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.
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.