The FMA is consulting on two standard conditions it may potentially impose for transitional licences, as part of the new financial advice regime.
The new regime will be in force from June 2020 and those who provide regulated financial advice to retail clients will need to operate under a financial advice provider licence.
The two standard conditions being considered on financial advice provider transitional licences are as follows:
- You must maintain adequate written records in relation to your financial advice service
- You must have an internal process for resolving client complaints in relation to your financial advice service
The FMA stated it expects these standard conditions will apply for full licences, which may also have additional standard conditions.
On recording keeping, the FMA stated, “Record keeping is a requirement under the current Code of Professional Conduct for Authorised Financial Advisers (the existing code). However, this has not been included as a standard under the new code. The new code takes a principles-based approach and applies to everyone who gives regulated financial advice to retail clients. Record keeping is a process requirement that should apply to the licensed business.”
On an internal complaints process, it stated: “An internal process for resolving client complaints does not have to be complex or expensive. However, it must meet the four requirements in the proposed condition. How you comply with this condition will depend on your personal preferences and the nature and scale of your business.”
The full version of the two proposed conditions are included in the consultation paper, with explanatory notes, comments and examples.
The FMA is seeking feedback from potential transitional licence applicants, their advisers and interested parties and included the following questions for consideration on the two proposed standards:
Questions on record keeping condition:
- Do you agree or disagree with the proposed standard condition? Please provide your reasons.
- What written records do you currently keep for your financial advice business?
- Would the proposed standard condition create any additional compliance costs for your business? If so, please detail those costs.
- Would the proposed standard condition have any other adverse impact on your business? If so, please describe what this would be.
- Does this proposed standard condition create a barrier to enter the market? If so, please explain why this is the case.
- Do you have any other comments on the proposed condition or how it is drafted?
Questions on internal complaints process condition:
- Do you agree or disagree with the proposed standard condition? Please provide your reasons.
- Do you currently have an internal complaints process for your financial advice business?
- Would the proposed standard condition create any additional compliance costs for your business? If so, please detail those costs.
- Would the proposed standard condition have any other adverse impact on your business? If so, please describe what this would be.
- Does this proposed standard condition create a barrier to enter the market? If so, please explain why this is the case.
- Do you have any other comments on the proposed condition or how it is drafted?
The FMA confirmed it is currently developing the transitional licensing application form and preparing a guide with details on how to apply.
Click here to read the consultation paper and view the submission form.
Submissions close at 5pm on Friday, 26 July 2019