The Financial Markets Authority (FMA) has opened consultation on the proposed full licence standard conditions for financial advice providers, as part of the new financial advice regime.
It said that it was proposing three licence classes for financial advice providers.
Class A licences will apply to advisers who give advice on their own, as part of a one-adviser business.
Class B licences will be for firms that have multiple advisers but no nominated representatives.
Class C licences permit the holder to engage nominated representatives or another entity.
"Licence classes apply to the manner in which regulated financial advice may be provided but do not limit the types of financial advice that may be provided under the licence, as the latter is addressed by the competency requirements in the new code. Licence classes are incremental from A to C. Each incremental class of licence incorporates and permits all service classes below it."
The FMA is considering eight standard conditions for full licences: record keeping, internal complaints process, regulatory returns, outsourcing, professional indemnity insurance, business continuity and technology systems, ongoing capability, and notification of material changes.
Record-keeping and internal complaints are the same conditions as will apply to transitional licences.
FAPs will be required to have appropriate professional indemnity insurance, ensure outsourcing agreements allow them to meet their market service licencee obligations at all times, and have a business continuity plan that is appropriate for the business.
"If you use any technology systems, which if disrupted, would materially affect the continued provision of your financial advice service (or any other market services licensee obligation), you must at all times ensure that cybersecurity for those systems – being the preservation of confidentiality, integrity and availability of information and/or information systems – is maintained."
The FMA said the criteria in full licensing would be more comprehensive than for transitional licencing.
"In addition to the matters considered for transitional licensing, we will consider whether applicants and authorised bodies are capable of effectively performing the financial advice service. The capabilities that we will assess at full licensing will depend upon the scope of financial advice service of each financial advice provider included in the application."
John Botica, FMA director of market engagement, said: "We’re pleased to open this consultation as it will give financial advisers further clarity on their obligations under the new regime.
"Our proposal to specify three classes of financial advice recognises the diversity of business structures in the industry and will allow advisers to apply for the class that’s most appropriate for them."
Botica said the three classes – along with the tailored questions and assessments based on the complexity of the financial advice provider structure – will ensure the application process is straightforward, particularly for small advice businesses.
The consultation is open until August 7.
The FMA will start accepting full licence applications when the new legislation takes effect, which is anticipated to be no earlier than March 2021. Once a specific date is known this will be communicated.
Meanwhile, the FMA continues to process and grant applications for transitional licenses, which have now passed 800 in total. They include an estimated 5,800 financial advisers – representing well over half the current number of authorised and registered financial advisers in New Zealand.
