Authorised Financial Advisers (AFAs) must comply with their terms and conditions of authorisation which include:
• Standard Conditions
• Any terms and conditions specific to the AFA
The Standard Conditions apply to all AFAs and are available on our website with explanatory notes. FMA considers it part of your professional obligations to be familiar with these conditions and to understand your obligations which include providing us with periodic reporting and notifications (see stories below).
See Standard Conditions and Standard Conditions incorporating explanatory notes.
Under the Standard Conditions of Authorisation AFAs must maintain a current written Adviser Business Statement (ABS). Each year, you must confirm to us that your ABS is current.
Confirmation is due 12 months after the date of your authorisation. If you were authorised before <date> April 2011 and you haven't yet provided us with this confirmation, then please let us have this by Friday 11 May.
For confirmation instructions see our web page.
The notification requirements in the Standard Conditions specify that AFA's must notify FMA within five business days of 'any significant matter concerning the AFA's authorisation'.
This includes a requirement to notify us of any matter that has arisen since the date on which you were authorised 'which would have been required to be disclosed at the time' of your application to be authorised (or any subsequent application for re-authorisation). If any significant issue arises for you, you should consider making a notification to FMA.
Significant matters can include disciplinary actions or rulings made by professional bodies or other forums, initiation of court proceedings involving you or your company, convictions, and liquidation or bankruptcy proceedings. This is not intended to be a full list of matters.
For more see:
• AFA Authorisation Guide
• Guidance Note: Good Character and Criminal Convictions
Disclosure is another key AFA obligation. Here are some of the main issues we have been talking to advisers about on our recent monitoring visits:
- You must stick to the prescribed format in the regulations. Disclosure statements are not marketing material. They are intended to provide easy-to-read information to help clients decide whether to use an adviser and then whether to follow their advice. In a primary disclosure statement no other additional text is allowed. In a secondary statement there is more flexibility to include other text however the prescribed information must be prominently displayed. Remember the Code requires clear, concise and effective dealings with clients as well as requiring advisers to ensure clients have sufficient information to enable them to make informed decisions.
- Joint disclosure statements are not permitted because no regulations have been made to allow for this. Each adviser must have individual, signed disclosure documents.
- Secondary disclosure should be provided in one or more separate documents. A secondary disclosure statement is intended to be relevant to the type of service the client is contemplating. We have seen advisers providing all disclosure at once in a single document. We don't believe this approach complies with the regulations and we don't think it is helpful to the client.
For more information on disclosure see here.
• FMA's second consultation on effective disclosure is now underway. Submissions close on Thursday 10 May 2012. See here.
• FMA has clarified how RFAs can use the term RFA or registered financial adviser in their advertising. See here.
• The Wellington District Court has dismissed an appeal by Sean Wood against a Financial Markets Authority decision to decline his application for authorisation as an Authorised Financial Adviser (AFA). See here.
• A list of reporting entities under AML/CFT legislation has been published. See here.
This periodic email provides information, guidance and feedback to help you meet your obligations as an AFA. It is not intended to be an exhaustive list of all AFA obligations on the topics discussed. Please see our website for further resources and information available for AFAs.