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New Zealand Securities Commission |
Last Updated: 16 November 2014
RESPONSE TO SUBMISSIONS ON CONSULTATION PAPER: STANDARD CONDITIONS FOR
AUTHORISED FINANCIAL ADVISERS
5 November 2010
Executive summary:
The Commission released its consultation paper on Standard Conditions for
Authorised Financial Advisers on 9 September 2010. The Consultation
period ran
until 1 October. A total of 11 public submissions were received. Some of the
common themes raised by submitters were
as follows:
a) questions regarding reporting, content and confidentiality
b) questions regarding notifications, the 5 day period and the
content
c) clarity or guidance requested regarding the prohibition on endorsement by the Securities Commission and promoting the
AFA brand
d) queries raised in relation to the practicality of displaying the
certificate of authorisation
e) comments that some conditions should not apply or should be modified for
AFAs in a QFE
f) comments about the ABS- submitters suggested more flexibility and further
guidance
g) comments regarding the period of authorisation – submitters
suggested some groups were lower risk and should have the longest
period
available
In general, submitters supported most of the conditions but provided some constructive and practical suggestions regarding the application of the conditions and highlighted areas where further information would be useful.
The Securities Commission has considered all issues raised by submitters and has provided a summary below of the main issues
together with the Commission’s response to each of these issues. Not
all issues raised have been recorded in this table.
After consideration of the submissions, the Commission made the following
amendments to the conditions:
Standard Condition 1: Requirement to have and maintain and ABS – the
words “at all times” have been removed to
address any practical
difficulties with timing and to recognise that an ABS will be a living document
that will change and develop
over time.
Standard Condition 2: Reporting – no change
Standard Condition 3: Notifications - no substantive changes – some re
ordering of items in bullet point 3 (additional guidance
will be developed over
time)
Standard Condition 4: Records – no change
Standard Condition 5: Client Money – no change (additional guidance
will be provided)
Standard Condition 6: Supervising Trainee advisers: no change (additional guidance will be provided) Standard Condition 7: No endorsement – no change (additional guidance to be provided)
Standard Condition 8: Display of Certificate – this Condition has been
removed.
Please note: In order to capture the key elements of each issue, some
paraphrasing of text, general editing and summarising of information
has been
necessary.
Issue raised (Standard Condition ref.)
|
From
|
Submission
|
Securities Commission response
|
1.Authorisation period
|
a) Confidential submission
|
Authorisation periods should deal with expiry of sunset arrangements (in
the Competency alternatives schedule in the Code) “...the
Commission to
adopt a flexible renewal arrangement which provides, at the Commission's
discretion, a temporary 1 or 2-year renewal
of authorisation for advisers to
complete the required Unit Standards in the National Certification of Financial
Services in the
absence of being provided proper exemptions when initially
authorised”.
|
The Commission considers that five years should be sufficient time for
advisers to plan for and complete any further training requirements
for
renewal.
|
|
b) Securities Industry Association
|
For those subject to NZX Participant rules the maximum period should
apply.
|
While it is accepted that those subject to NZX rules may already be subject
to high standards of compliance and oversight, practices
across firms will
differ and there is no guarantee the individual will remain subject to these
standards for the entire period of
authorisation.
|
|
c) Institute of Financial Advisers
|
Recommend longer authorisation periods where
the adviser can demonstrate higher standards than the norm and/or less
risk: advisers who are CFP, CLU designates (default of 7 years)
and IFA members
(default of at least 6 years).
|
Please see comments at 1b) above. In addition to this, membership of IFA
may not endure for the entire period of authorisation. CFPs
and CLUs may also
need to undertake further training before renewal (where designations have been
relied on for relief against unit
standards for the first period authorisation).
The Code does not allow for these designations to be relied on (for Set C) for
authorisations
granted past 2014 and therefore a longer period is not
appropriate.
|
Issue raised (Standard Condition ref.)
|
From
|
Submission
|
Securities Commission response
|
|
d)Westpac
|
The Commission is unreasonably vague about what factors will define the
authorisation period-no criteria provided about the risk assessment.
No
indication why product and service risk should lead to different periods.
Occupational regulation regimes generally provide for
annual renewal of
practising certificates. The Commission should provide transparent guidance
about the circumstances that may lead
to different authorisation periods.
|
The Commission is sympathetic to the concern that there is a lack of
information around risk factors. In the first or initial period
it is inevitable
that risk information about the AFA population will be limited. Over time risk
information will be developed and
the Commission intends
to be transparent in outlining its criteria for setting renewal periods.
Given the absence of reliable risk information for the first
period, we consider
a default period
of 5 years for all is fair across all groups.
Annual licensing has been considered and discounted on the basis of immense
cost and resource required to re- licence all AFAs within
12 months – both
for industry and the Commission. Note however there is an annual confirmation
requirement for registration
(on the FSPR).
|
|
e)Kiwibank
|
An applicant should have the opportunity to respond to a proposed reduction
in period from 5 years.
|
Partially agree – where appropriate the
Commission will engage with an
individual where there is a departure from the default period (stated in
the consultation as being 5 years). However this may not
be practical in all
cases. The Commission will publish further information (initially this will be
good character and criminal conviction
assessment criteria) and other risk
information as this is developed.
|
Issue raised (Standard Condition ref.)
|
From
|
Submission
|
Securities Commission response
|
|
f) Kiwibank
|
Being in a QFE should be a factor to support being in the upper
range.
|
The AFA licence is about professionalism of the individual and the QFE
relationship may change during the period of licence.
|
|
g) NZ Mortgage Brokers Association
|
Mortgage brokers are low risk and should get 7 years.
|
Noted. The Commission wishes to take a standardised approach to all
advisers for the initial period however a longer period may be
considered for
lower risk groups at renewal.
|
|
h)Confidential submission
|
AFAs who are QFE employees should be granted a longer term as they pose
less risk.
|
As per response to 1 b), c) and f)
|
|
i) PAA
|
We support a minimum 5 year period.
|
Noted
|
Total
|
9
|
|
|
2. FAS Scope
|
a) Westpac
|
The FAS scopes should be drawn from s55 of the
Act.
|
The Commission considers that the FAS scopes are directly drawn from
section 55 and the Code. The FAS scopes are designed to address
the possible
combinations of permissible activities and competence requirements in the Code.
The Commission has developed some further
help text and guidance to assist
applicants with their choices.
|
|
b)Westpac
|
The Commission should develop transparent criteria for allocating the FAS
scope based on the eligibility of the applicant under the
Code.
|
The applicant will select their own FAS scope, the Commission will not
allocate this. The Securities Commission will authorise the
applicant provided
the applicant meets the eligibility criteria including the competence
requirements (set out in the Code) for the
FAS scope they have selected.
|
Issue raised (Standard Condition ref.)
|
From
|
Submission
|
Securities Commission response
|
|
c)Westpac
|
The Commission should develop transparent criteria for allocating the FAS
scope based on the competence of the adviser rather than
the scope
‘that best fits their activities’. For example, an adviser who
has unit standard sets A, B, C and D should be eligible
for the full range of
FAS. Terms and Conditions could then relate to the activities of the AFA. Not
supportive of FAS Scopes being
tied to specific business activities. (comparison
with the medical council)
|
As per response 2 a) above. The
example given is correct, however it is up to the adviser to ensure he or
she is fully competent (Code Std 14) therefore he or she
may have attained all
the unit sets
but may not wish to be authorised for
“All”.
|
|
d) Westpac
|
FAS scope should reflect the fact that applicants can be allocated more
than one. At present ‘ALL’ does not include WS
and C. Table needs to
be revised so applicants can be authorised for the full range of activities they
are eligible for.
|
Partially agree – further help text has been developed to make this
clear on the application system however the codes have been
developed so that
only one needs to be selected.
|
|
e)Kiwibank
|
The Commission should clarify when it would decline to allocate the FAS
Scope provided the competency requirements are met.
|
Agree – we will be producing our criteria for consideration of good
character and criminal convictions in the near future. In
the meantime the AFA
Authorisation guide includes some guidelines.
|
|
f)Kiwibank
|
There should be separate scopes of practice for wholesale and class-may be
relevant in controlling what an AFA is authorised to do
(although code standard
14 is noted).
|
We have considered this issue and on balance have decided to leave WS + C
as one code because the competency requirements are the
same. We have however
updated our help text to ensure applicants understand the implications of CS 14
and that any class services
to
retail clients requires DRS membership.
|
Total
|
6
|
|
|
Issue raised (Standard Condition ref.)
|
From
|
Submission
|
Securities Commission response
|
3. Requirement to have and maintain an ABS (Standard Condition
1)
|
a)Confidential submission
|
In specific instances there are significant benefits to all stake-holders
(the public, the regulators, and the financial advisers)
for a degree of
prescription in a non-public compliance document. In this case, a template
document for the ABS which would significantly
reduce compliance costs (in both
time and cost to the adviser and auditing costs of the Commission, in
particular, costs which eventually
have to be passed onto clients) should be
considered.
|
The Commission does not intend to produce a template ABS but has encouraged
employers (and industry peers) to do this to assist their
employed AFAs provided
the AFA remains ultimately responsible for and takes ownership of the content of
the document.
|
|
b)Securities Industry Association
|
Supported, albeit the annual confirmation that the ABS is current should be
aligned with other reporting requirements.
|
Agree - AFAs can align their ABS confirmation date with other reporting
dates (such as annual confirmation for FSPR register).
|
|
c) confidential submission
|
Guidance would be helpful on how to update an ABS where the information is
subject to constant change.
|
Agree – the requirement to have an ABS recognises that this is an
evolving and changing document. We have made a slight amendment
(see comment 3
i) below) to Standard Condition 1 to make this clear and will also explain in
guidance.
|
|
d) confidential submission
|
The ABS Guide should provide definitions around conflicts of interest and
what needs to be included in an ABS.
|
Noted. The Commission does not intend to produce additional guidance on
this point at this time.
|
|
e) confidential submission
|
Suggest that in monitoring the Commission anonymously publishes examples of
good and bad practice. This would be helpful to industry.
|
Over time guidance will be developed to assist industry with examples of
good practice.
|
Issue raised (Standard Condition ref.)
|
From
|
Submission
|
Securities Commission response
|
|
f) Westpac
|
The Commission should recognise that AFAs can provide advice as employees
or nominated reps. Under s20F an employer is responsible.
So, the conditions and
guidance should recognise that employers have a right to require an ABS is
consistent with the employer and
enable an QFE employee or NR to adopt portions
of an ABS that relate to the QFE’s systems.
|
AFAs are not included in the definition of
“QFE advisers” therefore our view is that
20F (a) applies, not (b). An AFA may use parts of an employer provided
template but the AFA is ultimately responsible for having
and maintaining this
document.
|
|
g) ING
|
Problematic to require AFAs to update their ABS as per the current ABS
Guide. This includes all administrative, non-material amendments.
How will AFAs
be alerted to a new version? Will key changes be highlighted?
Suggest including a materiality qualification and a timely notification to
AFAs when an updated guide will be published.
|
The Commission is required to consult on all changes to the ABS
Guide.
|
|
h)Kiwibank
|
The second sentence should take into account
AFAs that are employees or NRs.
|
Noted however the AFA’s ABS should give details of their own clients
and advice processes etc.
|
|
i)Kiwibank
|
Should delete ‘at all times’ because potentially
unachievable.
|
Agree. Amendment made to Standard
Condition 1.
|
|
j)Kiwibank
|
Consider whether the condition should require that the ABS substantially
reflect the minimum business and compliance arrangements.
This would allow
flexibility about when it should be updated. Currently, an AFA would breach the
condition by updating the ABS first
or by updating the arrangements first.
|
As per response in 3 c) above, the ABS is supposed to be a living document
that will evolve over time. The ABS Guide is intended to
support this
flexibility.
|
Issue raised (Standard Condition ref.)
|
From
|
Submission
|
Securities Commission response
|
|
k)NZ Mortgage Brokers Association
|
The Commission should provide consultation around an ABS that is suitable
for Cat 2 elective AFAs.
|
The Commission does not intend to have a separate approach to Category 2
AFAs. All AFAs should be subject to the same minimum standards
to avoid consumer
confusion and a ‘watering down’ of the AFA brand.
|
|
l)PAA
|
Some discretion is needed for updates to ABS (at least 6 months or 1 year)
unless a major change has occurred.
|
Noted. We expect AFAs to review their ABS at least annually and more
frequently when there are changes to the business. Note the condition
requires
the document to be up to date – but please also see comment at 3 c).
Additional guidance will be provided on this
point.
|
Total
|
12
|
|
|
4. Reporting (Standard Condition 2)
|
a) Securities Industry Association
|
Support alignment with AML requirements.
|
Noted.
|
|
b) Securities Industry Association
|
Could the AFAs employer (or at the very least a QFE employer) satisfy the
requirement rather than the individual AFA?
|
The professional obligations are personal to the AFA – it is an
individual licence, however the QFE may well also have an obligation
to report;
both could be done at the same time.
|
|
c) Securities Industry Association
|
Concern about potential for competitors to gain commercially sensitive
information provided to the Commission under the OIA. Can we
consider
protections to reduce or remove this risk.
|
*See OIA footnote below.
|
|
d) Institute of Financial Advisers
|
Should be simple and in a standardised format- not overly onerous.
|
Noted.
|
Issue raised (Standard Condition ref.)
|
From
|
Submission
|
Securities Commission response
|
|
e) Institute of Financial Advisers
|
Should be in electronic format.
|
Noted.
|
|
f) Institute of Financial Advisers
|
Should logically coincide with other reporting requirements eg annual
statement, registration renewal and authorisation renewal.
|
Noted.
|
|
g) Westpac
|
QFEs should provide the primary reporting on their adviser business of
their AFAs. Otherwise there is duplication, cost and practical
difficulties.
|
Noted – however the reporting obligation rests with the AFA –
they are individually responsible for reporting in accordance
with the Reporting
Guide for AFAs.
|
|
h) Westpac
|
AFAs employed by registered financial service providers do not have
individual AML reporting obligations and AML reporting should
be aligned to
reflect this.
|
Noted.
|
|
i) Westpac
|
Serious concern that actual reporting obligations are not yet known. Issues
of confidentiality, data capture and compliance cost.
Need time to develop
systems.
|
Noted. Currently the reporting obligations are in relation to the ABS
and the matters listed in the notifications.
Adequate lead time will be factored in to any additional requirements
imposed by the Regulatory reporting guide. The Commission will
consult on the
guide in the early part of 2011.
|
|
j) ING
|
Reporting is a key compliance obligation and impacts on an AFA’s
processes. The consultation should be published ASAP.
|
Noted.
|
|
k) ING
|
Concern about any obligation to collate and provide extensive factual
business information. Information required must be meaningful
to the
Commission.
|
Noted.
|
Issue raised (Standard Condition ref.)
|
From
|
Submission
|
Securities Commission response
|
|
l) ING
|
Information should be kept confidential by the
Commission and related government bodies.
|
*see OIA footnote below.
|
|
m) Kiwibank
|
Suggest exempting AFAs employed by a QFE from direct reporting
obligations.
|
See response at 4 b) above.
|
|
n) NZ Mortgage Brokers Association
|
Need to know what the information required is to ensure processes are
implemented with minimal cost. Information should be clearly
defined and
relevant to the sector.
|
Noted – see comment 4 i) above.
|
|
o)Confidential submission
|
Concern about a duplication of reporting for AFAs in QFEs. Information
requests should go to the QFE in the first instance.
|
Noted – we will consider copying the information request to the QFE
on a case by case basis.
|
|
p)PAA
|
Opposes this requirement- onerous and unproductive to require regular
reporting. Administrative overload for AFAs without added value
for the public.
Recommend the requirement is scaled back to be absorbed into the ABS.
|
Noted – However reporting obligations are an essential part of the
regulatory relationship between the licensed individual and
the licensing
authority.
|
|
q)PAA
|
Concern that the Reporting Guide is still being developed and the details
are yet to be finalised.
|
See comment at 4 i) above.
|
|
r)PAA
|
Acknowledge AML requirements but essential that duplication of compliance
costs is avoided and administrative costs on AFAs are minimized.
|
Noted.
|
Issue raised (Standard Condition ref.)
|
From
|
Submission
|
Securities Commission response
|
|
s)PAA
|
Concern that commercially sensitive data should not be shared with other
govt agencies unless unlawful or criminal activity.
|
Noted - The Commission is permitted to communicate, for a proper purpose,
information to the agencies listed in section 151 of the
Financial Advisers
Act. See also footnote on OIA below.
|
Total
|
19
|
|
|
5. Notifications (Standard Condition 3)
|
a)Securities Industry Association
|
Draws Commission’s attention to the NZ Markets Disciplinary Tribunal
Rules Penalty Band Guidance Procedure re how to assess
the materiality of a
breach and whether self reporting is warranted.
|
Noted.
|
|
b)Securities Industry Association
|
Please consider practically how notifications will be made, suggest using
existing mechanism like companies office registration system.
Where the
registrar needs to be notified about something this should also satisfy the
Commission and separate notification should
not be required.
|
Noted.
|
|
c)Westpac
|
Urgent notifications should be limited to serious breaches by the AFA AND
Adverse findings or convictions. These would enable the
Commission to take
disciplinary action to protect the public. Notifications should not include
changes that can be dealt with administratively.
5 days is unnecessarily short
and should be ‘as soon as practicable’ or ‘at the earliest
opportunity’.
|
Noted. We will clarify in our guidance that the notification required
within 5 days does not need to be a full report and can be
followed with
further/more detailed information.
|
|
d)Westpac
|
The notification about changes to the business or activities including
changes that may affect a FAS Scope is unclear. Should be covered
in reporting,
not notifications. An AFA wanting a change in a FAS Scope should re-apply to the
Commission not send in an urgent notification.
|
Noted – we consider the current notifications to be appropriate
particularly for matters that are in consumers’ interests.
|
Issue raised (Standard Condition ref.)
|
From
|
Submission
|
Securities Commission response
|
|
e)Westpac
|
Changes that may impact on the certificate of authorisation, period or
exemption should be covered by an administrative process to
apply for changes
not an urgent notification.
|
As above.
|
|
f)Westpac
|
Change of employer should be dealt with in a change to an ABS not an urgent
notification.
|
As above.
|
|
g)ING
|
Should amend the condition to clarify what is meant by each notification
requirement- it is unclear. Also, a guidance note should
be published.
|
Please see guidance notes to standard conditions - we will also continue to
develop guidance over time as to what is expected.
|
|
h)Kiwibank
|
Suggest removing bullets and putting in guidance. Concerns with the matters
in bullets 1, 2 and 3. 1 and 2 are unclear and unnecessarily
burdensome.
3 could jeopardize a fair hearing and could be inconsistent with the Bill
of Rights. An AFA should not have to notify the Commission
of a suspected
breach.
|
Noted – The Commission views self reporting as an important part of
the AFA’s regulatory obligations. This is an established
and well used
tool in other jurisdictions. All matters reported to the Commission will be
subject to due process.
|
|
i)Kiwibank
|
Suggest amending to just notifying the Commission of the following:
Within 5 business days of the AFA becoming aware of any material matter
relevant to the AFA’s authorization, and
Within 5 business days of any material change to the AFA’s
relationship with a QFE or employer or within 5 business days of
any relevant
adverse finding etc.
|
Noted, however it may be difficult to measure the point in time that the
AFA has ‘become aware’ and therefore we
have avoided this wording. We will look at this in context of the reporting
guide.
|
|
j)NZ Mortgage Brokers Association
|
Suggest extending 5 day period to 20 days. The process of ascertaining the
breach takes longer than 5 days.
|
Noted – see comments at 5 c) above.
|
Issue raised (Standard Condition ref.)
|
From
|
Submission
|
Securities Commission response
|
|
k)PAA
|
5 days is not always practical although appreciated that NZX firms are
subject to this now. What about small firms with 1 or 2 individuals?
Suggest
restricting the 5 day requirement to very serious compliance issues.
|
As above.
|
Total
|
11
|
|
|
6. Records (Standard Condition 4)
|
a)Securities Industry Association
|
Concern about an AFA having access to records of his/her employer or in the
situation of a nominated rep of a QFE. Suggestion that
this condition only
applies to the extent that the AFA has the authority to provide records.
|
AFAs will need to ensure they can provide files relating to the clients
they service or have serviced in the past. The Commission
expects employers
and AFAs to work together to fulfill such requests and notes that Code
Standard
13 also contemplates co-operation.
|
|
b)ING
|
Should include an express condition that records may be kept
electronically.
|
It is the responsibility of the AFA to ensure files can be accessed in a
timely manner and are able to be reviewed. The Commission
should not need to
specify format as long as those requirements are met.
|
|
c)Kiwibank
|
Unreasonable to require records ‘at any time’. Should be during
business hours and upon reasonable notice.
|
Agree that reasonable notice periods should be given in all but extreme
cases
– guidance will make it clear that the
Commission will give reasonable notice.
|
|
d)Kiwibank
|
Suggest that the condition be deemed to be satisfied if the AFA’s
employer or QFE provides the records.
|
The Commission will hold the licensed individual to account and therefore
the individual should take steps to ensure the condition
can be met.
|
|
e)Confidential submission
|
Requests to examine files should go to the QFE
rather than directly to AFA employees.
|
As above.
|
Issue raised (Standard Condition ref.)
|
From
|
Submission
|
Securities Commission response
|
|
f)PAA
|
Even the IRD gives reasonable warning when inspecting records. There should
be specific and compelling reasons before the Commission
makes minor
administrative or random visits.
|
For routine visits reasonable notice will be given.
|
Total
|
6
|
|
|
7. Client Money (Standard Condition 5)
|
a) confidential submission
|
If the AFA is involved in the handling of client funds then it would be
more consistent to make the AFA meet the same standards required of
registered brokers ie disclosure, conduct and trust accounting etc not just
conduct and trust accounting.
|
Noted – however this may be confusing to consumers and AFAs (two sets
of disclosure obligations) If the AFA is also registered
as a broker then he or
she will be subject to brokers disclosure but otherwise the employer’s
disclosure regarding any broking
services should be sufficient.
|
|
b)Securities Industry Association
|
Suggest amending to clarify that an AFA can fulfill the obligation using
his/her employer’s structures. It is not clear whether
an employee must
set up separate structures.
|
Agree. Further guidance will be provided to make it clear individuals
should adhere to those standards but they don’t also need
to duplicate
their employer’s systems.
|
|
c)ING
|
Suggest removing this conditions, possibly ultra vires, or re-drafting so
that it only applies to AFAs who provide a broking service.
|
Further guidance on this will be provided
– see comments above. We do not consider that this is ultra vires see
section
55 (2) Financial Advisers Act.
|
|
d)Confidential submission
|
Concern that brokers’ obligations may contradict specific rules which
apply to trustees. Recommend that regulations state that
brokers’
obligations do not apply to trustee corporations who have their own legal
duties.
|
We do not consider there is overlap – if trustees are acting as
brokers they will be registered as such and need to comply with
Part 3A
Financial Advisers Act.
|
Total
|
4
|
|
|
Issue raised (Standard Condition ref.)
|
From
|
Submission
|
Securities Commission response
|
Supervising trainee advisers (Standard Condition 6)
|
a)Confidential submission
|
Provision needs to be made for trainees to be able to create client files
to qualify for authorisation by meeting Unit Standard C
assessment requirements.
We feel the present wording is a
Catch-22. We would ask that additional wording be included to the effect:
An exception exists for services to clients provided by
a trainee for the
purposes of the assessment requirements under Unit Standard Set C, in which
case, the supervising AFA is not only
responsible for the services but is also
required to co-sign with the trainee in writing
to the client the advice or services.
|
Please refer to ETITO’s website for guidance on trainee advisers and
preparation of client files for Set C. The trainee can
not provide advice that
is reserved for AFAs so the supervisory will always need to “sign
off” on the advice. This does
not render the client file (prepared by the
trainee) invalid for assessment purposes.
|
|
b)Institute of Financial Advisers
|
Support but there needs to be enough flexibility to make it practical. An
adviser can only learn by doing. No overly rigorous interpretations
of the Act
and the Code.
|
Please see above.
|
|
c)Institute of Financial Advisers
|
Cost issue- AFAs who take on trainees need them to be involved in the
process as early as possible
to generate revenue. An overly restrictive approach makes the situation
worse.
|
Noted.
|
|
d)ING
|
The Commission should provide guidance on the extent and nature of
supervision that would satisfy this condition.
|
Supervisory practices will vary and the Commission does not intend to
prescribe how to train and supervise advisers. The law applies
in all cases
– an adviser can not provide advice on services for which he or she is not
authorised.
|
|
e)NZ Mortgage Brokers Association
|
The AFA should take responsibility, should be limited to what is fair and
reasonable. The trainee needs to be made to take responsibility
of the process
used.
|
As above – a trainee can not provide any services for which
authorisation is required and therefore an AFA needs to take
responsibility.
|
Total
|
5
|
|
|
Issue raised (Standard Condition ref.)
|
From
|
Submission
|
Securities Commission response
|
8. No endorsement (Standard Condition 7)
|
a)Securities Industry Association
|
It could be argued that an AFA is not permitted to disclose he is an AFA,
contradicting with disclosure requirements. Granting AFA
status in itself
suggests endorsement by the Commission. Suggest that it is appropriate to
promote that one is an AFA and the standards that an AFA
must meet.
|
Noted – the ‘no endorsement’ wording is consistent with
wording already used in other authorisations granted by
the Commission AFA
status is not ‘granted’ rather the AFA is authorised to provide the
relevant service by reference
to minimum levels of competency, knowledge and
skills specified in the Code. Therefore the Commission should not be taken to
endorse
the advice or business of the AFA.
|
|
b)ING
|
Concern that there is no guidance. Suggest the Commission provide a phrase
for AFAs to use to describe their AFA status.
|
Noted – see above.
|
|
c)Confidential submission
|
Seek clarity that AFAs will be able to state that they are AFAs on items
like business cards.
|
This is permitted.
|
|
d)PAA
|
Recommend clarifying this because it is confusing. The Commission’s
website explicitly endorses the AFA logo as reflective of
higher
standards.
|
Noted – The Commission’s website uses the AFA abbreviation to
pose the question “Are you an AFA?” but with
the strapline
“Minimum standards for professional advisers” as distinguished from
“higher standards”.
|
Issue raised (Standard Condition ref.)
|
From
|
Submission
|
Securities Commission response
|
Total
|
4
|
|
|
9. Display of Certificate (Standard Condition 8)
|
a)Confidential submission
|
We feel the requirement should go further to achieve the purpose intended
subject to point 7, i.e. that it, and any detail of special
terms of
authorisation, be clearly visible to clients and prospective clients. In
practice, an adviser may conduct an interview or
meeting with a client at a
place other than the principal place of business, e.g. at a client's home or a
client's place of
business. Furthermore many advisers have "out-of- town" clients. We
understand that the "visibility" could be improved by providing
a prospective
client a copy of the certificate along with the disclosure statement. In the
case where only the standard terms of
authorisation apply, this could be met by
the adviser's Disclosure Statement containing the following or similar:
Authorisation
<AFA full name> has been authorised by the Securities Commission
as an Authorised Financial Adviser (AFA) under the Financial
Service Act 2008
for the period until
<authorisation expiry date> subject to the standard conditions
that apply to all AFAs. The Securities Commission does not endorse
the AFA's
business, advice, or solvency or any other agreements or business arrangements
of the AFA.
The disclosure requirements to advise clients when a material change to the
disclosure details occur
would then apply to any new non-standard term of authorisation or any
change to a non-standard term of authorisation.
|
Agree – the display of the certificate will be optional and the
suggestion to display via website is a practical solution. This
condition has
been removed. We consider that disclosure regulations will
adequately address when changes to the adviser’s circumstances need
to be notified to the client.
|
Issue raised (Standard Condition ref.)
|
From
|
Submission
|
Securities Commission response
|
|
b)Securities Industry Association
|
Suggest this is unnecessary and potentially problematic in many office
environments and offers little if any benefit to consumers.
Suggest deleting
it, but suggest that an AFA be allowed to voluntarily display the certificate.
ie the ‘no endorsement’
term would not preclude this.
|
Agree – now optional and not a condition.
|
|
c)Westpac
|
Will not work for those advisers working in call centres or with no public
interaction. Question as to what location should be used-
under SMA means
registered office of their employer.
|
Agree – as above.
|
|
d)Kiwibank
|
Unclear how this would work for an AFA in a large branch without a
dedicated office. More effective to require FAS Scope disclosed
in the
AFA’s disclosure statement.
|
As above. We expect regulations to require the FAS scope to be
disclosed.
|
|
e)NZ Mortgage Brokers Association
|
Condition should be extended to apply to websites. Also, should encourage
an AFA to display their disclosure document to the public.
|
See above.
|
|
f)PAA
|
Should be optional. Unnecessary and impractical for large adviser
businesses that may not have the display space. Also, many clients
never go to
an office but are visited by the adviser.
|
Agree – see comments above
|
Total
|
6
|
|
|
10. Miscellaneous
|
a)Securities Industry Association
|
Suggestion that the Commission state a rationale for each of the conditions
to show how the conditions fit with the objectives of
the legislation.
|
Explanations have been provided for all conditions.
|
Issue raised (Standard Condition ref.)
|
From
|
Submission
|
Securities Commission response
|
|
b)Sovereign
Ltd
|
Conditions are appropriate for individual AFAs but not for those in a QFE.
For example, an ABS should not be required, nor should
displaying a
certificate be required for advisers who do not have face to face contact
with consumers. The QFE should be empowered to set appropriate
conditions.
|
Disagree – as per responses in 1 b), c) and f) above. Re certificate
see comments above.
|
|
c)NZ Mortgage Brokers Association
|
Prior to gazetting, the Commission should consult with financial adviser
associations to ensure requirements are appropriate
|
Noted, however the Commission is unable to re consult on the final form of
the standard conditions. These need to be in force by 1
December (and
gazetted
28 days prior to this).
|
|
d)Confidential submission
|
We await the class advice disclosure regulations under s36.
|
Noted.
|
|
e)PAA
|
Concern that the Commission will take an unduly punitive approach to AFAs
at the outset. Suggest the Commission work with industry
associations on the
practical application of authorisation, not
against them. PAA would welcome the opportunity to work with the
Commission. Suggests a grace period for AFAs to meet new compliance
requirements.
|
As outlined in the consultation paper, the Securities Commission intends to
work collaboratively with industry but will take action
where standards fall
below the required level.
|
|
f)Confidential submission
|
Welcome voluntary authorisation.
|
Noted.
|
* Note regarding Official Information Act and ABS (and other
reports):
The Commission will respect the confidential nature of information received in any ABS (or other reports) submitted to it. Information held by the Commission is subject to the Official Information Act 1982 and the Privacy Act 1993. Any request for release of information we hold must be considered in accordance with the requirements of those Acts on a case by case basis. There are a number of grounds likely to provide good reason to withhold sensitive information submitted to the Commission, such as where its release would disclose a trade secret, prejudice the commercial position of the financial adviser business, or breach an obligation of confidence where release of the information would be likely to prejudice future supply or similar information, or information from the same source. Whilst we understand that information submitted to us will generally be submitted on a confidential basis, we suggest applicants state if they consider the information provided is confidential.
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URL: http://www.nzlii.org/nz/other/NZSecCom/2010/19.html