Transitional licensing for financial advisers and brokers opened on November 25.

The FMA has indicated that there will be two standard conditions on financial advice provider transitional licences:

  • You must maintain adequate written records in relation to your financial advice service 
  • You must have an internal process for resolving client complaints in relation to your financial advice service.


Brokers are going to have to maintain adequate written records showing how they, and any persons engaged by them to give regulated financial advice to retail clients, have complied with the Financial Markets Conduct Act, Regulations and the new code. Brokers are going to have to ensure the records are kept for at least seven years. Adequate written records include information about any financial advice given to clients, copies of written information and documents, and all file notes and diary entries. 

At a recent roadshow, the FMA observed that it has seen:

  • Incomplete record-keeping
  • Files not easily accessible
  • Handwritten notes not legible
  • Files that are not safely stored
  • Reliance on free cloud-based storage which is not fit for purpose.

Good record-keeping is often found lacking in cases that come to FSCL for investigation and resolution. We not infrequently receive a broker’s file which has no file notes or diary entries to record important meetings or calls with a client. In a "he said/she said" situation, we may be more likely to prefer the evidence of the client, where the broker has no file notes as evidence of a meeting or call with a client. As the professional in the relationship, brokers and advisers will be expected to keep good records and, if their records are lacking, this will reflect on the broker or adviser’s credibility. 

Fortunately for the broker, in some cases the lack of records has not been the cause of the loss the client is claiming. However, had proper records been kept, it is more probable than not that the complaint would never have ended up at FSCL. The case below is an example of this. 



In December Sanjay arranged insurance for his taxi through an insurance broker. He intended paying for the insurance through an instalment service offered by the broker, but the payments were dishonoured with the notation "account closed". The broker wrote to Sanjay twice, and sent a new direct debit form, but the form was not completed and returned, so the policy was cancelled.

The following May, Sanjay purchased another taxi, and went through the same process again. While Sanjay thought he was arranging insurance for his new taxi, all the broker’s records referred to insurance for the first taxi that was intended to be effective from 1 August. Again, the broker arranged payment for the insurance through its instalment service.

On 10 July the taxi was involved in an accident. The first payment for the insurance was due on 10 August. The payment was dishonoured, again with the notation "account closed". The broker wrote to Sanjay twice, and then the policy was cancelled.

Two years later Sanjay contacted the broker because the insurer of the other car involved in the accident was pursuing him for the cost to repair the damage. Sanjay considered the broker should be responsible for the loss because he had asked it to arrange cover and it had not done so.

The broker responded by saying that it had no record of ever arranging insurance for the car involved in the accident and, in any event, Sanjay had not paid for any insurance. 

Sanjay disagreed and referred his complaint to FSCL. 


Sanjay said the broker had made a mistake by arranging insurance for the first taxi again in May. Sanjay said he told the broker he had purchased a new taxi and needed insurance cover for the new taxi immediately. Sanjay agreed that he had received the letters from the broker about the cancelled insurance, but said he thought they related to the first taxi, which he was no longer driving. 

The broker could not understand why Sanjay had referred his complaint to us. From the broker’s perspective there was no case to answer: 

  • it had no record of ever arranging insurance for the car involved in the accident 
  • Sanjay had never paid for any insurance 
  • it knew nothing about the accident for two years. 


We had very little information about the circumstances giving rise to the complaint. There were no telephone recordings or notes of any of Sanjay’s conversations with his broker. As a result, it was impossible to work out where the misunderstanding arose. Inadequate record-keeping impacted on the broker’s credibility. However, the little information that was available indicated that the broker was not responsible for Sanjay’s lack of insurance cover at the time of the accident. 

Although Sanjay said the broker made a mistake by reactivating the cover that had previously lapsed, there was no evidence to support his belief that he had insured the second car. All documentation from the broker referred to the first car. We did not consider it reasonable for Sanjay to ignore the letters advising the insurance had been cancelled because they referred to the first car. These letters should have prompted Sanjay to contact the insurer to resolve the misunderstanding. 

We also would have expected Sanjay to notify his insurer immediately after the accident, even if he believed he was not at fault. 


We explained to Sanjay that we could see no evidence to find that the broker was responsible for his loss. Sanjay did not respond to us, so we closed our file. 


This complaint appeared to have little merit from the outset, but the lack of record-keeping meant that it required an investigation and decision from us. 


Brokers will have to have an internal complaints process for resolving client complaints. It is important to bear in mind that a complaint means a “an expression of dissatisfaction made to an organisation, related to its product or service, or the complaints/handling process itself, where a response or resolution is explicitly or implicitly expected.” 

An internal complaints process should provide for: 

  • acknowledging complaints as soon as practicable 
  • giving information to the client about the process and how it works 
  • resolving a complaint and providing a response to the client as soon as practicable 
  • keeping a written record of all complaints and the action taken to resolve them 
  • telling the client the name and contact details of your external dispute resolution scheme 

Once again, we often find that a complaint needlessly escalates to FSCL because the broker has failed to recognise a complaint from a client and has then failed to deal with the complaint promptly, leaving the client with no option but to go straight to FSCL. 

Dec 2019

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