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FMA grants Australian Licensees Class Exemption 

by Jeremy Muir, Lloyd Kavanagh

Published: December, 2020

Submission: January, 2021


On 18 December 2020, the Financial Markets Authority (FMA) issued the Financial Markets Conduct (Australian Licensees) Exemption Notice 2020 (Exemption Notice). The Exemption Notice follows the FMA’searlier consultation and then decision in principleto grant an exemption for certain Australian-licensed financial service providers from certain requirements under the incoming new financial advice regime.

Our discussions of the consultation and decision in principle can be found on our website.

Who needs to read it? Why?

This will be of particular interest to financial service providers licensed in Australia that currently provide, or are contemplating providing, financial services into New Zealand.

What does it cover?

The Financial Services Legislation Amendment Act 2019 (FSLAA) will repeal the Financial Advisers Act 2008 (FAA) and insert into the Financial Markets Conduct Act 2013 (FMCA) the new regulatory regime for financial advice. This new regime will commence on 15 March 2021.

With the impending repeal of the FAA, the existing exemptions under it will end. This will include the Financial Advisers (Australian Licensees) Exemption Notice 2011 (FAA Exemption Notice). The Exemption Notice is intended to step into its place at that time.

Under the Exemption Notice, where the conditions are met Australian licensees and their representatives will be able to give financial advice to certain New Zealand retail clients from offshore on an unsolicited basis without getting a financial advice provider licence and without complying with certain duties under the FMCA.

In particular, where the Exemption Notice applies:

  • Australian licensees will not be required to hold a New Zealand market services licence to act as a provider of financial advice services;
  • Australian licensees’ representatives will not be subject to the restrictions on who can give regulated financial advice to retail clients on behalf of a financial advice provider; and
  • Australian licensees and their representatives will be exempt from the statutory duties to meet the standards of competence, knowledge, and skill provided in the code of conduct, to comply with the other standards in the code of conduct, and to make prescribed information available.

In order to rely on the Exemption Notice, an Australian licensee will need to:

  • hold a current Australian financial services license, be in the business of providing a financial service in Australia, and not have a New Zealand place of business;
  • be registered as a financial service provider in New Zealand, and be a member of a dispute resolution scheme, under the Financial Service Providers (Registration and Dispute Resolution) Act 2008;
  • submit, and take all reasonable steps to ensure its representatives submit, to the New Zealand courts in respect of the relevant financial services;
  • give the FMA written notice that it intends to rely on the Exemption Notice, along with certain other information;
  • have procedures that give reasonable assurance that the licensee and its representatives comply with relevant Australian regulatory requirements when giving regulated financial advice to a New Zealand retail client under the Exemption Notice, as if that advice were given to a retail client in Australia;
  • give a disclosure statement to retail clients in New Zealand before any financial advice services are provided to them; and
  • not engage in any conduct intended to induce or solicit (or is likely to have the effect of inducing or soliciting) New Zealand retail clients (and the licensee’s representatives must do the same).

The Exemption Notice will not, however, cover regulated financial advice given to retail clients in New Zealand through a digital advice facility.

The FMA’s reasons in issuing the Exemption Notice include that:

  • Australian licensees are licensed and regulated by the Australian Securities and Investments Commission (ASIC) under the Australian regime, which seeks to achieve similar aims and provide broadly comparable protections overall to the New Zealand regime;
  • some statutory duties under the New Zealand regime will still apply, and New Zealand retail clients will be given a disclosure statement so that they are aware of the nature of the exemptions;
  • it will encourage Australian licensees and their representatives to make available to New Zealand retail clients advice that would otherwise be unlikely to be available given the costs of compliance with dual licensing and regulation;
  • as Australian licensees will still be required to be registered on the New Zealand financial service providers register and to be members of a New Zealand dispute resolution scheme, New Zealand retail clients will still have independent access to redress;
  • the FMA’s relationship with ASIC, which involves sharing of information and co-operation arrangements, will enable the FMA to seek assistance if enforcement issues arise;
  • the FMA is accordingly satisfied that granting the exemptions is desirable in order to promote a number of purposes of the FMCA, specifically promoting the confident and informed participation of businesses and consumers in financial markets and avoiding unnecessary compliance costs; and
  • it only applies in limited circumstances, and so is not broader than is reasonably necessary to address the matters that gave rise to it.

Our view

As the new regulatory regime for financial advice will affect all persons and entities in the financial advice space, the provision of specific exemption designations will play an important part in its smooth and effective application to different parties without introducing excessive complexity or compromising the standards for its normal operation.

As the existence of the FAA Exemption Notice makes clear, there is an appetite for Australian financial service providers providing financial services into New Zealand. The comparable nature of the Australian regulatory regime to that of New Zealand provides an opportunity to leverage that without impeding it with the costs of full compliance and dual licensing.

Although there are noticeable differences between the FAA Exemption Notice and the Exemption Notice (for instance, the exemptions under the latter cover a wider range of obligations), it must be kept in mind that the financial advice regime as a whole will be undergoing substantial change under the FSLAA, and replicating the current exemptions would not have the same effect as they have now.

What next?

The Exemption Notice will come into effect on 15 March 2021, at the same time as the FSLAA regime, and will last for 5 years. Between now and 15 March, the FAA Exemption Notice will continue to apply.

If you have any questions in relation to the Exemption Notice or the financial advice regime more generally, please contact one of our experts.


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