Commission consults on conditions for advisers
The Securities Commission has started on the process of determining the conditions Authorised Financial Advisers (AFAs) will be bound by.
Friday, September 10th 2010, 7:03AM
by Jenha White
The Financial Adviser's Act (FAA) allows the Securities Commission to authorise financial advisers for a range of specified financial adviser services for a precise period and it requires that the standard conditions be consulted on before they are approved.
Securities Commission director supervision Angus-Dale Jones says before the latest legislative changes the Commission was going to have to create individual terms and conditions for each adviser.
However the latest enhancements made to legislation in June allows for standard terms and conditions for the industry.
"This is a folding out of a more efficient mechanism and it is a chance for the industry as a whole to see if the conditions are reasonable.
"If the industry sees any issues then they have the next three weeks to speak up as advisers will be bound by the conditions."
The Securities Commission intends to issue a Certificate of Authorisation to each AFA which will include the period of authorisation, financial adviser services (FAS) Scope authorised by the Commission, the standard conditions and any modifications.
The Commission says it is considering setting all licence periods for between three and seven years.
The particular period granted in each case will reflect the Commission's risk-based assessment of products and services provided.
The Commission says in the absence of information on which to base that assessment, the default period proposed for all advisers is five years.
Each AFA will also be authorised to provide the FAS described in their FAS Scope allocated by the Commission and stated on the AFA's Certificate of Authorisation.
The Commission says AFA's have to select the FAS scope that best fits their activities when applying for authorisation through the FSPR website.
An AFA must only provide the financial adviser services that are described within their FAS scope
The six FAS scopes are:
- Financial advice – Cat 1 and 2 (FA),
- Financial Advice and Investment planning Services (FA+IP),
- Discretionary Investment Management Services (DM),
- Financial Advice and Discretionary Investment Management Services (FA+DM),
- Financial Advice, Discretionary Investment Management Services and Investment planning Services (ALL)
- Financial Advice to Wholesale clients and provision of Class services (WS+C).
The Commission says for this stage of the regime, the FAS scopes will be limited to the activities and combinations of activities that are referenced in section 55 (1) of the Act and future scopes of practice may be refined to include specific types of products and services.
The proposed standard conditions for AFA’s which also require consultation are:
- Requirement to have and maintain an Adviser Business Statement (ABS)
- Reporting
- Notifications
- Records
- Client money
- Supervising trainee advisers
- No endorsement
- Display certificate of authorisation
Dale-Jones says the most substantial term and condition is the ABS which is something that has been talked about all year. He says this process will give it legal force and it is a case of dotting the i's and crossing the t's.
The other interesting term and condition is Reporting, which will be consulted on separately prior to 1 July 2011 and which will take effect from 1 July 2011.
Further details about the standard conditions are available on the Securities Commission website.
Submissions close at 5pm on Friday 1 October 2010.
A separate consultation paper in relation to terms and conditions for QFEs will be issued at a later date.
Jenha is a TPL staff reporter. jenha@tarawera.co.nz
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