Knowing your new obligations is key to operating post 15 March 2021

Life as a financial adviser or FAP will not be the same as it is today. There are 5 major areas of compliance to embrace and have systems in place to prove compliance with these before 15 March 2021

Legal duties under the Financial Markets Conduct Act 2013 (as amended by FSLAA).

These include:

  • meet standards of competence, knowledge, and skill (431I);
  • ensure the client understands the nature and scope of advice (431J);
  • give priority to client’s interests (431K);
  • exercise care, diligence, and skill (431L);
  • comply with the new Code of Professional Conduct (431 M);
  • not recommend an offer that contravenes the FMC Act or regulations (431N);
  • make prescribed information available (4310); and
  • not make false or misleading statements and omissions (431P).

Code of Professional Conduct for Financial Advice Services.

The Code mirrors the FMCA duties listed above plus outlines the requirements for meeting competence, knowledge, and skill – NZCFS (Level 5) V2.

Standard conditions for transitionally licensed FAPs

All those who hold a FAP transitional licence must comply with the two standard conditions:

  • Record keeping
  • Internal complaints process

Both of these standard conditions may take a bit of time to set up and document in your business if you are doing from scratch. Strategi has templates as part of their Small FAP Operations Manual that will make this easy. Read the guidance note to understand the implication of standard conditions and what each involves.

Disclosure Regulations

The new disclosure regulations are very different to what you have been used to. There is now much more that needs to be disclosed. You need to know when the four stages of disclosure apply, how you disclose and what you disclose. The penalties are tough if you get it wrong. The Strategi Guidance Note: ‘New Disclosure Requirements for Financial Advice Providers’ provides all the information you need.

Product provider contracts

In addition to the legal bits mentioned above, there are now new contracts from product providers. These are much tougher than before and require FAPs and in some cases financial advisers to confirm that they are compliant with all the items listed above. Failure to remain compliant can lead to termination of the contracts and the cessation of trail commissions. A number of product providers are wanting confirmation from businesses that they will be compliant on 15 March 2021.