The future been spelled out for financial advisers planning to operate under the incoming regulatory regime.
During a webinar organised by the Financial Services Council, David Ireland, a partner at law firm Dentons Kensington Swan, told viewers the Financial Services Legislation Amendment act (FSLAA) will cease to exist on day one of the Financial Markets Conduct act (FMC).
“The FSLAA is an amendment type of legislation that feeds into the Financial Markets Conduct act,” said Ireland. “We will probably still refer to the FSLAA regime, but it is all going to be woven into the FMC act. You will no longer have this handy condensed piece of the FSLAA legislation.”
While no confirmed date has been announced for the start of the new regulatory regime, Ireland says that come day one – possibly in nine-months’ time – financial advisers must be up and running, and ready to go.
“Financial advisers cannot start transitioning from day one,” he said. “If you don’t observe any of the obligations on day two then you are in the gun, you have to comply with everything.
“There is a little bit of transition relief around competency – but from day one you have to be fully compliant.
“From that day, if you want to be a financial adviser you’ve got to be engaged by a transitioning license FAP. Otherwise you are not going to be able to give any form of financial advice under the Financial Advisers act. You will have to stop.”
Your legal duties on day one
- Must be compliant with the applicable legislation, regulations, code and standard conditions
- All financial advisers must be engaged by a transitionally licenced FAP
- Strict limits on the engagement of nominated representatives
- Must demonstrate compliance with good conduct obligations
- New disclosure regulations must be satisfied
Ireland told advisers watching the webinar on Friday 12 June that they will need to update their registration to identify which financial provider, or providers, they are providing advice on behalf of. However, he says there is a three-month leeway to update the register (from day one).
What you are doing today will cease to be an option from day one…
Ireland says while financial advisers have to follow the new rules when they come into force, they also need to be able to demonstrate that they have met the act when giving advice.
“It is no good telling the FMA what a good job you have been doing about complying with all you have to do – you need to be able to show them. And that involves record keeping and good evidence.
“What you are doing today will cease to be an option from day one.”
Before day one
- Build your policies, processes and controls (your operation manual)
- Draft new disclosure documents
- Update your website in preparation for day one
- Update all marketing material, email signature, social media, brochures etc
- Make IT changes
- Update the advice process and advice templates
- Obtain signed contracts with FAPS, Abs, and Fas
- Train staff
Ireland says financial advisers should start meeting the incoming record-keeping requirements now.
The record keeping requirement can be overwhelming…
“The record keeping requirement can be overwhelming when you look at it, but you can put it in place now,” he said.
“Look at your CRM process, think about how you can do this in the most cost-effective manner to make sure it is workable. It is almost like a practice period of nine months.
“There’s no point putting it off. Look at the way you are recording your financial advice process and make sure you have a robust effective and efficient system for recording the key information you need.”
You can watch many of the webinars hosted by the Financial Services Council here.