Legal and regulatory review for the life and health insurance sector

10 Mar 2021 – FMA released a consultation on potentially using its exemption power to exempt restricted schemes from certain disclosure and reporting obligations under the Financial Markets Conduct Regulations 2014. Submissions close on 21 April 2021. The FMA consultation website also noted closure with decisions of earlier consultations on the “New Financial Advice Regime Exemptions” and the “Proposed class exemption for restricted schemes from certain disclosure and reporting obligations.” https://www.fma.govt.nz/compliance/consultation/

10 Mar 2021 – Commerce Commission issued a reminder that from 1 October 2021, lenders providing consumer credit and mobile traders selling on credit must be certified by the Commerce Commission or face penalties, unless they are licensed or registered by the Financial Markets Authority or Reserve Bank of New Zealand. https://comcom.govt.nz/news-and-media/media-releases/2021/lenders-and-mobile-traders-must-be-certified-to-operate-from-1-october

5 Mar 2021 – Commerce Commission is seeking feedback on draft guidance for directors and senior managers of consumer credit providers and mobile traders on how to comply with the due diligence duty coming into force from 1 Oct 2021. Submissions close on Friday 19 March 2021. https://comcom.govt.nz/news-and-media/media-releases/2021/commission-seeks-feedback-on-due-diligence-guidance

8 Mar 2021 – Commission for Financial Capability announced the launch of a new workplace course to help women become more confident with money to mark International Women’s Day on 8 March. https://cffc.govt.nz/news-and-media/news/money-skills-for-women-offered-in-new-workplace-course/

7 Mar 2021 – Investment News NZ reported that the Financial Markets Authority (FMA) advised that, as at last Friday, it had approved some 1,636 transitional licenses and 943 authorised bodies, up from 1,467 and 774 on February 9. https://investmentnews.co.nz/investment-news/licensing-splurge-adds-400-in-last-dash-for-fslaa/

8 Mar 2021 – Good Returns, reported on the penalty outcome of the Financial Advisers Disciplinary Committee for the adviser who failed to keep proper records, while also noting the FADC statement that, “There is no suggestion that the Respondent has improperly benefited at the expense of her clients, or that any client has been disadvantaged”. Good Returns then reported that the adviser has stated that she has now retired and that the advice practice will be wound up by 31 March 2021. https://www.goodreturns.co.nz/article/976518248/adviser-learns-her-fate-from-fadc.html


Legal and regulatory review for the life and health insurance sector

4 Mar 2021 - Overseas Investment Amendment Bill (No 3), introduced on 14 May 2020, reported back to Parliament. https://www.parliament.nz/en/pb/bills-and-laws/bills-proposed-laws/document/BILL_97807/overseas-investment-amendment-bill-no-3

4 Mar 2021 – APRA released separately the statistics for December 2020 for life insurance and general insurance. Weblinks are https://www.apra.gov.au/news-and-publications/apra-releases-life-insurance-statistics-for-december-2020 and https://www.apra.gov.au/news-and-publications/apra-releases-general-insurance-statistics-for-december-2020

4 Mar 2021 – Financial Advisers Disciplinary Committee issued its penalty determination on the case decision released in Jan 2021 regarding Code Standard breaches. The FADC imposed the penalty that the Respondent is censured for the Code breaches together with permanent suppression of identity. https://fadc.govt.nz/decisions/

4 Mar 2021 – Commission for Financial Capability announced that it had launched achievement standard resources through its Sorted in Schools programme. The resources are designed to be taught by teachers as part of day to day classes in Statistics and Economics for students studying toward NCEA Levels 1 and 2. https://cffc.govt.nz/news-and-media/news/money-lessons-offer-ncea-excellence-grades/

5 Mar 2021 – FMA issued a public warning to the adviser for KiwiSaver advice given generally to switch funds in the wake of COVID-19 and market volatility in March 2020. https://www.fma.govt.nz/news-and-resources/media-releases/fma-warns-financial-adviser-kiwisaver-covid19/

5 Mar 2021 – IRD advised that the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Bill, introduced on 4 June 2020, was reported back to Parliament on 4 March 2021. https://www.parliament.nz/en/pb/bills-and-laws/bills-proposed-laws/document/BILL_98047/taxation-annual-rates-for-2020-21-feasibility-expenditure


FADC rules adviser in breach of code standard, and more daily news

The Financial Advisers Disciplinary Committee (FADC) has concluded that an adviser breached the Code of Professional Conduct for Authorised Financial Advisers. The case was brought forward by the FMA after it begun an investigation on the adviser on 23 August 2019. The adviser, who has name suppression, operated under three different businesses offering financial advice, financial planning, investments, mortgage broking, KiwiSaver, retirement planning, residential property management, and personal and small business tax advice services. Through the FMA investigation, it was found that there were three breaches of Code Standard 15. The breaches were in relation to financial advice, personalised services, and client relationship management provided to three clients. Advisers looking to ensure that their advice processes are up to standard would benefit from our Advice Process Management service.

“The Financial Advisers Disciplinary Committee (FADC) has today published its decision regarding a case brought by the FMA. The case relates to alleged breaches of the Code of Professional Conduct for Authorised Financial Advisers.

It says that "this is a case about breaches of the Code". It is not about the integrity of the financial adviser. "There is no suggestion that she has improperly benefited at the expense of her clients, or that any client has been disadvantaged."

"But, the provisions of the Code are fundamental and adherence to them is always required."

The financial adviser still has interim name suppression, but the decision says she registered as an AFA on the FSPR in 2011. She offers a range of services including financial advice, financial planning, investments, mortgage broking, KiwiSaver, retirement planning, residential property management and personal and small business tax advice (as a tax agent) through her business. She trades under three businesses, one of which is registered on the FSPR from 2011 as an employer or principal of a financial adviser and/or Qualifying Financial Entity.

After an unrelated complaint in January 2018, the FMA took an interest in the AFA, which culminated in a monitoring visit to the premises in May 2019, and a desk based review in July 2019.

As a result of these two visits, the FMA began an investigation on August 23, 2019.

The investigation found that the AFA breached standards 12 and 15 of the Code, which relate to keeping information about personalised services for retail clients, and the requirement to have an adequate knowledge of Code, Act and laws.

The court briefing says that "The breaches are established in respect of three clients, whose identities are permanently suppressed; it consists of the adviser having failed:

  1. to record in writing adequate information about a personalised service provided to a retail client
  2. to demonstrate adequate knowledge of the relevant legislative obligations which result from the term ‘personalised service’."” Click here to read more

In other news

Cigna: Multi-benefit discount offer on Assurance Extra products extended to 28 February 2021

Cigna: Karen Ward appointed as Head of Claims

Cigna: Nicci Johnston appointed as Head of Customer Care

Financial Advice: Ready, Set, Go webinars to begin 27 January 2021

Financial Advice: Trusted Adviser mark to be publicly launched 15 February 2021


Legal and regulatory update for the life and health insurance sector

10 Nov 2020 – The Financial Advisers Disciplinary Committee website has again been amended such that the “Next Hearing” has been changed from 19 Nov 2020 to Thursday, 10 Dec 2020 at 9:00 a.m., with no further information provided other than details of the venue. https://fadc.govt.nz/upcoming-hearings/

6 Nov 2020 – The Privacy Commissioner published on the website details relating to the serious threat to public health or safety exception where the collection, use and disclosure of personal information is needed to combat a serious threat to public health or safety, such as Covid-19. https://www.privacy.org.nz/blog/privacy-covid-19-and-the-serious-threat-to-public-health-exception/

9 Nov 2020 – FSC released a new Disclosure Guide for the financial advice community. https://www.fsc.org.nz/site/fsc1/Reports/Financial%20Services%20Council%20-%20%20Disclosure%20Guidelines.pdf


Legal and regulatory update for the life and health insurance sector

14 Oct 2020 – The Financial Advisers Disciplinary Committee website has again been amended such that the “Next Hearing” has been changed from 2 Nov 2020 to 19 Nov 2020, again with no further information provided other than details of the venue. https://fadc.govt.nz/upcoming-hearings/

14 Oct 2020 – Good Returns reported the launch of the Trusted Adviser mark by Financial Advice NZ, noting that the public launch of the mark is scheduled for February 2021. https://www.goodreturns.co.nz/article/976517649/trusted-adviser-mark-finally-launched.html


Legal and regulatory update for the life and health insurance sector

2 Oct 2020 – Government released the Request for Proposal documents to appoint the next set of KiwiSaver default providers. https://www.mbie.govt.nz/about/news/kiwisaver-default-provider-rfp-opens/

5 Oct 2020 – Department of Internal Affairs posted on its AML/CFT News and Information website information on some of the risks associated with compliance with election financing laws. https://www.dia.govt.nz/AML-CFT-Election-financing-laws

5 Oct 2020 – The Financial Advisers Disciplinary Committee website has again been amended such that the “Next Hearing” has been changed from 5 Oct 2020 to 2 Nov 2020, again with no further information provided. https://fadc.govt.nz/upcoming-hearings/


Legal and regulatory news update for insurance sector

10 Aug 2020 – RBNZ published an amended Insurer Solvency Return and Guidance Note (v5.3) to improve the information provided through projections of solvency. These documents will be in-force from 1 September 2020.

11 Aug 2020 – The Financial Advisers Disciplinary Committee website was amended, changing the next scheduled hearing from 24 August to 5 Oct 2020, with no further details given.


Insurance replacement business - disciplinary actions

Advisers have been disciplined for failures to observe replacement business guidance for insurance, if they are AFAs, and in this case, in a QFE. Link. Reading the article I noted that it was the QFE itself that made the referral. Also, that they failures were mainly record-keeping issues. These are significant, but the comments of the disciplinary committee about harm are important too.


Insurance complaint ruling: wider market comparison expected

The FMA  recently complained about an AFA who provided both advice on a pension transfer and replacement of insurance. The Financial Advisers Disciplinary Committee have heard the case. The part of the decision which relates to insurance is particularly interesting: 

"There is nothing to suggest that his recommendation was supported by analysis, apart from an indicative illustration provided by AIA and the Respondent's emailed statement that AIA was the only insurer who would offer "take-over terms". We do not know whether a fuller analysis would have led to the same conclusion but would have expected a far broader examination of what market options existed for the relevant client, even if that involved different terms. Financial decisions of this type typically involve trade-offs and analysis of those would be an expected and basic element of advice of this type" 

Although I am duty bound to point out that I am conflicted - as I have a financial interest (indirectly) in Quality Product Research Limited, this looks like a strong indication that seeking options, proof of analysis, and comparing the market, are components of insurance advice that the FADC expect. 

There are also parts of the decision that relate to pension transfers which are also of interest, and also relevant to providing insurance advice, particularly where replacement is being contemplated.

Also, aspects of the decision in relation to the fee that the adviser proposed, which was only to be paid if certain actions were taken, is worth reviewing. The FADC did not find that the FMA's complaint was made out, and allowed that although the adviser did have conflicted remuneration it was adequately disclosed. 

You can read the decision at this link