The type of clients an adviser works with affects the type of adviser they are, and what they need to do to comply. The types of client are retail and wholesale.
Retail clients are any clients who are not considered 'wholesale' clients.
Wholesale clients are defined in s5C of the Financial Advisers Act 2008 and include:
- any other financial adviser or broker who receives the service in the course of business as a financial adviser or broker
- a person who is in the business of providing any other financial service and receives the financial adviser service or broking service in the course of that business
- a person whose principal business is the investment of money or who, in the course of and for the purposes of the person's business, habitually invests money
- an entity to which at least one of the following applied at the
end of each of the last two completed accounting periods
- at the balance date, the net assets of the entity exceeded $1 million
- the turnover of the entity (or a related body corporate) for the accounting period exceeded $1 million
- a local authority, a Crown entity, a State enterprise, the Reserve Bank of New Zealand, and the National Provident Fund
- a person who falls within one or more of the categories listed
in section 3(2), 5(2CB) or 5(2CBA) of the Securities Act 1978 if
the service relates to securities offered to that person or
subscribed for by that person in a private offer of securities. The
categories listed in these sections are:
• relatives or close business associates of the issuer or one of its directors
• recognised professional investors
• persons required to pay (or previously required to pay) a minimum subscription of $500,000
• other persons who have not been selected as members of the public
• persons invited to underwrite or sub-underwrite the offer of securities
• 'eligible persons'
- an 'eligible investor'
Note: Wholesale clients are also defined in section 49(2) of the Financial Service Providers (Registration and Dispute Resolution) Act 2008 for the purposes of determining whether a provider must be a member of a dispute resolution scheme. This definition is largely the same definition as the definition under the Financial Advisers Act, except for the eligible investor certificate requirements. However financial advisers should ensure their eligible investor certificates comply with the Financial Advisers Act requirements so that these clients are wholesale clients under both Acts.