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Financial Markets Conduct Act 2013

Licensing and other regulation of market services - Regulating conduct of financial institutions - Duties relating to incentives regulations

446M: Meaning of incentive

You could also call this:

"What is an incentive: a reward for doing something, like getting money for selling a product."

Illustration for Financial Markets Conduct Act 2013

When you hear the word incentive, it means a reward or benefit that someone gets for doing something. In the context of financial services, an incentive is something you get if you are involved in providing a service or product. You might get this incentive because of the number of services or products you provide, or because of how much they are worth. You can get an incentive in different forms, such as money or a holiday, and it can be given to you directly or indirectly. The incentive can be based on how well you do your job, like selling a certain number of policies, or it can be based on how well your team does.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=LMS1428475.

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Part 6Licensing and other regulation of market services
Regulating conduct of financial institutions: Duties relating to incentives regulations

446MMeaning of incentive

  1. In this subpart and section 546, incentive, in relation to a relevant service or any associated product, means a commission, benefit, or other incentive (whether monetary or non-monetary and whether direct or indirect) that is offered or given to a person (A) if—

  2. the commission, benefit, or other incentive is offered or given to A in connection with A (directly or indirectly) being involved in the provision of the service or the products; and
    1. A’s entitlement to the commission, benefit, or other incentive, or the nature or value of the commission, benefit, or other incentive, is determined or calculated in any way by reference (directly or indirectly) to the volume or value of the services or products.

        1. Examples

        A person (A) is given a bonus based on A’s individual performance in selling life policies. A’s performance is measured by reference to the value of the premiums payable. The bonus is an incentive.

        A person (A) is a manager of a team of people who sell life policies. A will be entitled to a paid holiday if the team sells a certain number of life policies. The paid holiday is an incentive.

      1. Subsection (1) applies—

      2. regardless of whether A’s entitlement, or the nature or value, is also determined or calculated by reference to 1 or more matters unrelated to the volume or value of the services or products involved:
        1. regardless of whether A’s entitlement, or the nature or value, is determined or calculated by reference to a target or other threshold:
          1. whether A is an intermediary or is an employee or agent of a financial institution or an intermediary.

            1. Determining or calculating a matter by reference to the volume or value of the services or products involved includes (without limitation) determining or calculating the matter—

            2. by reference to the number of consumers to whom the services or products are provided or the number of contracts entered into (for example, the number of bank accounts opened, the number of credit cards issued, or the number of policies underwritten); or
              1. by reference to any amount paid or payable in connection with the services or products (for example, fees, charges, commissions, interest, or premiums); or
                1. by reference to any amount related to the services or products (for example, the amount of credit advanced under a consumer credit contract); or
                  1. by reference to a person’s performance compared to others in relation to the volume or value of the services or products involved; or
                    1. by reference to a person’s performance in a period in relation to the volume or value of the services or products involved compared with their own performance in another period; or
                      1. by reference to avoiding or preventing something in connection with the volume or value of the services or products involved; or
                        1. on a linear basis (that is, on a per service or per product basis).

                          Notes
                          • Section 446M: inserted, on , by section 12 of the Financial Markets (Conduct of Institutions) Amendment Act 2022 (2022 No 36).