It passed with no sign of the Supplementary Order Paper (SOP) that critics have been counting on to resolve “defects” in the bill.
However, it is understood the SOP has been written and is out for consultation with selected interest groups.
The COFI bill will impose a code of conduct on institutions such banks, insurers or non-bank deposit takers. But it will also cover intermediaries such as brokers and advisers.
According to Financial Advice New Zealand, that is needless repetition, since advisers are already complying with existing law, the Financial Services Legislation Amendment Act of 2019 (FSLA).
This administers the FAP regime, which advisers are already facing up to at a considerable cost in time and money.
But far from acknowledging this overlap, Labour speakers doubled down on the merits of their law.
One speaker, Ingrid Leary of Dunedin South, told parliament that far from imposing tough rules on companies, it was equalising a “David and Goliath” relationship between banks and their customers.
Leary added intermediaries should definitely be covered by the law, along with financial institutions, and in fact should be investigated by financial institutions that use them as though they were employees.
“Firms have an onus to do criminal record checks on their intermediaries...they should have robust processes in place for dealing with misconduct.”
Leary also rebutted complaints that COFI overlapped and duplicated existing rules. Far from bringing needless complexity, the rules would be “complementary, acceptable and would not cause confusion.
“The Minister has seen the mischief in the market and has moved to rebalance things for the consumer,” Leary said.”
Another Labour MP, Helen White was even more enthusiastic.
“I am glad to see principles like this come into our law …. because these things hurt real people.”
But the Act MP Karen Chhour told parliament studies by the Reserve Bank and the Financial Markets Authority (FMA) found very few problems that needed to be fixed.
And she said the Insurance Brokers Association argued the bill would reduce the numbers of people giving advice and reduce the amount of information available to be disseminated.
“Institutions already have policy in place and (the COFI bill) will simply impose more regulation and bureaucracy,” Chhour said.
National MP Simon Watts was even more savage.
“What you will hear from the other side of the house is that this legislation is out to protect the consumer.
“But what I heard was an ideological attack on big bad banks.”
Watts said the banks employed thousands of people and in attacking them, the Government was attacking those people.
Nor was the law needed - it was a solution looking for a problem – and was not backed up by research from either the FMA or the Reserve Bank
“Time and time and time again we see an increase in the cost burden (imposed by Government) on hard working Kiwis in this country. This legislation will bring an increase in red tape on businesses and the cost will be passed on to the consumer,” Watts said.
Despite these arguments, the COFI bill progressed to its next stage by 77 votes to 42. Labour, the Greens and Te Pati Maori supported the bill, Act and National voted against.
This bill dates back several years but the Government is determined to get it through by mid-year.
Meanwhile, Financial Advice NZ is still holding out for the SOP in the hope that it will ease some of its concerns. Its chief executive Katrina Shanks has said her talks with Government officials on this matter have gone well, but no details are available.
