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New Standard Conditions for Full Financial Advice Provider Licences Released 

by Jeremy Muir, Lloyd Kavanagh

Published: November, 2020

Submission: November, 2020

 



On 6 November 2020, the Financial Markets Authority (FMA) released the final standard conditions for full financial advice provider (FAP) licences and the classes of financial advice service. A link to the standard conditions and licence classes are available online.


These conditions follow the FMA’s consultation in June this year. See our previous discussion on the standard conditions and licence classes.


Who needs to read it? Why?


Under the new financial advice regime, all providers of regulated financial advice to retail clients will need a FAP licence. There will be two phases to the financial advice provider licensing process – transitional and full. Those who intend to provide such advice under a full FAP licence (after the two-year transition period) will need comply with these standard conditions.


What does it cover?


As previously proposed in the FMA’s consultation, the FMA has confirmed three different FAP licence classes which applicants can apply for. The names of the classes have been changed from the proposed ‘A, B and C’ to ‘1, 2 and 3’.


In summary, there are seven new standard conditions for a full licence:


Record keeping


  • FAPs must create in a timely manner, and maintain, adequate records in relation to their financial advice service.
  • The records:
    • must be kept in a form and manner that ensures the integrity of the information and enables it to be conveniently inspected and reviewed by the FMA;
    • may be in any language, provided that the FMA is provided in a timely manner a full translation of the record into English by a translator approved by the FMA;
    • must be available for inspection at all reasonable times;
    • must be readily available to the FAP, and in any event within 10 working days or as otherwise agreed by the FMA when requested; and
    • must be kept for a period of at least 7 years.

Internal complaints process


  • FAPs must have a fair, timely and transparent internal process for resolving client complaints.
  • The process must provide for complaints to be dealt with in a fair, timely and transparent manner.
  • Records of all complaints and any action taken in relation to them must be kept.

Regulatory returns


  • FAPs must provide information for the FMA to monitor the FAP’s ongoing capability to effectively perform the financial advice service in accordance with the applicable eligibility criteria and Financial Markets Conduct Act 2013 requirements.
  • This will include updated information on the nature, size and complexity of the FAP’s financial advice provider service.
  • Information must be provided in accordance with any Regulatory Return Framework and Methodology the FMA will issue.

Outsourcing


  • Where any system or process necessary to the provision of the FAP’s financial advice service is outsourced, the FAPs must be satisfied that the provider is capable of performing the service to the standard required to enable the FAP to meet its market services obligations.

Business continuity and technology systems


  • FAPs must have and maintain a business continuity plan that is appropriate for the scale and scope of its financial advice service.
  • FAPs must at all times ensure that information security is maintained for any technology systems, which if disrupted would materially affect the continued provision of its financial advice service (or any other market services licensee obligation). This means the preservation of confidentiality, integrity and availability of information and/or information systems.
  • FAPs must notify the FMA within 10 working days of discovering any event that materially impacts the information security of its critical technology systems.

Outgoing requirements


  • FAPs must at all times continue to satisfy the requirements set out in section 396 and, if applicable, section 400 of the FMC Act.

Notification of material changes


  • FAPs must notify the FMA in writing within 10 working days of implementing any material change to the nature of, or manner in which, the FAP provides its financial advice service.

What next?

Full FAP licence applications open from the start of the new financial advice regime (15 March 2021).


If you have any questions in relation to the standard conditions or the financial advice reforms more broadly, please contact one of our experts.


 



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