Most Read Contributor in New Zealand, September 2016
Prime opportunity to sort out financial advisers'
Terms of Reference for the much-anticipated review of the
Financial Advisers Act 2008 (FAA) and the Financial
Service Providers Act 2008 (FSPA) are now out – and
seem to offer a prospect for genuine reform.
The Ministry of Business, Innovation and Employment
(MBIE) will lead the review, which will run over 18
months. A discussion document will be released in May.
Scope of review
The review will cover the full operation of the FAA and FSPA
with a view to identifying any requirements that are
"unnecessary, ineffective or excessively costly".
MBIE's remit extends to other legislative regimes which are
"imposing undue compliance costs on the adviser sector".
In particular, MBIE will examine the impact of the Anti-Money
Laundering and Countering Financing of Terrorism (AMLCFT)
Act to ensure that any feedback is fed into any future changes to
Chapman Tripp intends raising problem areas such as beneficiary
identification, reliance on third party identification and whether
identification is needed for long term savings. Hopefully, the
impending 'Managing Intermediaries' exemption will go a
long way to aligning the requirements of the AML regime with the
reality of how client relationships are intermediated in the
financial services industry.
Outside the scope of the review are:
the development of strategies to promote financial literacy,
substantive changes to other legislation, unless consequential
to any amendments to the FAA or FSPA.
Topics which we think could be usefully addressed include:
the definition of who is a 'wholesale' client –
this is currently fragmented across the FAA, Financial Markets
Conduct Act (FMCA), Non-Bank Deposit Takers Act and Financial
Advisers (Custodians of FMCA Financial Products) Regulations 2014
the custody regime – the application of the Custody
Regulations and the FAA to the provision of custody services by
offshore custodians seems over-zealous and may result in New
Zealanders being unable to access offshore wealth management
the territorial scope of the FAA
the re-categorisation of certain products as either Category 1
or Category 2.
These are in addition to the issues we raised in a
commentary last year that looked forward to the review. Those
the alignment of FAA and FMCA - it is important that the FAA
allows advisers to advise clients on the exciting new capital
raising opportunities created in the FMCA through the new small
offer exemption and equity crowd funding and peer to peer lending
the porous definition of "investment planning
service" in the FAA gives rise to a range of boundary issues
affecting AFAs, and non-AFAs who voluntarily elect to apply AFA
Code Standard 8 (which requires an up-to-date understanding of the
client's "financial situation, financial needs, financial
goals and risk profile"), and
the boundary between personalised advice, class advice and no
MBIE's indicative timeline is set out below. It shows that
there will be many opportunities for industry participants to
engage with this process. We recommend early engagement to give
yourself the best chance of getting your issues and ideas included
in the reform agenda.
Key stages of the review process
" Analysis of the intervention logic
" Literature review
" Consumer focus groups
" Consumer surveying
" Adviser surveying
of 2015: Consumer surveying, supplemented by consumer
focus groups and adviser surveys
" Stakeholder meetings
" Consultation on the intervention logic and issues
" Open forums on issues paper
" Engagement through stakeholder forums
" Analysis of submissions
February-April 2015: development of issues
May-July 2015: public consultation on issues paper and
ongoing stakeholder engagement
Report to Minister:
" Report on the results of our research and issues
identification and outlining the options identification
" Statutory report on Part 2 of the FSP Act, with the
intention of further work in this area being undertaken as part of
the broader review
By 15 August
2015: statutory deadline for report on the operation of
Part 2 of the FSP Act
" Development of options to address key issues
" Discussions and workshops on options
" Release options paper for consultation
" Analysis of submissions
2015: release options paper for public consultation
Report to Minister:
" Overall findings of the review
" Recommendations on what, if any, legislative changes are
needed and a plan for these changes
" Tabling of report in the House
2016: statutory deadline for report to the Minister on the
operation of the FA Act
The information in this article is for informative purposes
only and should not be relied on as legal advice. Please contact
Chapman Tripp for advice tailored to your situation.
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