Consultation on new financial advice regime exemptions

  • Legal update

    16 August 2019

Consultation on new financial advice regime exemptions Desktop Image Consultation on new financial advice regime exemptions Mobile Image

The Financial Markets Authority (FMA) has released a consultation paper on potential exemptions under the new financial advice regime.
The Financial Services Legislation Amendment Act 2019 (FSLAA) will repeal the Financial Advisers Act 2008 (FAA) and insert into the Financial Markets Conduct Act (FMC Act) the new regulatory regime for financial advice. The new regime is expected to start in June 2020.

View our previous discussions on the timing of the new regime, passing of the FLSAA and the approval of the new Code of Professional Conduct for Authorised Financial Advisers (Code).

Who needs to read it? Why?

This consultation is important for any person or entity currently giving regulated financial advice or providing client money or property services under an exemption from the FAA, as well as their advisers and other interested parties. When the FAA is repealed, those exemptions will end and unless the FMA grants new exemptions, those people will need to meet the full FSLAA requirements.

The FMA is also seeking feedback on specific questions on exemption support for Australian licensees.

What does it cover?

The consultation paper discusses three matters where the FMA thinks it may be useful to continue existing FAA exemption relief to support effective operation of the new FSLAA  financial advice regime:

  • Overseas custodians – the assurance engagement notice, that exempts overseas custodians who hold client money or client property relating to an FMC Act financial product from the requirement to get an assurance engagement with a New Zealand auditor
  • Australian licensees – the Australian licensees notice, that exempts Australian-regulated licensed financial services firms providing financial adviser services in New Zealand in limited circumstances
  • Australian qualified advisers – the Australian qualified advisers notice, that exempts Australian advisers who meet certain qualification requirements from the educational competency requirements under the current Code

The consultation paper also discusses four matters where the FMA thinks existing FAA exemption support will no longer be required given expected changes in the law:

  • Recognition of alternative qualifications – the Certified Investment Management Analyst notice which exempts Authorised Financial Adviser applicants from Code Standard 16 of the Code.
  • NZX and non-NZX brokers – the NZX Brokers Client Money and Client Property notice and non-NZX Brokers Client Money notice
  • Personalised digital advice – the Personalised Digital Advice notice which enables named entities to provide personalised digital advice services to retail clients
  • Offers of financial products through Authorised Financial Advisers supplying personalised Discretionary Investment Management Services (DIMS)– in particular, the FMC Act statutory exclusion from the standard disclosure regime for offers of financial products made through a licensed DIMS provider.

Schedule 2 of the consultation paper contains further discussion relating to Australian licensees and their representatives, in particular:

  • the exemptions from new regime requirements for Australian licensees and their representatives which are likely to be required;
  • conditions relating to Australian licensees that may or may not be still be required; and
  • 10 specific questions, in which the FMA is seeking feedback on, relating to exemption relief, conditions under the existing Australian Licensee notice, and specific requirements.
Our view

The new regulatory regime for financial advice will affect all persons and entities in the financial advice space. Legislative tools, such as exemptions designations, will help modify the standard requirements to effectively support the operation of the new regime to different parties.

It will be important to continue to provide exemptions for those providing services from overseas to New Zealand recipients.

What next?

Submissions on the new financial advice regime exemption close at 5pm on Friday, 13 September 2019.

If you have any questions in relation to the consultation, the new FSLAA financial advice regime, or would like assistance with submissions, please contact one of our experts.