What happens when the Sec Com comes knocking
The Securities Commission has explained what it intends to do when it comes knocking on an adviser's door to do a compliance check.
Friday, March 11th 2011, 9:48AM
by Jenha White
The Securities Commission explanatory notes on the Standard Conditions for authorised financial advisers (AFAs) says the Securities Commission will give reasonable notice when requesting records and a few days for them to be made available with routine visits made during business hours.
The Securities Commission also says it expects to have an open and constructive relationship with AFAs and the conditions relating to reporting, notifications and provision of records, for example, allowing the Commission to engage in a dialogue with AFAs during the term of their licence.
"This is to understand how advisers comply with their obligations and how they will continue to fulfil their responsibilities as their businesses change, and as any issues arise and are dealt with."
When talking about the requirement to have and maintain an adviser business statement (ABS), the Securities Commission emphasises that it is intended to be a living document that is kept up-to-date and which will evolve over time as the AFA's business or circumstances change.
The Securities Commission says the second standard condition around reporting is likely to require reporting of factual business information such as business volumes for different product groups and service types, numbers of customers, numbers and types of breaches and complaints information.
This is for the purpose of helping the Securities Commission to understand the profile of advisers in the industry and to focus its resources appropriately. However, it will consult with industry before it publishes the reporting guide which will form part of the Standard Conditions in the latter part of the year.
Standard Condition three requires an AFA to notify the Commission in writing within five business days of any matter concerning the AFAs authorisation.
The Commission has clarified that in circumstances where full information is not able to be provided within five days, an initial report could be made and followed with more detailed information.
It also says that over time the Commission will publish guidance on the sort of matters that are expected to be reported, for example guidance on what amounts to a serious breach. It may also publish information on matters that are being reported.
Standard Condition six around supervising trainee advisers has the Commission explain that it recognises that real-life client interaction is an important part of building competence and one of the assessment components in AFA status.
The Commission gives examples of how a supervising AFA may ensure consumers who are in contact with trainees have an adequate level of protection.
"This may entail for example, accompanying the trainee adviser to client meetings and validating all advice-related documentation completed by the trainee adviser."
The explanation notes can be seen in full here.
Jenha is a TPL staff reporter. jenha@tarawera.co.nz
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