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Financial Markets Authority AFA Update: Issue # 25

Guide to help small financial adviser businesses with the licensing process for DIMS

On 18 June, FMA released a quick guide for small financial adviser businesses wanting to become licensed to provide DIMS. The guide explains further the summary of the changes announced on 16 June, by Commerce Minister, Craig Foss.

Advertisements advertising financial adviser services

This is a reminder to ensure you are meeting all your disclosure obligations under the Financial Advisers Act 2008 (Act). In particular, under section 30, any advertisement advertising financial adviser services by an AFA must state that a disclosure statement is available, on request and free of charge.

Recording keeping

We have been asked several questions recently about record keeping obligations. Compliance with Code Standard 12 remains an important focus of our ongoing monitoring programme. The overarching principle is:

“An Authorised Financial Adviser must record in writing adequate information about any personalised services provided to a retail client”

The information required to be recorded in relation to each retail client must:

  • be sufficient to demonstrate compliance with Code Standards 5 to 9
  • include copies of all information and documents provided to, or received from, the client in writing, in connection with the AFA’s personalised services.

We expect AFAs to proactively ensure their record keeping meets this standard and to take any steps necessary to improve their processes if they don’t meet this standard. Without proper record keeping it can be difficult or impossible to demonstrate whether the financial services provided to your clients are suitable.

We remain committed to supporting AFAs to achieve better compliance through our monitoring work. Our approach to non-compliance is proportionate to the circumstances. We are unlikely to take formal action where a breach is a one-off, isolated case, and involves minor events relating to a technical error or similar issues unless there are other compelling reasons to do so. However where there is evidence the breaches are intentional or reckless or involve other serious unlawful conduct then you can expect FMA to take appropriate action, such as a referral to the Financial Adviser Disciplinary Committee.

Important information for Financial Advisers completing annual AML/CFT reports

As a reminder, annual AML/CFT reports can now be submitted to FMA using our online system any time from now until 30 August 2014. However, we understand there is some uncertainty regarding how financial advisers can/should interpret Question 6.1. We are working with adviser associations to clarify the requirements to help you provide the correct information. More guidance on this will be published on our FAQs page in the coming days.

Remember, all reporting entities for AML/CFT are required to prepare an annual report on their risk assessment and AML/CFT programme. The first report for the period 1 July 2013 to 30 June 2014 must be submitted to FMA by 30 August 2014, in accordance with the AML/CFT Act 2009.

More information on annual AML/CFT reports can be found in the ‘Help me comply’ section on our website. If you have any further questions please email aml@fma.govt.nz

AFA Information Return

We would like to update you on our progress following the second consultation.
In line with the second consultation, we expect AFAs to complete the first Information Return relating to their business as at 30 June 2014. AFAs will be required to submit the completed Information Return online to FMA by 30 September 2014.

We will provide you with further information shortly, including confirmation of timeframes and when the AFA Information Return will be available online.

In the meantime we have developed a revised AFA Information Return set of questions, which has been reduced to 40 questions in total. For this first Return, you will be able to give your best estimate to any question where it may be difficult to collect the necessary information.

The particular questions that you will need to answer will depend on your situation, including the types of financial adviser services you provide.

To help you prepare, you can review the reduced set of questions in the AFA Information Return. We recommend you:

  • familiarise yourself with the questions
  • ensure you have your correct RealMe login details

Remember, the purpose of the AFA Information Return is designed to support your reporting obligations to us so we can better understand your business, your compliance approach and your approach to continuing professional development. It will also help us focus our monitoring and surveillance work and how best to apply our resources.

If you would like further information about this, please contact our Customer Service Centre on 0800 434 567 or email us at questions@fma.govt.nz