While the Financial Service Providers (Registration and Dispute
Resolution) Act 2008 (FSP Act), which provides a regulatory
framework for registration of all financial service providers,
received Royal Assent on 29 September 2008, much of the detail is
to follow in Regulations yet to be promulgated.
The FSP Act prohibits any person from being in the business of
providing financial services or holding out that they are in the
business of providing financial services unless they are registered
under the Act.
The business of providing a financial service does not have to
be the only, or even the principal, business of that person.
Certain persons such as lawyers, chartered accountants, tax
agents, and real estate agents will not be covered by the FSP Act
if the financial services they provide are a necessary incident of
their professional practice. A specific exemption is also provided
for non-profit organisations that provide free financial
A wide range of entities are affected by the FSP Act, with the
definition of 'financial service' being very broad.
Those caught will include, amongst others, banks, building
societies, credit unions, participants in the offering of
securities to the public such as trustees, promoters and managers
of security issues, money transfer services, finance companies,
credit providers, foreign currency exchanges, and insurers. The Act
also applies to credit, not just to investment services.
Aimed at providing a simple and low cost avenue for consumers to
seek redress, the FSP Act also requires all persons who provide
financial services to the public to belong to a dispute resolution
The FSP Act is to be implemented in stages. The part of the Act
relating to applications for approval of dispute resolution schemes
came into force on 30 September 2008. No date has been set for Part
2 of the Act (registration of financial service providers) or
section 44 (the obligation of financial service providers to be
members of a dispute resolution scheme).
The current indication is that the FSP Act will come fully into
force by the end of 2010, alongside the Advisers Act, to enable
financial service providers time to comply with the new
requirements. Despite this transition period, financial
institutions and individual financial service providers should
begin the initial compliance preparation, as the changes brought by
the Act are considerable.
Questions still remain as to how some provisions of the FSP Act
will work in practice.
In respect of the requirement that financial advisers belong to
a dispute resolution scheme, the FSP Act envisages that there will
be more than one scheme. Issues have been raised by industry
regarding the desirability of having more than one scheme. The
Institute of Financial Advisers (IFA) has highlighted the cost and
a single entry point for consumers as incentives for a single
scheme to be pursued.
The fact that only 'consumers' and small to
mediumsized businesses and organisations will be able to make
complaints to a scheme is also at odds with the requirement that
all financial service providers must belong to a scheme. In what
appears to be a drafting oversight, a financial service provider
who provides no services to consumers at all must still maintain
membership of a scheme, even though none of its customers may
access that scheme.
In addition, the FSP Act does not apply to persons providing
financial services from offshore to a person in New Zealand and
therefore offers no protection to the public in New Zealand dealing
with offshore financial service providers.
We expect substantial developments in 2009 around the
implementation of the FSP Act, which we expect will follow
extensive consultations with the financial services industry.
Phillips Fox has changed its name to DLA Phillips Fox
because the firm entered into an exclusive alliance with DLA Piper,
one of the largest legal services organisations in the world. We
will retain our offices in every major commercial centre in
Australia and New Zealand, with no operational change to your
relationship with the firm. DLA Phillips Fox can now take your
business one step further − by connecting you to a global
network of legal experience, talent and knowledge.
This publication is intended as a first point of reference
and should not be relied on as a substitute for professional
advice. Specialist legal advice should always be sought in relation
to any particular circumstances and no liability will be accepted
for any losses incurred by those relying solely on this
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