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Standard conditions for financial advice provider full licences

Home Insights Standard conditions for financial advice provider full licences

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Contributed by: Bridgette White, Sarah McQueen, Emmeline Rushbrook and Dan Jones

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Published on: November 10, 2020

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The Financial Markets Authority (FMA) has released the standard conditions for full financial advice provider (FAP) licences.
 
The final standard conditions are broadly consistent with the proposed standard conditions set out in the consultation document (discussed here). The standard conditions for a full licence include:

  • record keeping;
  • internal complaints process;
  • regulatory returns;
  • outsourcing;
  • business continuity and technology systems;
  • ongoing requirements; and
  • notification of material changes.

The most notable change is the removal of proposed standard condition 5 (professional indemnity insurance) which would have required a licence holder to have and maintain a level and scope of professional indemnity insurance that is adequate and appropriate for the provision of its financial advice service to retail clients in New Zealand. The FMA considered the industry's feedback regarding the costs of professional indemnity insurance to FAPs, likely benefits for consumers and availability of cover and chose not to include it as a standard condition. Instead, an individual FAP should make its own decision regarding professional indemnity insurance based on its own particular circumstances.  
 
Other changes include:

  • an alternative date for measuring the 7 year period for which the licence holder is required to maintain its records, being 'the date of the conclusion of the life of the financial advice product that the financial advice relates to'; and
  • additional content in the explanatory notes, in particular standard condition 4 (outsourcing) and standard condition 6 (ongoing requirements).

FAPs can expect the process for full licensing will be conducted online and more comprehensive than transitional licensing.
 
These conditions will be effective from the date a FAP's full licence takes effect. All FAPs must have obtained a full licence by 15 March 2023.
 
Please let us know if you would like to discuss the standard conditions to full FAP licences or the new financial adviser regime more generally.

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