FMA Reduces Third-Party Anxiety With COFI ‘Shared’ Update
Regulators have allayed concerns that third-party distributors may face additional legal burdens under the new Financial Markets (Conduct of Institutions) Modifications Act of 2022 (COFI) regime.
The Financial Markets Authority (FMA) said in its feedback on the “intermediary distribution” COFI consultation process released last week that the draft guidance referring to “sharing responsibility” would “cause confusion and impose legal obligations on intermediaries.” There are multiple proposals that claim that there is a possibility to suggest.” not one. ”
“References to ‘shared’ and ‘shared liability’ do not imply additional legal obligations to the parties beyond those already imposed under the CoFI,” the FMA said. “Rather, they are included to acknowledge that multiple parties are involved in intermediary distribution and dual CoFI and financial advice schemes that create different but related responsibilities regarding the fair treatment of consumers. .
“…our focus is on collaboration Between financial institutions and intermediaries where appropriate and necessary. We have clarified our guidance to recognize that not all restorations require cooperation, and that the degree of cooperation may vary depending on the situation. ”
Dentons Kensington Swan partner David Ireland said the FMA clarifications incorporated into the final guidance for COFI third-party distributors released last week represented an industry victory.
“It’s clear that the FMA has listened to the concerns of the industry,” Ireland said. “And it shows that consultation can be effective and why it’s worth filing.”
He clarified the “shared responsibility” relationship between COFI-regulated entities and external intermediaries, and said the FMA’s final guidance would require financial institutions to have “higher assurance” when dealing with peers. He said he was sure he could rely on it.
The draft guide already confirms that financial institutions can expect a lower level of oversight from their financial advice providers (FAPs) than from unlicensed intermediaries.
To help the industry better understand the regulatory approach to third-party distribution under COFI, Ireland said, “they have extended the example to include some more non-standard situations.”
In general, he said fine-tuned FMA guidance should reduce potential disputes between intermediaries and COFI-compliant institutions.
“The final guidance isn’t a silver bullet, but it’s more nuanced,” Mr. Ireland said. “This confirms that financial institutions do not need to scrutinize the insides of intermediaries.”
However, the conduct regime, which is due to be fully implemented in 2025, creates a two-tier financial product distribution system, with non-COFI operators such as non-bank fund managers and kiwi saver providers receiving different regulatory treatment. Same service while it could.
“In principle, the same themes of action could apply across financial institutions, especially for KiwiSaver,” Ireland said. “If at some point the government decides to expand the COFI system, it will only need to change the definition of ‘financial institution’ in the law.”
https://investmentnews.co.nz/investment-news/fma-eases-third-party-angst-with-cofi-sharing-update/?utm_source=rss&utm_medium=rss&utm_campaign=fma-eases-third-party-angst-with-cofi-sharing-update FMA Reduces Third-Party Anxiety With COFI ‘Shared’ Update