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Why good conduct matters


At its most basic level, conduct is about how people and firms behave. Standards, systems, processes and controls are all necessary to provide the best outcomes for investors – but ultimately, it comes down to the conduct of individuals.

 

When financial service providers act in their customers' interests, it builds confidence in individual providers and the market as a whole.

Good conduct leads to greater depth and resilience in our financial markets, as well as increased investor participation. 

Better conduct, better customer outcomes

To reduce the risks and harms outlined in our Strategic Risk Outlook 2017, we must work together with those we regulate, rather than in isolation. Our role is not to be the ‘culture police’ of financial service providers. Good conduct needs to be designed, built and maintained by each firm individually. 

We acknowledge there is no one-size-fits-all approach. We do not intend to be prescriptive or rigid about how licensed businesses and individuals deliver good customer outcomes. What we do expect to see – and want to see more of – is providers operating in a way that puts customers first.

The FMA’s guide to our view of conduct states that firms need to aim for good customer outcomes in every decision, disclosure and interaction they make. Where we see they haven’t done that, we will take appropriate steps to address actionable misconduct. 

Our focus on investor outcomes is reflected in our investor entitlements guide, which explains what consumers should expect from a financial service provider.


“Customer knowledge of financial markets and products varies widely. Providers should be particularly sensitive to this and show how they have taken steps to minimise the risk of misunderstandings and poor customer outcomes.”

- FMA’s guide to our view of conduct


 

Applying a conduct lens

When we interact with regulated firms and individuals, we apply what we call our ‘conduct lens’ to any issues we identify. This consists of five areas that convey how we expect financial service providers to treat their customers.

 

  • Listen to customers
  • Help customers understand products and services
  • Ensure good communication across the whole organisation


  • Have the skills and experience to provide the right products and services
  • Meet professional standards of care
  • Seek continuous improvements through training


  • Serve business and customer interests
  • Disclose and discuss conflicts
  • Explain related party arrangements


     
  • Maintain systems to support good conduct
  • Seek continuous improvements
  • Effectively manage complaints and disputes transparently


  • Act in the interests of customers
  • Treat customers honestly and fairly
  • Conduct expectations communicated clearly by leaders and understood by staff
  • Address poor conduct; recognise and reward good conduct