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On 15 March 2021, the Financial Services Legislation Amendment Act 2019 (FSLAA) amended the Financial Markets Conduct Act 2013 (FMCA). This overhaul of financial advice law affected anyone who gives financial advice in New Zealand. The law aims to ensure the availability of financial advice for persons seeking that advice, and ensure the quality of financial advice and financial advice services (FMCA, section 431B).
The law requires anyone who gives regulated financial advice to retail clients to have, or be engaged under, a financial advice provider licence issued by the Financial Markets Authority (FMA).
When financial advice was brought under the Financial Markets Conduct Act 2013 on 15 March 2021, industry regulation changed from supervising individuals, to licensing and supervising financial advice providers (FAPs). With this change came an expectation that licensed FAPs possess the systems and processes necessary to continue providing financial advice if a key person becomes unavailable.
These licensed FAPs can be anything from a group of companies with hundreds of financial advisers and nominated representatives, to an entity with one person who can give financial advice – which may be a company with one financial adviser, or a licensed FAP who is a sole trader. More than three quarters of licensed FAPs are at the smaller end, with two or fewer financial advisers.
Prepared by Cygnus Law, we are presenting a guide which summarises the new disclosure obligations of financial advice providers (FAPs) & financial advisers set out in the Financial Markets Conduct Regulations 2014 (Regulations).
The new disclosure obligations apply from 15 March 2021 and replace disclosure obligations at law prior to that date. The new disclosure obligations are part of wider reforms of the regulation of financial advice services from that date. There are related obligations in the Financial Markets Conduct Act and the Code of Professional Conduct for Financial Advice Services(Code). We consider some of those related obligations in this guide.
What is PI Insurance?
PI Insurance is a topic most businesses don’t pay very much attention to. Typically, you will have an understanding of whether you have obtained it or not and if so, for roughly how much. Compliance Refinery sat down with Clinton Stanger and Michael Robertson for 90+ minutes (yes that’s right, 90+ minutes on PI) and discussed; what PI insurance is and covers, how it should be incorporated into FAP governance and some key features not commonly known. We established 4 key tips for all FAP’s and financial advisers;
Read your policy: Know and understand the wording, manage the risks and understand the areas not covered by your PI.
Notify, notify, notify: Call your PI provider early in the complaints process.
Keep good records: Client file notes are often the difference between a short defense
and a long, stressful expensive one.
Review your business structure: Assess your business structure and who needs PI cover.
If you have a complex model, engage your PI provider now. A complex structure would include a structure where an Adviser is in two different FAP’s.
FAP licensing doesn’t only incorporate regulatory requirements. Other variables can impact potential business structures and PI cover is definitely one of those.
The regime around financial advice is changing and compliance is a regulatory requirement. The Privacy Act is being updated after 27 years (1993). This Act governs how individuals, organisations and businesses; collect, use, disclose, store and give access to personal information. In New Zealand, our approach is to apply these general principles called ‘information privacy principles’, derived from principles set out by a working group in the OECD in 1980. These principles were implemented to cover the life cycle of personal information through an agency. Agency is defined in the Act as ‘a person or body of persons whether corporate or un-incorporate’. Therefore, agencies must comply in relation to personal information which can identify an individual. Given the level of complexity, infinite variety and the enhancements within the technology space, the contextual nature of privacy has adapted. We are grappling with the question of how we deal with the implication of the new-fangled technology and the personal computer.
The concern on privacy has been increasing at a steady rate. The Privacy Commissioner has qualified these results through surveys completed every few years. In light of these concerns, the Law Commissioner has reviewed this Privacy Act and noted the following results; the fundamentals of the privacy act operate efficiently, however modernising is a crucial requirement. This Act has been completely rewritten to modernise the language and add the following seven key changes.
