22 December 2010

New Conditions for Qualifying Financial Entities

(Media releases from the Securities Commission)
22 December 2010

The Securities Commission has published the standard conditions Qualifying Financial Entities (QFEs) will need to abide by when their employees and representatives give financial advice.

As the new regulatory regime for financial advisers takes effect over the next six months many entities will become QFEs, including large institutions such as banks and insurance companies.

"Under the new regime, some consumers may get advice from Authorised Financial Advisers (AFAs) while others may choose advisers at larger institutions," said Commissioner for Financial Advisers, David Mayhew

"AFAs are governed by a formal code of conduct. We've put in place these conditions for QFEs in line with the legislative intent that consumers should receive equivalent protection whether they choose an AFA or a QFE adviser. The fundamental principle is that the QFE takes responsibility for the QFE adviser.

"The QFE conditions were developed in consultation with industry and I acknowledge their input.

"This is one of the last building blocks for the new regime and is fundamental to promoting public confidence in advisers' professionalism and integrity."

In addition to conditions about the QFE maintaining procedures to ensure retail clients receive adequate consumer protection, they specify a range of requirements including regulatory notifications, record-keeping and disclosure.

"In particular, the disclosure obligations are critical," Mr Mayhew stressed. "We want consumers to receive meaningful information that helps them choose an adviser and decide whether to follow the advice given. Disclosure conditions take effect from 1 July 2011."

The gazetting of standard conditions for QFEs tomorrow (Thursday 23 December) opens up the way for the first entities to be granted QFE status. An entity must comply with the conditions from the date it becomes a QFE.

The standard conditions are published on the Commission's website www.seccom.govt.nz.

Licensing update

  • The Commission is currently reviewing Adviser Business Statements (ABS) from 80 prospective QFEs. The ABS is a prerequisite for obtaining a QFE licence.
  • The first QFE licences are expected to be granted in late January when these standard conditions come into effect and the entities have finalised their registration and licence application processes.
  • There are now 24 licensed Authorised Financial Advisers (AFAs).
  • 202 AFA applications have been received by the Commission.


Contact Rebecca Barclay 04 471 7666