1. Compliance
  2. QFEs & QFE advisers
  3. Who needs to comply
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QFEs & QFE advisers

Page last updated: 21 Feb 2019

Who needs to comply

Qualifying financial entities (QFEs) are companies or organisations that are registered on the Financial Service Providers Register and have been granted QFE status. An organisation that employs a number of financial advisers may want to become a QFE.

The benefits of becoming a QFE vary for each organisation depending on:

  • the product category on which advice is given
  • whether the product is provided by the QFE (or QFE group) or a third party, and
  • whether advisers also provide an investment planning service.

QFE status enables an organisation to streamline the registration, disclosure, dispute resolution and supervision arrangements that will apply to its advisers under the financial adviser regime. In return, the QFE takes responsibility for its advisers' compliance.

Further discussion on the benefits and obligations of QFE status is set out in the QFE Adviser Business Statement Guide.

Types of QFEs

The Financial Advisers Act 2008 provides for two types of QFE:

  1. Single entity. The simplest QFE structure consists of a single legal entity employing a number of financial advisers. The QFE is responsible for the compliance of its advisers and nominated representatives with the Act.
  2. Partner entities. Two or more entities can join to become a single QFE. To apply for QFE status in partnership the entities must be related bodies corporate. These partner entities are jointly and severally liable for the compliance of the QFE advisers in all of the partner entities, as well as for the conduct of their nominated representatives, i.e. they share collective responsibility.

Every QFE and every partner entity of a QFE must comply with the terms and conditions of its QFE status.

Once QFE status has been granted, employees and nominated representatives who provide financial advice do not have to be individually registered and authorised. However, some of the QFEs' advisers will still need to be registered and authorised if they provide an investment planning service or give advice on category 1 products that are not provided or promoted by the QFE or QFE group. Find out more about the products a QFE adviser can sell.

A QFE is responsible for the conduct of all of the financial advisers it employs and can also take responsibility for advisers who are not its employees. These may include:

  • Nominated representatives - where a QFE nominates a person to provide financial adviser services on its behalf
  • Employees of associated entities - where a QFE applies to the Financial Markets Authority to approve the addition of one or more entities as associated entities of the QFE.

All of the advisers that a QFE is responsible for, including those it directly employs, nominated representatives and advisers in associated entities, fall into one of the following two groups:

  • QFE Advisers - individual advisers who are not Authorised Financial Advisers (AFAs)
  • AFAs - individual advisers who are registered on the Financial Service Providers Register and authorised by FMA. AFAs are individually accountable for their own behaviour and compliance with the Code of Professional Conduct for AFAs, and the QFE is also directly accountable for their conduct.

The QFE is responsible for the sound delivery of financial adviser services by its financial advisers and encouraging their professionalism and integrity. A QFE must ensure that its financial advisers comply with the obligations of the Financial Advisers Act 2008. It is accountable for the advice they give, whether they are authorised or not. The QFE sits between FMA and its advisers and is responsible for ensuring that they meet and maintain appropriate standards.

When applying for QFE status an entity must specify the procedures it has in place to train its advisers, demonstrate how it sets standards for advisers and how it monitors those standards.

What responsibility does a QFE take for its nominated representatives?

A QFE is responsible for ensuring compliance by each nominated representative with the terms and conditions of the grant of status (see section 76 (1) (a)) and is further responsible for ensuring compliance with each nominated representative's financial adviser obligations (section 76 (1) (d)). A QFE takes full responsibility for all of the financial adviser services provided by nominated representatives. It should take this into account in considering any nomination of an adviser particularly if it is contemplated that the adviser may provide services other than on behalf of the QFE, for example on their own behalf or for third parties.

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