the same select committee, we can make sure that things are brought together as we look through and scrutinise these properly. This is a bill that’s looking just to remove some undue compliance costs, improve outcomes for consumers, and really ensure that consumers and customers remain fairly treated, but we’re also getting rid of some of the heavy-handed regulation and really getting rid of this tick-box exercise and giving more flexibility to firms about how they achieve fair outcomes and provide information to customers about pricing, ensuring they resolve complaints quickly. But we don’t want to be micromanaged by the regulator, so that’s really where this fits in.

Obviously, in ACT we’re very keen about getting away from over-regulation and making sure that there are good outcomes by just having clear rules and strong incentives, but not bureaucratic checklists. I think that this bill ticks those boxes.

It will move towards a single-licence model for financial services, so, rather than firms having to hold multiple licences, they’ll be able to have one overarching licence for all the different financial services they do. We have got some other things around reducing duplication and costs and making sure that the Financial Markets Authority (FMA)—you know, we’re really creating greater clarity. So we do think that this is a common-sense, red tape - busting bill. As you know, in ACT we want to allow business and consumers in New Zealand just to get on with providing services, so we do think that these three bills together are actually going to modernise, really, the financial services industry in New Zealand.

While this is just one bill—and, as I said, it’s a fairly simple bill—it is another step in the right direction to just make sure that the regulatory and legal settings in this very important area are fit for purpose and are actually delivering for people. Really, it does continue to ensure that we support consumer protection by making sure that there are clearer conduct standards. There’s market efficiency by reducing duplication. It’s streamlining licences and regulatory agility, and making sure the FMA has tools and oversight capabilities that are fit for purpose. So I commend this bill to the House.

Thank you, Mr Speaker. I rise on behalf of New Zealand First to support the Financial Markets Conduct Amendment Bill. It just seems like a blink of my eye ago that I was up here talking about the Credit Contracts and Consumer Finance Act, so—

Hon Member: That’s right.

JAMIE ARBUCKLE: —as other speakers—that was right. Other speakers have outlined the purpose of the bill. It is going to be important, through the Finance and Expenditure Committee, to examine this bill but also the other two bills that make up the three financial bills that are a part of this package.

This bill is a step in strengthening our financial markets and protecting New Zealand consumers and—most importantly—supporting economic growth, and that’s what this side of the House is all about. The bill is a demonstration of the Government’s commitment to ensure that there are fair and transparent financial systems in this country. These changes are all about creating a more stable environment for businesses, and that’s definitely what this side of the House will be supporting.

We’ve heard from previous speakers about the on-site inspections. This will allow the Financial Markets Authority (FMA) to do checks on financial firms around compliance, so that’s a good incentive. This change is also about ensuring a high standard of accountability for our financial institutions.

In summary, by reducing compliance costs, streamlining regulation, and enhancing the FMA’s oversight, this legislation will foster a robust and efficient financial sector. I commend the bill to the House.

As Ryan Hamilton so eloquently said earlier, this is part of a “Holy Trinity” of financial reform, with this being the second bill that we have had the first reading on. It will go to the Finance and Expenditure Committee for scrutinisation over the next five or so months before it gets reported back, so the work has only just begun.

It’s good to know that some people are tuned in. I just got a text from some friends, Gary and Lesley Monk. They are watching, so we know that at least two people in Takapuna are watching, possibly helped by Lesley having had keyhole knee surgery, so she can’t go anywhere. But I recommend these debates for those that are trying to wind down this this evening.

But back to the bill—as I can see you looking at me, Mr Speaker. This bill amends the Financial Markets Conduct Act 2013 and the Financial Markets Authority Act 2011. The bill, as we’ve said, is part of our financial services reform package. It will simplify and streamline regulation of our financial services, it will remove—

Dan Bidois: Sounds good.

CAMERON BREWER: —Mr Bidois—undue compliance costs for financial market participants, and—Suze Redmayne, you’ll like this—it will improve outcomes, ultimately, for consumers. I commend the bill to the House.

Thank you, Mr Speaker. What’s pretty apparent, having heard the speeches from the other side of the House, is they don’t actually know what the conduct of financial institutions (CoFI) legislation does. They just know that it’s something to do with the consumer and finance and insurance sector. What CoFI does is it puts the consumer at the centre of the regulatory framework of financial institutions, and, in fact, in the election campaign, Andrew Bayly said that he was going to do away with it. He thought that the whole CoFI regime was just too much. Well, the Government is not quite doing that, but it is certainly watering it down.

It’s worth remembering that CoFI was put in place after the banking inquiry in Australia and the Reserve Bank inquiry in New Zealand found that the finance sector was structurally deficient in that it was designed, in a sense, around the profit margins of financial institutions and not the interests of customers, so the CoFI regime actually requires financial institutions—particularly, when selling financial products—to put the interests of the consumer first. The evil that is being addressed here was things like people being sold insurance products like income insurance when they were unemployed or, on one occasion, even being sold a life insurance policy when they were dead.

Now, when you’ve got commission frameworks that go simply to volume—how much can you sell—that’s what happens. The reason we have a CoFI framework is because not only are the prohibitions on those kind of commissions important, but so is the training around what financial advisers are expected to do, and how they’re expected to take into account and balance the interests of their customers with their own commercial imperatives and also, across the organisation as a whole, how the organisation needs to make sure that from management to sales, they are making sure that they are not providing products which aren’t fit for purpose, which don’t do the job, or which aren’t needed by the consumer.

So it’s all very nice to say that we’re going to lower compliance costs, but the real question is—and we’re not convinced that that’s the case, and that’s why we’re not supporting this bill. The real question is “Will the CoFI regime, as watered down by this Government, still protect consumers from exploitation?”, because that is what was going on.

So whilst it’s all very nice to say “Let’s have a single regulator.”, we want regulators who know what they’re doing, who know their sector, and who have sectorial expertise. Now, the Financial Markets Authority (FMA) does do a good job. It has got good expertise in there, but we’re not sure that moving to things like having a single regulator or a single licence is the appropriate thing in a very diverse industry, and we are concerned that the Government has listened very carefully, because—you’re right—the finance industry doesn’t like compliance. They don’t like having to demonstrate that they have good practices and procedures within their organisation which are subject to licensing and oversight by the FMA and others, but taking that away may create much greater problems.

Insurance and financial products are an important part of our economy. They provide long-term income for savers and security against catastrophe, and if we undermine confidence in that market by deregulation, then we have a real problem. Whilst we agree with the purported objective of having an efficient regulatory system, what we are seeing is, in fact, simply a watering-down of the protections of consumers and, again, this Government listening carefully to lobbyists and being influenced by them, and that’s why we won’t be supporting this bill.

Thank you very much, Mr Speaker. I just wish to come back to what my colleagues said, which was that the Financial Markets Authority does have good people in there, but this is actually about making sure they’ve got the right processes and that we’ve got the right processes in the financial sector, so that it runs efficiently for the benefit of consumers and for the businesses, as well. This is part of the “Holy Trinity”, as my colleagues Cameron Brewer and Ryan Hamilton have both aptly put it. This is the second bill out of the “Holy Trinity” that we’ll be discussing tonight, and I commend this bill to the House.

Thank you, Mr Speaker. I expect my contribution will be a little longer than that of the previous member, because whilst he suggested such strong support for the bill, he was barely able to sustain more than 30 seconds to speak to it. I would suggest that that contribution was slightly less bearable than the keyhole knee surgery that another member mentioned was having to be tolerated by someone who then had to tolerate his speech on this, the Financial Markets Conduct Amendment Bill.

Now, I think it’s worth drawing an analogy here. I think it’s like saying to a team that turns up to Saturday sport, “Hey, team, the good news is that the fair play rules are out the window today. What we’ve done is, rather than just having two teams equally matched, instead what we’re going to do is put you up against some much, much bigger players. It’ll be really good. You’ll be fine—I’m sure they’ve got your best interests at heart. Not only that, as well as the players being a whole lot bigger than you, we’ve also decided that we’re just going to change some of the rules today and you’ll figure it out as you go along. We’ll just let you know as we go what rules have changed.”

You can imagine that the smaller team—and those members on the other side will have no trouble imagining what it is like to be part of a smaller team—will think, “Could it get any worse?” The bad news is that it does because there’s also not going to be a ref. So all of a sudden, you’re going to be out on the field, playing against much bigger teams, the rules have changed, and there’s no one there to be the ref, because that’s, ultimately, what the conduct of financial institutions (CoFI) legislation was there to be.

CoFI was there to be the referee, and without time to bed in properly and to be able to really make the most of the role that had been created for CoFI, instead, this team, with their “Holy Trinity” of bills, have ridden in and said that they want to remove administrative burden. Well, “administrative burden” sounds like reasonable guardrails. Administrative burden can be exactly the kinds of rules and regulations you need in place to make sure that smaller players—that’s individual consumers—have a fair chance up against some very big operators, which is some of our bigger banks. The opposite to administrative burden would be consumer protections, and I think that’s what we’re actually talking about.

We also had reference in some people’s speeches to simplifying the requirements, and we’re getting used to this simplification. It’s simply cuts, and we’ve had a lot of them from this team. One of the things I think is really dangerous in this bill is the removal of training and monitoring—so removing the requirements around legal obligations and removing the requirements about regular reviews of fair conduct, which, ultimately, really places consumers at risk.

Ultimately, what is this bill doing? This bill is taking away protections that consumers need. I talked earlier in my contribution on a previous bill about some of the harm that was caused to communities by loan sharks, and that is just the tip of the iceberg. There are literally stories of people who have taken out a loan who have come home to find a “For Sale” sign in front of their home, and who have been told by loan sharks, in front of their children, that they are going to take their home. This is not someone who has defaulted on their mortgage; this is someone who has taken out the kind of loan you’d take out to make sure that you’ve got the school uniforms that your kids need or that you’re able to buy the car that you need to get to work or to get to study. Ultimately, their homes are on the line as a result, and their children are scared by loan sharks at the gate putting up “For Sale” signs.

So you might want to talk about cutting the red tape and making things easier, but my question is: who are you making it easier for? It is not for consumers; it’s for the big guys. It’s for that team on that field at Saturday sport that already have all the odds stacked in their favour, and this kind of decision—this kind of bill—stacks it even more unevenly.

For far too long, New Zealanders have faced a complex and costly maze of financial regulation. It’s pushed up prices, it’s slowed innovation, and it’s locked up consumers from better financial services, and that is why the National Government is fixing that. As a member of the proud Finance and Expenditure Committee and also as the last speaker to speak on this bill, I look forward to hearing all the public submissions and making sure we create it fair for all New Zealanders. I commend this practical bill to the House.

Bill read a first time.

The question is, That the Financial Markets Conduct Amendment Bill be considered by the Finance and Expenditure Committee.

Motion agreed to.

Bill referred to the Finance and Expenditure Committee.

Instruction to the Finance and Expenditure Committee