MBIE releases new financial advice regime fact sheets
Yesterday, the Ministry of Business, Innovation and Employment (MBIE) released two new fact sheets on the new financial advice regime under the Financial Services Legislation Amendment Act 2019 (FSLAA):
- Engaging individuals through ‘interposed persons’ to give financial advice; and
- Can advisers be engaged by multiple financial advice providers?
Links to further fact sheets (listed below) can be found on the MBIE website.
- A new financial advice regime: factsheet
- Enforcement in the new financial advice regime
- Liability in the new financial advice regime
Who needs to read it? Why?
This is important for all business involved in the provision of financial advice and financial services or products.
What do the fact sheets cover?
Engaging individuals through ‘interposed persons’ to give financial advice
- An interposed person arrangement is where a Financial Advice Providers (FAP) engages individuals (Financial Advisers (FAs) and/or Nominated Representatives (NRs)) indirectly through one or more other entities (the ‘interposed persons’) to give advice on its behalf.
- An entity can only engage FAs or NRs through an interposed person if authorised by a licence condition.
- An arrangement is not interposed where individual FAs and/or NRs are engaged directly, i.e. as employees or contractors.
- It may be worth considering whether engaging an individual directly is feasible, as this would avoid the need for potentially complicated interposed person arrangements.
Can financial advisers be engaged by multiple FAPs?
- While it is possible for a FA to be engaged by more than one FAP, there is a risk that these multiple provider arrangements could lead to consumer confusion or harm.
- An individual does not need to be engaged by different FAPs in order to give advice about different types of products or different product providers’ products.
- FSLAA provides for licensing conditions to prohibit FAPs from engaging a FA that is also engaged by another FAP. Conditions may be imposed either by the Financial Markets Authority (FMA), or through regulations developed by MBIE, to prohibit particular types of arrangements if concerns arise with regards to how these arrangements are impacting on consumers.
- MBIE is not currently considering imposing licensing conditions through regulations to prohibit particular types of arrangements. However, licensing conditions may be imposed if it becomes apparent that there is potential for consumer confusion or harm.
- Those considering multiple provider arrangements will need to consider a number of factors. The fact sheet provides a non-exhaustive list of questions to consider.
The new fact sheets help clarify certain aspects on how the regime will apply. In our experience, however, these areas continue to be complex and require careful negotiation to ensure your chosen advice structure is robust, compliant and fit for purpose.
If you have any questions about the issues raised by these fact sheets, or are considering how FSLAA may affect your business, please contact one of our experts.
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