Important developments on disclosure requirements for financial
Commerce Minister Simon Power introduced the Financial Services
Providers (Pre-Implementation Adjustments) Bill
(Bill) to Parliament on 8 December.
The Bill is designed to simplify the implementation of the
Financial Advisers Act and reduce compliance costs that will be
borne by the financial services industry in implementing the new
regulatory regime. The Bill also contains technical amendments to
the Financial Service Providers (Registration and Dispute
The majority of the proposed amendments to the Financial
Advisers Act focus on the QFE regime. Under these proposed
Bonus bonds, call building society shares, call debt securities
and term life insurance policies are now prescribed as category 2
QFEs will be able to name representatives (ie contractors and
agents) whose advice they will take responsibility for.
Exemptions relating to companies, organisations and Crown
organisations have been extended to employees of these
The ability to provide financial advice or conduct investment
transactions in relation to a QFE's category 1 products
(without being an authorised financial adviser) will be extended to
the QFE's named representatives. This is currently only
permitted in respect of the QFE's employees.
QFE employees and named representatives will be able to provide
financial advice or conduct investment transactions in relation to
products for which the QFE is promoter under the Securities Act.
Currently, the Financial Advisers Act allows this only if the QFE
is the issuer of the product.
The proposed amendments to the Financial Service Providers
(Registration and Dispute Resolution) Act are largely technical in
nature. However, there are a couple of amendments that the industry
should be aware of. These include:
Employers are exempted from the Act so far as they provide
services for their employees to enable them to join superannuation
or KiwiSaver schemes in which the employer participates (ie
The territorial scope of the Act has changed. The Act will now
apply to all 'licensed providers' and persons required to
be registered under the Financial Advisers Act, even when they are
outside New Zealand. 'Licensed provider' is defined in the
Act and includes entities such as registered banks.
The changes are expected to be passed into law in the first half
The Bill is better news for QFEs who give financial advice
through a network of advisers and for promoters of securities, and
in particular promoters of superannuation and KiwiSaver schemes.
However, it has not gone as far as many hoped. A QFE's
employees and named representatives will still need to be
registered/authorised if they want to sell third party financial
products where the QFE is not a promoter of the products.
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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
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In the years following the global financial crisis of 2008 many Australian investors lost their life savings as financial products failed and the Australian Stock Exchange shed over 3,000 points.
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