Consultation: New financial advice regime exemptions

Updates

March 2021

Australian licensees

We have published the Financial Markets Conduct (Australian Licensees) Exemption Notice 2020 guidance note, which provides an overview of the exemption notice relating to Australian advice businesses giving advice to New Zealand retail clients, and the circumstances in which a business may be able to rely on it.

18 December 2020

Australian Licensees

On 16 December 2020 the FMA granted a class notice, the Financial Markets Conduct (Australian Licensees) Exemption Notice 2020, exempting certain Australian financial services licence holders and their representatives, on conditions, from financial advice provider licensing and certain other requirements in the Financial Markets Conduct Act 2014 (FMC Act) (as amended by the Financial Services Legislation Amendment Act 2019). The exemptions are given on the basis that Australian licensing and regulation apply to Australian licensees relying on the notice.  The exemptions relate to providing financial advice services to New Zealand retail clients from offshore (where there is no solicitation or inducement of those clients by the Australian licensees or their representatives).

The main effects of the notice are that—

• Australian licensees are not required to hold a New Zealand market services licence to act as a provider of financial advice services under the notice:
• Australian licensees’ representatives are not subject to the restrictions on who can give regulated financial advice to retail clients on behalf of a financial advice provider in relation to providing financial advice services under the notice:
• Australian licensees and their representatives are exempt from the following statutory duties in relation to the financial advice services provided under the notice:
  • the duty to meet standards of competence, knowledge, and skill provided in the code of conduct:
  • the duty to comply with the other standards in the code of conduct:
  • the duty to make prescribed information available.

Key protections include that:

• Australian licensing and regulation apply to Australian licensees relying on the notice
• Australian licensees must register on the FSPR and be members of a New Zealand dispute resolution scheme
• Australian licensees must provide information to New Zealand clients about the nature of the exemption
• key statutory duties under New Zealand law still apply (i.e. duty of care, diligence and skill, duty to give priority to clients’ interests and duty to ensure clients understand the nature and scope of advice being given).

Terms and conditions under this notice include requirements that:

• an Australian licensee must have procedures that give reasonable assurance that the licensee and its representatives comply with relevant Australian regulatory requirements when giving regulated financial advice to a New Zealand retail client under the notice as if that advice were given to a retail client in Australia; and
• an Australian licensee give a disclosure statement to a retail client in New Zealand before any financial advice services are provided to the client; and
• an Australian licensee and its representatives must not engage in any conduct that is intended to induce or solicit New Zealand retail clients or is likely to have that effect.

The exemptions under the notice do not apply to regulated financial advice that is given to a retail client in New Zealand through a digital advice facility.

An Australian licensee must give the FMA notice that it intends to rely on the exemptions and provide certain information before relying on the notice.  Further detail about the conditions can be found in the notice.

The notice will come into effect on 15 March 2021 along with the new financial advice regime. 

Overseas custodians of client money and client property

On 16 December 2020, the FMA granted a class notice, the Financial Markets Conduct (Overseas Providers of Custodial Services – Assurance Engagement) Exemption Notice 2020, exempting overseas providers of custodial services from getting an assurance engagement with a New Zealand auditor that complies with requirements in the Financial Markets Conduct Regulations 2014 (as amended by the Financial Markets Conduct Amendment Regulations 2020).  Assurance engagements can instead be obtained with auditors in certain overseas jurisdictions and comply with overseas requirements. 

The notice will come into force on 15 March 2021 along with the new financial advice regime. 

Overseas custodians of scheme property

As noted in our previous update, we are also planning to extend exemptions for overseas custodians of scheme property under the Financial Markets Conduct (Overseas Custodians—Assurance Engagement) Exemption Notice 2018 (existing notice).  The purpose of this is to align the expiry date of the existing notice with the expiry date of the Financial Markets Conduct (Overseas Providers of Custodial Services – Assurance Engagement) Exemption Notice 2020.  This will enable these similar notices to be reviewed together in future.  This extension will be done closer to the end of the application period for the existing notice (it applies for relevant periods ending before 24 September 2022).

Australian qualified advisers

We consulted in October 2020 on our detailed proposals to recognise certain Australian adviser qualifications.  We are considering the feedback received to determine whether recognition is appropriate. 

6 November 2019

After carefully considering submissions, the FMA has agreed in principle to:

1. Australian Licensees:

Grant exemptions for five years for Australian financial services licensees with no place of business in New Zealand and their representatives, to allow them to provide unsolicited regulated financial advice to retail clients in New Zealand from offshore.  Exact exemptions and conditions are still to be finalised.  However, the FMA has agreed in principle to grant exemptions from:

a)  the requirement in the FMC Act to be licensed to act as a provider of a financial advice service
b)  limitations in the FMC Act on who can give regulated advice to retail clients on behalf of a financial advice provider
c)  the prohibition in the FMC Act on holding out certain matters in relation to giving financial advice
d)  the duties in the FMC Act on persons giving regulated financial advice except:

• • • the duty of care, skill and diligence;
    • the duty not to recommend an offer that contravenes the FMC Act or Regulations;
    • the duty to give priority to clients’ interests where there is a conflict;
    • the duty to ensure clients understand the nature and scope of the advice; and
    • the duties on financial advice providers who engage others to give advice to ensure compliance with the above duties.

The new exemptions will not extend to regulated financial advice given through a digital advice facility.

Conditions will largely replicate the conditions under the Financial Advisers (Australian Licensees) Exemption Notice 2011, subject to any changes that may be necessary or desirable in view of regulatory or other changes. 

We aim to have a notice in place to give effect to this decision well before the new regime comes into effect on 29 June 2020.

2. Overseas custodians of client money and client property:

Grant exemptions for five years for overseas custodians of client money and client property from new regulations to be made under the FMC Act [i], to relieve overseas custodians from the requirement to obtain an assurance engagement from a New Zealand qualified auditor that complies with requirements in the New Zealand regulations. Instead, they will be required to obtain an assurance engagement from an overseas auditor from a list of specified overseas jurisdictions that comply with requirements in that jurisdiction. The exemptions and conditions (and the overseas jurisdiction) will be substantially similar to those under the existing Financial Advisers (Overseas custodians – assurance engagement) Exemption Notice 2018.

We aim to have a notice in place (if required) after the new regulations have been made and before the new regime is effective on 29 June 2020.

3. Overseas custodians of scheme property:

Grant a five-year extension of existing exemptions for overseas custodians of scheme property under the Financial Markets Conduct (Overseas Custodians—Assurance Engagement) Exemption Notice 2018, to align the expiry date with expiry of the proposed new exemptions for overseas custodians of client money and client property.

Consultation on draft notices

We may consult with interested stakeholders on drafting of the exemption notices that will give effect to these decisions. If you would like to be added to the list of stakeholders please email your request to [email protected]. Please specify the exemption notice(s) you are interested in.

Australian qualified advisers

Under the Financial Advisers (Australian Qualified Advisers) Exemption Notice 2018, Australian advisers who meet the qualification requirements under ASIC's regulatory guides to provide personal financial product advice to retail clients in Australia are given recognition when applying to be an AFA in New Zealand. ASIC provides reciprocal recognition for New Zealand qualified advisers in its Regulatory Guide 146.

Given significant changes to qualification requirements for financial advisers on both sides of the Tasman, we intend to review the arrangements under this notice and discuss continued trans-Tasman recognition with ASIC and the Financial Adviser Standards and Ethics Authority Limited. Depending on the outcome of those discussions, we will aim to consult on proposals for continued exemption support (if any) in the first half of 2020.

Exemption support not necessary due to regulatory change

The FMA does not intend to continue exemption support provided by the following notices, as regulatory changes will mean that support is no longer required under the new financial advice regime:

1. Financial Advisers (Certified Investment Management Analyst) Exemption Notice 2017
2. Financial Advisers (Non-NZX Brokers – Client Money) Exemption Notice 2017 and Financial Advisers (NZX Brokers – Client Money and Client Property) Exemption Notice 2015
3. Financial Advisers (Personalised Digital Advice) Exemption Notice 2018 and related amendment notices
4. Financial Markets Conduct Act (Offers of Financial Products Through Authorised Financial Advisers Supplying Personalised DIMS) Exemption Notice 2015.

If you have any questions in relation to any of the above matters please contact us at [email protected]