Delay to the new financial advice regime
The Minister of Commerce and Consumer Affairs has agreed that the start of the new financial advice regulatory regime set out in the Financial Services Legislation Amendment Act 2019 will be delayed from 29 June 2020 to early 2021 (March at the earliest).
The Financial Markets Authority’s (FMA) announcement is available online.
Who needs to read it? Why?
All financial advisers and those providing financial advice services should read the FMA’s announcement. The Financial Advisers Act 2008 (FA Act) will continue to apply to the provision of financial advice before the introduction of the new regime.
What does it cover?
The new financial advice regulatory regime has been delayed until early 2021. The latest date permitted under the Financial Services Legislation Amendment Act 2019 (FSLAA), is 1 May 2021, and the announcement indicated it would not be before March 2021.
The new Code of Professional Conduct for Financial Advice Services and the disclosure regulations that were due to be made this month will also be delayed. The FMA will communicate the new start date to financial advice providers, expected to be at the same date as the new regime starts.
The announcement did not address whether the amendments also made by FSLAA to the Financial Services Providers (Registration and Dispute Resolution) Act 2008 (FSP Act) will also be deferred – but we understand from MBIE that this is the case, and the FSP Act changes will come into effect at the same time as the financial adviser regime. Those changes include modifications to the application of the FSP Act so that providers which are required to be reporting entities for Anti-Money Laundering and Countering Financing of Terrorism Act 2009 (AML-CFT Act) purposes are required to be registered whether or not they have a place of business in New Zealand.
In the meantime:
- the current FA Act continues to apply;
- transitional licensing will remain open. Applications will be processed when FMA resources are available and in time for the new start date in early 2021;
- those who have already submitted applications for a transitional licence will not need to reapply; and
- all transitional licences granted by the FMA will come into effect at the start of the new regime.
The extension is part of the Government’s response to the COVID-19 pandemic. The delayed introduction of the new regulatory regime is intended to ease the regulatory burden on financial advice providers experiencing operational and financial pressures as a result of COVID-19. The FMA has delayed the introduction of the new regime to allow financial advice providers to deal with urgent matters arising from the COVID-19 pandemic.
The delay is another step the Government (including the FMA) has taken to support the financial services industry while New Zealand unites against COVID-19.
It will be greeted with a sigh of relief across the financial services sector. Even before the COVID-19 State of Emergency was declared, the timelines were tight, with the final disclosure regulations still not available.
The event of COVID-19, with the lockdown in particular, made it impossible for financial advice providers to be ready in time – for example, the restrictions on movement would make face-to-face training impossible during that period. Financial advisers are not considered an essential service by FMA, and therefore are working from home. The announcement means there will be further time for planning and presentation.
Financial advisers will also need to reflect on the implications of the current FA Act regime applying for at least another eight months. It may be that some will need to reconsider proposed initiatives to use the greater flexibility contained in the new regime.
The Government is making many announcements as the COVID-19 situation develops. The FMA recently announced further updates to the list of essential services. Our update is available here. We will continue to update the content regularly.
MinterEllisonRuddWatts moved ahead of the Government’s designation of Level 4 to play our part in reducing the risks for our clients, our people and the community. We are pleased that our people, systems and processes have responded well. While our physical offices are closed, we are fully open for business and remain available to support you and your business throughout this period.
If you have any questions in relation to how COVID-19 may affect your business or how to prepare for the new financial advice regime, please contact one of our experts.
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