The Financial Advisers Act 2008 (FAA) classifies products according to their relative risk and complexity. Products considered to be low risk, and well understood by clients are specified as category 2. Products which are considered to be a relatively higher risk, and are of greater complexity are specified as category 1.
However, the FAA provides some flexibility in the categorisation of financial products and enables products to be re-categorised by way of regulation.
Accordingly, on 23 June 2011, Financial Advisers (Definitions, Voluntary Authorisation, Prescribed Entities, and Exemptions) Amendment Regulations 2011 were introduced. These re-categorised certain category 1 products as category 2 products.
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