All financial advice providers are regulated under the Financial Markets Conduct Act 2013 (FMC Act), as amended by the Financial Services Legislation Amendment Act 2019 (FSLAA) and need to meet certain duties and obligations. Here’s a summary of the main duties that apply to everyone who gives regulated financial advice to a retail client:
Code of professional conduct
Anyone giving advice to retail clients is subject to a new Code of Professional Conduct for financial advice services. This outlines the standards of conduct, client care, competence, knowledge, and skill you need to meet when giving regulated financial advice to retail clients in New Zealand. The Minister of Commerce and Consumer Affairs approved the Code of Conduct in May 2019. It takes effect from the start of the new regime on Monday 15 March 2021.
A person who gives financial advice must:
Part 1: Ethical behaviour, conduct and client care
1. Treat clients fairly
2. Act with integrity
3. Give financial advice that is suitable
4. Ensure the client understands the financial advice
5. Protect client information
Part 2: Competence, knowledge and skill
6. Have general competence, knowledge and skill
7. Have particular competence, knowledge, and skill for designing an investment plan
8. Have particular competence, knowledge and skill for product advice
9. Keep competence, knowledge, and skill up-to-date
Visit the Code of Professional Conduct for financial advice services website
Duties
If you give financial advice to retail clients, you must:
- Take reasonable steps to ensure your clients understand the nature and scope of the advice being provided, including any limitations about that. For example, you must explain if you’re only able to give advice about certain products.
- Where there’s a conflict of interest you must give priority to your client’s interests. Download the customer care – managing conflicts of interest self-assessment tool PDF to help your FAP get ready to meet this duty as part of preparing to apply for a full licence.
- At all times exercise care, diligence and skill.
- Comply with the new Code of Professional Conduct for Financial Advice Services requirements for ethical behaviour, conduct and client care and meet the competence, knowledge and skill requirements.
- Only recommend financial products to clients that are offered in compliance with the FMC Act and its regulations.
- Ensure you follow the new disclosure regulations and that any information you make available to clients is not false, misleading or incomplete.
Where an authorised body is a financial advice provider, it must also:
- Make sure anyone it engages to give advice under the licence complies with all the duties listed above.
- Have appropriate processes and controls in place when it engages nominated representatives. These should allow it to control the advice being given and the circumstances in which it is given.
- If it engages nominated representatives, ensure that it does not give, or offer to give, any inappropriate incentives.
- Comply with the standard conditions in the Financial Advice Provider licence and the general reporting condition.
Competency
As a financial advice provider, it’s your job to ensure your advisers and nominated representatives meet the competence, knowledge and skill standards set out in the Code of Professional Conduct.
Disclosure
The disclosure obligations for those providing regulated financial advice to retail clients. These are detailed in regulations 229A to 229J of the Financial Markets Conduct Regulations 2014.
Publicly available information
- If a Financial Advice Provider has an internet site, it must make certain information publicly available in order to help retail clients find a provider that meets their needs (see regulation 229C).
Disclosures relating to advice
Certain other information must be given to retail clients when:
- the nature and scope of the advice becomes apparent in order to enable clients to make an informed decision about whether to seek, obtain, or act on the advice (see regulation 229D); and
- the advice is given (if not before) in order to help clients make an informed decision about whether to act on the advice (see regulation 229E).
Complaints information
- If a complaint is made, the person making the complaint must be given information about the complaints and dispute resolution process (see regulation 229F)
More details about the information required to be disclosed can be found in Schedule 21A of the regulations here.
Requirements for form and manner of disclosure
The regulations include general requirements for the form and manner of disclosure (see regulation 229H).
All disclosures must be
- presented in a clear, concise, and effective manner;
- given prominence if presented with other information;
- in a format, font, and type size that are easily readable if given in writing; and
- free of charge.
You can also make information available or give information in the form and manner you reasonably consider appropriate, having regard to any stated purpose of the relevant regulation (see regulation 229H(3)).
For example, provided all other requirements are met, including a way to allow a recipient to readily store disclosure information in a permanent and legible form, disclosure of information through an email with a prominent hyperlink may be appropriate.
In this context, prominence may require a suitable warning as to the nature and importance of the information.
AML/CFT
Financial Service Providers registering or filing their annual confirmation on the Financial Service Providers Register are required to declare if they are captured under the Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) Act 2009 as a Reporting Entity and who they are supervised by.
Find out more about your AML/CFT obligations on our AML web page
General reporting
If any of the following occurs, the authorised body under a Financial Advice Provider licence must, as soon as practicable, send a report containing details of the matter to the FMA:
- The authorised body is, or it is likely that either will become, subject to an insolvency event, or a director or senior manager of the licensee or any key personnel of an authorised body is adjudicated, or is likely to be adjudicated bankrupt (whether in New Zealand or overseas).
- The authorised body becomes aware that a relevant proceeding or action has been commenced or taken against the authorised body or any of the key personnel of the authorised body.
- Any key personnel of the authorised body resigns, is removed or otherwise ceases to hold the office or position, or is appointed, employed or engaged.
- An auditor of the authorised body resigns or otherwise ceases to hold office or is appointed (other than by way of reappointment).
- The authorised body proposes to change its name or its legal structure.
- The authorised body proposes to enter into a major transaction.
- The authorised body becomes aware that a transaction or an arrangement has been entered into or is likely that a transaction or arrangement will be entered into that will result or has resulted in a person obtaining or losing control of the authorised body.
Annual regulatory return
All licensed FAPs are required to complete and submit an annual regulatory return. The regulatory return is a series of questions to obtain an up-to-date understanding of the nature, size and complexity of the financial advice provider service.
NOTE: Authorised bodies are not required to submit their own regulatory returns. The licensee will include the activities of all the authorised bodies under its FAP licence when submitting the regulatory return. Only one regulatory return is to be submitted regardless of the number of authorised bodies under the FAP.
Licensees will be required to complete an annual regulatory return for the 12-month period ending 30 June and submit it to the FMA by 30 September.
We will notify all licensees when it is time to complete and submit the regulatory return. The first reporting period will be 1 July 2023 to 30 June 2024. Completed returns will be due by 30 September 2024. We will provide guidance and expectations to assist with completing the first regulatory returns.
The information you provide us through the annual regulatory return helps us to:
- better understand the profile and business of FAPs and the financial advice sector
- more effectively and efficiently target our resources, and focus monitoring and surveillance activity on areas of highest potential risk
- ensure our resources are best directed to help promote the statutory objectives of the FMC Act, which include promoting the confident and informed participation of businesses, investors, and consumers in the financial markets, and the development of fair, efficient and transparent financial markets.
View all related document on the FAP regulatory returns page
Standard conditions for FAP licences
Record keeping
- You must create timely and adequate records in relation to your financial advice service.
- You must keep records for at least seven years.
- Your records must be available to be inspected and reviewed by the FMA.
Download the Standard Conditions for FAP licences PDF
Tools and help available
Internal complaints process
Summary of what’s required
- You must have a process for resolving client complaints.
- Complaints must be dealt with in a fair, timely and transparent manner.
- You must keep records of all complaints, including the date the complaint was received and any action you took including if no action was taken then the reasons why.
For more information, download the Standard Conditions for FAP licences PDF.
Tools and help available
Regulatory returns
You must provide information to the FMA on a periodic or ongoing basis, or on request, in accordance with the requirements set out in a Regulatory Return Framework and Methodology. The requirements are presently not yet in place and the FMA will consult with the industry prior to publication of the requirements.
Outsourcing
Summary of what’s required
- You must ensure that the providers of any systems or processes you outsource to are capable of performing the service to a standard that meets your licence obligations. The condition only relates to those outsource arrangements where you rely on the outsource provider to meet your licensee obligations.
Tools and help available
Business continuity and technology systems
Summary of what’s required
- You must have and maintain an up-to-date business continuity plan that’s appropriate for the scale and scope of your financial advice service.
- If you use any technology systems that are critical to the provision of your financial advice service you must ensure the information security of those systems is maintained.
- You must notify us within 10 working days of you discovering any event that materially impacts the information security of your critical technology systems.
Tools and help available
If applying for a FAP licence
Ongoing requirements
Summary of what’s required
- You must continue to satisfy the requirements for licensing at all times while you hold your full licence. The requirements are specified in sections 396 and 400 of the FMC Act. These requirements include (not an exhaustive list) your directors and senior managers remain fit and proper persons, you are capable of effectively performing its service, there is no reason to believe you are likely to contravene your obligations and you are registered on the FSPR.
- There are similar requirements for your authorised bodies, including that arrangements are or will be in place to ensure that you maintain appropriate control or supervision over the provision of the service by the authorised body.
Notification of material changes
Summary of what’s required
- You must notify the FMA if you implement any material change to the nature of or manner in which you provide your financial advice service. The notification must be made, in writing, within 10 working days of implementing any such material change. For example, if you change your compliance approach to relying on procedures, change your systems and expertise, commence to engage any financial advisers or nominated representatives where you were not previously permitted under your licence class, etc.
- This notification requirement is in addition to the statutory notification obligation which requires notification of certain matters such as resignation or removal of directors, senior managers and key personnel of your organisation or an authorised body etc. Refer to Regulation 191 of FMC Regulation and section 412 of the FMC Act for the statutory notification obligations.
