Everything you need to know - the financial adviser regulatory regime

The main features of the regime, which began its phased implementation today, are as follows:

Wednesday, December 1st 2010, 1:58PM 1 Comment

Financial Service Provider Register (FSPR)

All entities that provide financial services must be registered with the new FSPR from today, except financial advisers who have until 31 March 2011.

From 31 March, it will be an offence to offer financial advice commercially without registration on the FSPR.

The FSPR will allow consumers to check to see if someone or a company they are considering dealing with is a legitimate provider.

www.fspr.govt.nz

Disputes and complaints

Every Registered Adviser is required to belong to one of four approved dispute resolution schemes.

This is designed to be the mechanism for resolving any issues a client might have with the service they have received from their adviser.

The FSPR will list the dispute resolution scheme the adviser belongs to. In addition, complaints about adviser conduct can be made directly to the Securities Commission from 1 December 2010.

Adviser categories

The main types of advisers are:

AFAs - registered and authorised
RFAs - registered
QFE advisers - entity is registered not the individual

Authorised Financial Advisers (AFA)

From today Authorised Financial Advisers begin receiving their AFA certificates and can start marketing themselves as an AFA.

Advisers wishing to qualify as an AFA have until 1 July to complete the process.

From 1 July it will be an offence to provide retail clients with investment planning services, or personalised advice on complex products, without authorisation.

Investment planning and personalised advice

AFAs are able to provide retail clients with investment planning services and personalised advice on Category 1 products.

Category 1 products are more complex investment products such as shares, certain unit trusts, KiwiSaver products and insurance products with an investment component.

Code of Professional Conduct

AFAs are subject to a new Code of Conduct that sets out the standards of professionalism that will be expected of an AFA.

"Independent" advisers

From 1 December AFAs may not describe themselves as "independent" if they receive commissions or any other sales incentives to sell any financial product.

Disciplinary committee

A statutory disciplinary committee has been set up to consider possible breaches of the Code of Conduct. This comes into being on 1 December.

The Commissioner of Financial Advisers chairs this committee which may, for example, impose fines of up to $10,000 or recommend the withdrawal of authorisation.

Registered Advisers

Registered Advisers are only able to sell category 2 products, which are simpler off the shelf products such as mortgages and bank term deposits.

Financial advisers have until 31 March to register on the Financial Service Providers Register.

Qualifying Financial Entity (QFE) Advisers

A QFE is a company that offers financial services and sells financial products.

QFEs undertake to take responsibility to provide a prescribed level of training and supervision for their employees that offer financial advice to the public.

A QFE adviser may sell category 2 products and any category 1 (AFA level) products that are produced by the QFE.