Delay of start of financial advice regime confirmed

Sharon Corbett, Manager Financial Markets Policy, at MBIE has made the following announcement: 

The Minister of Commerce and Consumer Affairs has agreed that the start of the new financial advice regulatory regime set out in the Financial Services Legislation Amendment Act 2019 will be delayed from 29 June 2020 to early 2021.

The new regime is important for promoting consumer confidence in financial advice and the Minister remains committed to seeing the changes through. For now, however, it’s important the financial sector focuses as much as possible on supporting its customers as well as its own staff and their families.

The exact revised date of the new regime will be communicated in due course, well in advance. We expect the new commencement date to be in March 2021 at the earliest. 

The transitional licensing application window will be extended until the same date in early 2021 and the new Code of Professional Conduct for Financial Advice Services will also come into force on that date.

The existing regime under the Financial Advisers Act 2008 will continue to apply in the meantime until the new regime commences.

We are still working through all the flow-on implications from this delay and the necessary legal mechanism to effect this change. We are aware that market participants are at varying levels of readiness for the new regime and that the delay will impact everyone differently.

The FMA has confirmed that transitional licensing will also remain open and the FMA licensing team will continue processing applications as resources are available and in time for the start date of the new regime in early 2021. Those who have already had licences approved or who have already submitted a transitional licensing application will not need to reapply – please see the FMA announcement and FAQs which will shortly be updated.

The disclosure regulations that were due to be made this month have now been delayed so that the commencement dates of those regulations can be updated. We hope to make these regulations available within the next couple of months.

We will be in touch when we have more details to share. We’d be grateful if industry associations could please pass the message onto members.

Thank you for your understanding in these challenging times and we hope that you are all staying well.

Kind regards

Sharon 

Sharon Corbett

MANAGER, FINANCIAL MARKETS POLICY

COMMERCE, CONSUMERS & COMMUNICATIONS BRANCH


Fees and Levies - wanted: the option not in the paper

Numerous advisers have written to me about MBIE's consultation on the FMA fees and levies. In essence, they have spotted that the paper either calls for an increase based on the current approach, or an increase in the portion recovered from market participants. Succinctly, the view of most advisers, which I share, is that if the regulatory structure is all about building confidence in financial services and, if it is so good for consumers generally, then a much larger proportion should be paid for by government/consumers via normal taxation revenues. 


FMA fee consultation - a big increase is sought

FMA Funding consultation by MBIE is announced below. In summary, and very broadly, if the enhanced funding model is adopted with all of the increase funded by increased levies, all current levies would, very roughly, approximately double. 

“As the financial markets regulator, the FMA plays a crucial role in ensuring New Zealand’s financial markets are fair, efficient and transparent,” Sharon Corbett, Manager Financial Markets at the Ministry of Business, Innovation and Employment (MBIE), says. The FMA’s funding was last reviewed in 2016. Since then, the FMA’s remit has broadened and now is the right time to look at its funding."

You can find out more at this link: https://www.mbie.govt.nz/about/news/consultation-opens-on-fma-funding-and-levies/ 

 


Australia: ASIC set to ban cold calling

The Australian Securities and Investments Commission (ASIC) is set to ban cold calling for life and consumer credit insurance sales from January 2020. This has change has been justified as addressing poor sales practices that ASIC believes has led to unfair consumer outcomes. This ban will not apply if the marketer provides the person they are calling with personal advice. It is another sign of the shift in conduct expectations that creates an incentive for a financial provider to choose to step into advice provision and the supervisory regime that surrounds it. We may experience similar incentives in this market. Click here to read more

 


The Value offered by Dealer Groups

Prompted by the recent article on goodreturns I've been challenged to state my view on the value that dealer groups add for the override they are paid. It has been 20 years since I was employed by an insurance company, although in my current business I deal with many. But back when I left Sovereign's employment to launch Quicken.co.nz I had the view shared by many 'inside' insurers that dealer groups offered little value. Over the ensuring ten years my view was changed. Today I have the economist's viewpoint: as most insurance advisers know that the group is paid an override, and many could obtain that themselves (through one of several strategies) they must see value in the groups, otherwise they wouldn't be members. Then, to explore what that is, I just asked a few. Since then - for about the last ten years - I have seen that value demonstrated. The sources vary. From networking and collegiate exchange, adding more training services recently, through to a broad suite of technology services, most of the groups have been adding value in a battery of ways. Whether that can continue to allow that to be funded in the traditional manner will be up to MBIE as they draft the new Conduct of Financial Institutions law. 


FSLAA fact sheets for advisers

MBIE recently added a set of documents under the heading “A new regulatory regime” these documents work clarify doubts advisers may have regarding the new FSLAA regime. There you can find out about all Government decisions and Cabinet papers.

The first document discusses who can give financial advice, conduct requirements, enforcement, and access to advice.

The second document outlines the roles of the FMA, FADC, DRS and Courts.

The third document discusses the duties and liabilities of financial advisers.


MBIE announcements: regulations, fees, delay

MBIE has made a package of announcements, which includes a (minor) delay to the start of transition:

Good morning,

As you are aware, the Financial Services Legislation Amendment Act 2019 (Act) introduces a new regime for financial advice. I am pleased to confirm that a number of regulations relating to the new regime were published today. These regulations give effect to previous policy decisions announced in June this year, and:

Regulations are unable to come into force until at least 28 days have passed from the date they are notified in the New Zealand Gazette. Accordingly, the regulations needed for transitional licensing will come into force on 25 November 2019, while the remainder of the regulations will come into force on 29 June 2020.

The regulations relating to licensing fees and registration need to be in force before the FMA can start processing licence applications. Unfortunately this means the FMA will be unable to start accepting transitional licence applications before 25 November 2019. The FMA will provide an update on the new transitional licensing date later today. I apologise for any inconvenience that this might cause.

For more information regarding the new financial advice regime, please visit www.mbie.govt.nz/faareview or https://www.fma.govt.nz/compliance/role/fap-new-regime/.

Kind regards

Sharon Corbett

The FAA Review Team


Reflections on the interactions between likely conduct law and the Financial Services Legislation Amendment Act

Following a recent speech by Kris Faafoi, Minister of Commerce and Consumer Affairs, my compliance consultant and I exchanged views on the interactions between the proposed conduct law and the other parts of the financial services legal and regulatory regime.

It is hard to envisage circumstances where the conduct requirements under the regime proposed for banks, insurers and NBDT entities will not be introduced into the new Licensed FAP regime. It is clear that FAPs will need to meet at least broadly equivalent conduct requirements. A product provider bound by a conduct law would have to require a FAP, perhaps an agent of the product provider, to meet standards if the standards were not going to be extended to the FAP.

Then consider this situation: There is the issue of those FAPs that provide advice on the products of licensed conduct entities where there is no commercial relationship between the FAP and the conduct licensed product provider. Take ABC Advice Ltd charging client fees direct and receiving no remuneration from XYZ Insurer Ltd with ABC Advice Ltd providing advice on XYZ Insurer Ltd products, with or without the knowledge of XYZ Insurer Ltd that ABC Advice Ltd is doing so. XYZ Insurer Ltd will still have conduct obligations to a consumer who is also a client of XYZ Insurer Ltd and ABC Advice Ltd, even in the absence of any contractual relationship between XYZ Insurer Ltd and ABC Advice Ltd. 

Separately to that issue, as the conduct licence is separate from the other licences required by banks, insurers and NBDTs, what does it mean if a conduct licence is withdrawn? It would seem likely that the loss of a conduct licence will be sufficient to put the total entity out of business. That raises so many questions about sanctions short of withdrawal of the licence, and also the need for a process to manage the extreme circumstance of licence removal and how to protect the interests of clients during that period of time.

 


MBIE Consultation Opens on Disclosure Regulations

From the team at MBIE: 

We are now seeking feedback on the draft regulations that will set the disclosure requirements that will apply in the new financial advice regime.

The Financial Markets Conduct (Regulated Financial Advice Disclosure) Amendment Regulations will give effect to the Cabinet policy decisions made in February 2019. We are now seeking feedback on the content of the regulations themselves. In particular, we are seeking feedback on whether these draft regulations achieve the policy intent and whether they are workable in practice for the different ways in which advice can be given.

You can read the exposure draft and make a submission here: https://www.mbie.govt.nz/have-your-say/exposure-draft-financial-markets-conduct-regulated-financial-advice-disclosure-amendment-regulations-2019. Submissions close on 8 November and we would greatly appreciate any feedback you might have.

Key points: 

  • As discussed previously, dollar disclosure
  • Disclosure of scope of service
  • Disclosure of conflicts and how they are managed - probably the latter part of that is the more interesting bit

 


MBIE announce updated timetable for implementation of new regime for financial advice

The Government has today announced that the new regime for financial advice will come into force in June 2020. The Government has also agreed on the licensing fees and FMA levies that will apply in the new regime and new requirements for registering on the Financial Service Providers Register.

You can view the media release here: https://www.beehive.govt.nz/release/new-advice-safeguards-will-protect-consumers

You can view updated timelines, the Cabinet papers and Regulatory Impact Statements on our website: www.mbie.govt.nz/faareview and related pages

Now is the time for industry to familiarise itself with the new requirements and complete preparations for the coming changes. This includes determining how you will operate in the new regime and how you will comply with the legislation and the new code of conduct for professional advice services, and obtaining transitional licences when applications open.

MBIE will soon be consulting on the draft disclosure regulations that will apply in the new regime. We encourage you to review the draft regulations when they are available and to provide any feedback on how you think they will work for you.

MBIE updated timelineJune29