FMA Sets Out Full Licence Conditions for New Zealand Financial Advisers

Source: Regulation Asia Editors, Regulation Asia 2020-06-18

In a consultation paper, the FMA specifies three distinct classes of financial advice provider licences, to allow applicants to apply for the licence that best suits their circumstances and business structures.

New Zealand’s FMA (Financial Markets Authority) has opened consultation on the proposed full licence standard conditions for financial advice providers.

The new financial advice regime emerged in the aftermath of conduct and culture reviews of banks and insurers, and will require financial advisers to obtain a licence from the FMA obliging them to treat consumers fairly and prohibit incentives based on volume or value sales targets.

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Initially, anyone providing financial advice to retail clients in New Zealand is required to operate under a transitional licence, held either by advisers individually or by the firms they work for.

The process for full licensing will be more comprehensive than for transitional licenses, where the FMA will consider whether applicants and authorised bodies are capable of effectively performing the financial advice service.

The consultation sets out eight standard conditions for full licences: record keeping, internal complaints process, regulatory returns, outsourcing, professional indemnity insurance, business continuity and technology systems, ongoing capability, and notification of material changes.

“The capabilities that we will assess at full licensing will depend upon the scope of financial advice service of each financial advice provider included in the application,” the FMA said.

As such, the consultation specifies three different classes of financial advice provider licences, to allow applicants to apply for the licence that best suits their circumstances and business structures:

1、Class A licences will apply to sole practictioners who give advice on their own, as part of a one-adviser business

2、Class B licences will apply to firms that have multiple advisers or authorised bodies, but no nominated representatives

3、Class C licences will apply to businesses that have engaged nominated representatives or another entity to provide financial advice

The three classes, along with the tailored questions and assessments based on the complexity of the financial advice provider structure, will ensure the application process is straightforward, particularly for small advice businesses, according to FMA Director of Market Engagement John Botica.

“We’re pleased to open this consultation as it will give financial advisers further clarity on their obligations under the new regime.”

The consultation, available here, is open for comment until 7 August.

The FMA will start accepting full licence applications when the new legislation takes effect, which is anticipated to be no earlier than March 2021. The start date of the new regime was delayed earlier this year to provide relief to the financial advice community amid the coronavirus outbreak.

However, the FMA has continued to process and grant applications for transitional licences. To date, 800 transitional licences have been granted, accounting for an estimated 5,800 financial advisers – over half the current number of authorised and registered financial advisers in New Zealand.

In May, the FMA’s funding was increased in part to help it prepare for the new financial advice regime.

FMA

financial advice provider

FMA Sets Out Full Licence Conditions for New Zealand Financial Advisers

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