Key insight

FMA findings and recommendations

The fair conduct principle

The requirement to establish, implement and maintain an FCP that complies with the fair conduct principle. This provides an opportunity for financial institutions to reflect on its conduct and culture and how it treats customers fairly.

The FMA recommends that financial institutions continually build on their FCPs as the CoFI regime matures. 

Financial institutions should reflect on what the fair conduct principle means within the context of their business, its relevance to their operations, and how it connects to their specific policies, procedures, systems and controls. 

Making the FCP relevant

An FCP needs to be relevant and proportionate to a financial institution’s business.

Considering nature, size and complexity when developing an FCP allows financial institutions to focus on what is most relevant to them.

The FMA suggest that financial institutions can demonstrate how they have considered the specific factors that characterise their business when establishing their FCP, for instance explaining their consumer base and the specific details of their services or products. 

Policies, processes, systems and controls (PPSC), and the FCP structure 

The framework that financial institutions use to support their FCP should be relevant and proportionate

As there are no prescriptive requirements regarding structure, financial institutions should design their FCP based on what works best for the business. 

The FMA recommend financial institutions consider who their FCP is written for, how easy it is to access and use relevant information, and whether information is presented in a clear way.

Products and services

The FMA want consumers to have access to appropriate products and services that meet their needs.

FCPs must include PPSCs that relate to product design, distribution and review, to ensure consumers continue to receive fair treatment and their objectives are being met

The FMA recommend financial institutions consider the impact their products and services will have on consumers and how these are designed, marketed, sold and managed – ensuring consumer outcomes are considered at all phases of the product (or service) lifecycle.

Types of consumers, including those in vulnerable circumstances 

The FMA wants to ensure consumers, especially those in vulnerable circumstances, are treated fairly by financial institutions.

Financial institutions are required in their FCP to have regard to the types of consumers they deal with, including those in vulnerable circumstances.

Financial institutions should understand who a vulnerable consumer might be in the context of their business and what fair treatment looks like for those consumers.

The FMA recommends that financial institutions regularly communicate with their consumers to monitor whether their circumstances have changed, and their objectives are being met. 

Similarly, the FMA recommend financial institutions engage with third-party support groups such as charities, counsellors, and support services, to improve their understanding of vulnerability.

Distribution methods and the use of intermediaries 

The FMA wants financial institutions to treat consumers fairly, regardless of the distribution channel they use. 

The FMA want financial institutions to have distribution methods that are fit for purpose, to maintain clear oversight of intermediaries, understand the risks associated with different distribution methods and have PPSCs in place to mitigate these risks, and record this information in their FCP.

Training

Training programmes need to be relevant, proportionate and tailored to the FI’s business. 

The primary purpose of training is to ensure employees understand the fair conduct principle and what they need to do to treat customers fairly.

The FMA recommend financial institutions have in place appropriate controls to ensure that employees have completed and understood any training, and be able to evidence this (i.e. a training register).

Complaints process

The FMA wants consumers (and others who wish to do so) to be able to make a complaint easily, and to ensure that financial institutions have processes in place to deal with these efficient, fairly and in a timely manner.

The FMA see complaints as an opportunity for financial institutions to get insights into their business and potential areas of conduct risk. 

The FMA observed most FCPs outline the complaints process but could provide more information on how financial institutions use complaints data in terms of analysis, reporting and addressing conduct risk.

The FMA also recommend that financial institutions have adequate processes for monitoring complaints from or relating to intermediaries, if applicable.

Conduct risk

The FMA want financial institutions to identify, monitor and manage conduct that fails to comply with the fair conduct principle, and to have clearly defined roles, responsibilities and accountabilities in place for managing those risks.

The FMA recommend financial institutions consider whether the PPSCs they have in place allow them to do this, in a way that is proportionate to their business. These PPSCs should be effective and enable the financial institution to respond to risks swiftly and escalate matters where necessary.

The FMA wants financial institutions to have appropriate assurance and governance processes in place to assess the effectiveness of their FCP.

These processes should be proportionate to the nature, size and complexity of the financial institution’s business and include regular reviews, as well as ad hoc reviews in response to trigger events. 

Finally, the FMA observed that treating consumers fairly is not a “set-and-forget activity”.

The FMA recommends financial institutions foster a culture that proactively identifies, monitors, and manages both current and evolving risks relevant to their business, and the implications for consumer outcomes.

As financial markets change, financial institutions must continuously assess and adapt their FCPs.