What is a fair conduct programme?
A fair conduct programme (FCP) means effective policies, processes, systems and controls that are designed to ensure the financial institution’s compliance with the fair conduct principle. The FCP must be in writing. As an FCP consists of policies, processes, systems and controls, it could comprise a number of documents rather than being a single document.
We expect financial institutions to be able to identify all of the policies, processes, systems and controls that form their FCP.
Some financial institutions, particularly those with large and/or complex operations, may choose to create an overarching policy or framework document that explains the structure of the FCP and outlines the different policies, processes, systems and controls that comprise the FCP. Other financial institutions may determine that a single document is sufficient to capture their FCP.
Who needs a fair conduct programme?
Every financial institution must establish, implement and maintain an effective fair conduct programme (FCP) in accordance with the provisions of section 446J of the CoFI Act. Applicants will need to have an established FCP when applying for a financial institution licence. While we do not expect these to be fully implemented at the time of applying, we do expect the FCP to have been established, which includes being approved by the applicant’s board of directors.
information sheet that provides information and examples to help smaller Financial Institutions (FIs) establish, implement and maintain their fair conduct programme. It should be read alongside our other resources on FCPs and CoFI licensing.
What do we need to have in our fair conduct programme?
A fair conduct programme (FCP) means policies, processes, systems and controls that are designed to ensure the financial institution’s compliance with the fair conduct principle. A financial institution’s FCP must be in writing and must meet the minimum requirements set out in the CoFI Act. The Fair Conduct Programme (FCP) information sheet provides more details about establishing an FCP.
Who needs to approve our fair conduct programme?
We expect the fair conduct programme (FCP), to have the support of your governing body, which would generally be the board of directors. We expect the governing body to consider the adequacy and effectiveness of the FCP, and to provide final approval, to ensure there has been adequate oversight of its establishment.
Is there an element of proportionality in the new regime for financial institutions where products for consumers encompass a very small part of their business?
The CoFI regime and your fair conduct programme (FCP) only apply to the part of your business providing relevant services and associated products to consumers. Your FCP needs to be relevant to your business. If the part of your business providing products and/or services to consumers is small, then your FCP should be proportional to this and reflect the unique characteristics of your business.
Can financial institutions that are subject to another conduct regime elsewhere rely on their compliance with the overseas regime to comply with CoFI?
If you already have a programme in place that meets all the minimum requirements for an FCP under the CoFI Act, then you could rely on that programme to meet your obligations under the CoFI regime. However, your FCP needs to reflect the unique characteristics of your business in New Zealand. If you are using a conduct programme developed for an overseas regime, you will need to review and potentially adapt it to ensure that it is fit for purpose for your New Zealand business and that it supports your compliance with the fair conduct principle under CoFI.
What is the purpose of FIs making information about their FCP publicly available?
Under CoFI, financial institutions have a duty to make certain information about their fair conduct programme publicly available. The information is required to be published on an internet site maintained by, or on behalf of, the financial institution, and provided to any person on request.
This duty is not a formal disclosure requirement, or intended to provide the fundamental information that consumers rely on to choose a financial institution to provide them with financial products and services. Specific disclosure obligations already exist to cover the specific information needs of consumers, including in the Credit Contracts and Consumer Finance Act 2003 and the Financial Markets Conduct Act 2013.
Rather, the purpose of publishing information about FCPs is to assist consumers of financial institutions to more generally understand how their chosen provider should be treating them, which for example, may be relevant if an issue relating to unfair treatment arises.
What information about the FCP needs to be made publicly available?
The information to be made publicly available is a summary of key matters about the FCP that is in sufficient detail to assist consumers to –
- be reasonably aware of how the financial institution will comply with the fair conduct principle; and
- make informed decisions about dealings and interactions with the financial institution in relation to the relevant services and associated products that the financial institution provides; and
- understand how to make a complaint about those relevant services and associated products.
Subject to providing the above information, there are no specific requirements in relation to the format of the information, the length, or the specific content that should be included. It should however be in a summary form to help consumers digest it easily. It should also be dynamic, responding to changes in financial institutions’ practices, and updated to keep consumers accurately informed.
This means that financial institutions have the flexibility to tailor the information in relation to their business, consumers, products and services. Financial institutions are likely to want to align the format and style of the information about their FCP, with their other communications and website content, to ensure that it is relevant and useful for the consumers they deal with. For example, diagrams or audio-visual content may be included, and the information may be published in English and other languages commonly used by the financial institution’s consumers.
