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. Most of these duties apply to everyone giving advice, but there are a few additional duties for licensed financial advice providers, particularly providers who engage others to give advice on their behalf. Here’s a summary of the main duties that apply to everyone who gives regulated financial advice to a retail client:
Operational resilience reporting
All reports relating to operational resilience can now be reported online via our online portal.
For more information on the notification process, please refer to Notification of incidents relating to the operational resilience of technology systems guide.
Notify the FMA via our online portal
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.
As a financial advice provider, you will have additional obligations, for example:
- Make sure anyone you engage to give advice under your licence complies with all the duties listed above.
- Have appropriate processes and controls in place when you engage nominated representatives. These should allow you to control the advice being given and the circumstances in which it is given.
- If you engage nominated representatives, ensure that you do not give, or offer to give, any inappropriate incentives.
- Tell the FMA if you materially contravene your obligations and must also let us know if you change the legal structure of your businesses or make certain other changes, such as changes in directors or senior people.
- Comply with any licence conditions we may include when granting your licence, including the standard conditions, and the licence conditions imposed by law.
General reporting
If any of the following occurs, the licensee or an authorised body must, as soon as practicable, send a report containing details of the matter to the FMA:
- The licensee or 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 licensee or an authorised body becomes aware that a relevant proceeding or action has been commenced or taken against the licensee, an authorised body, a director or senior manager of the licensee, or any of the key personnel of an authorised body.
- A director or senior manager of the licensee or any key personnel of an authorised body resigns, is removed or otherwise ceases to hold the office or position, or is appointed, employed or engaged.
- An auditor of the licensee or an authorised body resigns or otherwise ceases to hold office or is appointed (other than by way of reappointment).
- The licensee or an authorised body proposes to change its name or its legal structure.
- The licensee or an authorised body proposes to enter into a major transaction.
- The licensee or an 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 licensee or 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 your financial advice provider service.
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
- will set the focus for FMA’s risk-based monitoring approach
- 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.
If you would like to familiarise yourself with questions for the FAP regulatory returns you can find them here. The documents at this link are for information only; the actual regulatory returns data must be submitted through our online portal.
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.
Competence
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
There are disclosure obligations for those providing regulated financial advice to retail clients are detailed in the 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, including whether you are Reporting Entity under the AML/CFT Act, on the AML FAQ web page.