• Financial Services Legislation changes

The Ministry of Business, Innovation & Employment (MBIE) has released details of a number of changes being made to the Financial Services Legislation Amendment Bill (FSLAB) which is awaiting its final stages in the House before it becomes law.

The changes come via a supplementary order paper (SOP) to the Bill released by Minister of Commerce and Consumer Affairs, Kris Faafoi.  MBIE stated the SOP includes a number of minor, technical and other changes for the purposes of improving drafting or providing clarity around:

  • Advisers being engaged by multiple financial advice providers
  • When financial advice duties apply
  • Categories on the Financial Service Providers Register

 

Changes regarding financial advisers being engaged by multiple financial advice providers

The SOP provides for licence conditions to specify circumstances where a financial advice provider cannot engage an individual financial adviser that is also engaged by another financial advice provider.

  • This is not a ban on individual advisers working for more than one financial advice provider.
  • This also does not limit a financial adviser’s ability to give advice about multiple products from multiple product providers while acting on behalf of a single financial advice provider.

However, if providers are considering engaging individual advisers who will also be engaged by other financial advice provider(s), they should consider how such arrangements impact their duties, their disclosure obligations, professional indemnity insurance cover, and consumers’ ability to seek redress if something goes wrong.

The change in the SOP means the Ministry of Business, Innovation and Employment (MBIE) and/or the Financial Markets Authority (FMA) can consider whether it would be appropriate to use licence conditions to prohibit particular types of arrangements if concerns arise, including relating to consumer confusion or lack of clarity as to which provider would be liable for misconduct by the individual adviser. Input will be sought from affected providers prior to imposing any licence conditions prohibiting or restricting particular types of arrangements. You may wish to contact the FMA or MBIE in relation to your proposed arrangements.

 

Clarifying that the financial advice duties apply when giving advice to clients

Minor changes are made to the duty provisions to clarify that they apply where regulated financial advice is provided “to clients”. This clarifies that the duties do not apply where advice is given internally within a business in the course of and for the purpose that business. For example, the duties do not apply where a research analyst working for a financial advice provider writes a report for the provider containing recommendations relating to financial products.

 

Changes to the financial services categories on the Financial Service Providers Register

The Bill as introduced allowed for financial services to be broken down into subcategories. To improve workability with the framework of the Financial Service Providers (Registration and Dispute Resolution) Act 2008 (FSP Act), the SOP removes that concept. Certain financial services (e.g. the different licensed market services) are instead listed in the Bill. The SOP also amends various provisions of the FSP Act so that regulations can prescribe additional information to be collected from providers. For example, it is intended that regulations will allow for information to be collected about whether a person is providing a service as a licensed provider, as an individual adviser (in respect of the financial advice service), or an authorised body.

The SOP allows regulations to prescribe that providers do not need to register for more than one category of financial service in certain instances where there are overlaps between different services.  

 

Other minor changes 

There are other other minor to the Bill, the full release by MBIE available HERE



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