Adviser tips to prepare and meet the new regulations
Are you ready for 1 July 2011?

The Regulator may keep a close eye on the Financial Service Providers Register to find out what types of financial services you are registered to provide and they may cross check this with what you are communicating with your clients, through your website(s) and any other advertisements you put out into the public domain. If you are an AFA, then the Regulator may request to see your Adviser Business Statement (ABS). It is anticipated the Regulator will take a progressively harder stance, especially towards those advisers who have not made a major effort to embrace the new legislation and regulation. It is important you meet all your requirements so as to not come under the Regulator’s gaze. These notes provide some helpful tips on how to prepare for 1 July 2011.

What you should be doing now for a smooth transition

1. Make sure you are registered to provide all the types of financial services that you currently provide. It is worth visiting www.fspr.govt.nz to ensure that this is the case and confirm that you are not trading illegally. Where you have incorrectly selected a financial service that you are not providing, immediately remove that service.
2. Review the products and services you provide. If you are an RFA and not part of a QFE, then check your ENTIRE database to ensure you do not have any clients with Category 1 products. If you do have clients with Category 1 products, then take immediate steps to have them serviced by an AFA. The AFA you choose, must have the appropriate registration and authorisation to be able to service those clients. If you now have a new adviser (an AFA) servicing those clients, then that adviser needs to supply a disclosure statement to your clients, plus obtain the client’s approval to access their data. (This requirement will vary depending upon the original agreement signed between yourself and the client). Last but not least, talk to your clients who hold these products and introduce them to the adviser (an AFA) who you have made arrangements with.
3. Review all your marketing material, including the content of your website(s), to make sure you are not misleading your clients in any way. Let your clients know that the services you offer may change (if they are about to change from 1 July 2011 due to you not becoming an AFA). From 1 July 2011, any adviser advertising or marketing services when they are not licensed to do so will be breaching the ‘holding out’ and ‘misleading, deceptive and confusing conduct’ aspects of the law. The Regulator may be actively looking for instances of this and taking action.
4. If you know you are not going to meet the 1 July 2011 deadline for becoming an AFA, then review all your marketing literature and remove any references to products and services that only AFAs are permitted to provide. (The FMA has issued a number of warnings to advisers already relating to this issue).
5. Do not use the acronym AFA if you are not an AFA (meaning ‘Authorised Financial Adviser’), even if these letters mean (to you) something else (for example Associate Financial Adviser) and even where you may have been granted its use by a professional body.
6. If you are an AFA, make sure your marketing material and your advice documents (such as letter of engagement and Statement of Advice) do not convey an impression that the Regulator has endorsed your business or advice.
7. Where you intend to become an AFA, but may not become one by 1 July 2011, then put in place a supervision arrangement by talking to your Principal or fellow colleagues who are AFAs so that your work is supervised by an AFA and you do not provide advice to clients that can only be provided by an AFA.
   Contact Strategi to request a copy of the guidance notes, or see Supervising trainee advisers.
8. Prepare and have ready for issue to your clients, your Primary and Secondary disclosure statements (if you are an AFA) or your disclosure statement (where you are an RFA) and a secondary disclosure statement (where you are an RFA and a member of The Institute of Financial Advisers). Do not issue the new disclosure statements until 1 July 2011. You must NOT use your disclosure statement under the Securities Markets Act 1988 after 30 June 2011.
9. If you are an AFA, make sure your ABS is prepared and it fully describes exactly how your business operates.
10. Make sure your Operations Manual contains all the information that your ABS states it contains. Start to update your Operations Manual, where necessary, to reflect that your ABS is providing true and correct information (with any reference made in it to the Operations Manual).
11. Familiarise your staff with the changes that will happen from 1 July 2011.
12. If any of your staff are involved in dealing with clients (e.g. preparing and sending quotations on insurance products, or answering client calls when you are away), either consider getting them registered on the FSP Register or have a process in place to ensure they are not giving, or are perceived by clients as giving, financial advice.
13. Have a procedure to review your disclosure statement(s) and your ABS initially at least every quarter.
14. Fully adhere to the Code of Professional Conduct for Authorised Financial Advisers (Code) (if you are an AFA).
15. As a Best Practice approach, RFAs should voluntarily abide by the Code and work to the same professional standards as AFAs. They will be measured against these standards in the event of client complaints.
16. Make sure you have adequate Professional Indemnity insurance cover in place and confirm to your PI insurer whether you are an RFA or an AFA. If you intend to be an AFA but are not one as at 1 July 2011, then it is recommended you inform your PI insurer.
17. Remove from all disclaimers, brochures, websites and templates the phrase “A Disclosure Statement under the Securities Markets Act 1988... is available on request and free of charge.” There still needs to be reference to a disclosure statement being available on request and free of charge (but from 1 July 2011 it is no longer in accordance with the Securities Markets Act 1988).
18. If you have not already done so, do a search of all your documentation and change references to the Securities Commission to read the Financial Markets Authority.