25 August 2011
FMA will next week begin making visits to Authorised Financial Advisers (AFAs) as it steps up its monitoring activities under the Financial Advisers Act.
FMA Head of Primary Regulatory Operations, Sue Brown said monitoring was an important part of the new professional era, enabling FMA to check that standards are being met.
"We expect that in most cases we will simply be helping advisers refine what are already sound practices. Where we see potential for improvement we will work with advisers to ensure they comply with their obligations under the Act," Ms Brown said.
One aspect of visits that has generated enquiries from some advisers has been the implications of a visit for the privacy of client files.
"If an adviser has obtained their clients' authorisation for FMA to view their files, for example, by acceptance of terms and conditions of advice that include information about FMA's ability to view client files, they will not be in breach of the Privacy Act by providing information to FMA," said Ms Brown.
When advisers became AFAs they became bound under Standard Condition 4 to ensure that all records concerning their financial advice business, including client files, are available for inspection by FMA at any time.
When FMA writes to advisers notifying them of a forthcoming monitoring visit it will remind them of the obligation to have clients' files available. Any AFA who has not yet obtained clients' authorisation should take all reasonable steps to do so before monitoring begins.
FMA has powers under section 25 of the Financial Markets Authority Act to compel an AFA to provide the information in client files. The provision of information in response to a section 25 notice does not breach the Privacy Act.
"FMA is hopeful we will not have to use this power on a significant number of occasions as most advisers will be well prepared for the start of monitoring visits," Ms Brown said.