Concerns Raised Over FMA’s A, B, C Licence Proposal


While the FMA’s proposed three-class system of licencing financial advisers was roundly welcomed when it was announced by the regulator in June, its A, B, C categorisations for the different types of FAP licence has been cause for comment.

While the letter-based distinctions merely separate one type of licence from another, it hasn’t stopped concerns that the general public might perceive that someone holding licence A is better than someone with licence B or C.

Lawyers at Dentons Kensington Swan generally support the proposed licencing regime, but question the A, B, C class system. It says the perception of different classes matters as consumers “…will be confused by what appears to be a reverse-order class system.”

“You cannot stop the uninformed looking at a provider with a class C licence, and query what they have done wrong, or what inadequacies they have in their systems, that prevented them from obtaining a class A licence. There’s no logic to it, but that’s human nature.”

You cannot stop the uninformed looking at a provider with a class C licence, and query what they have done wrong…

The law firm suggests the FMA adopt descriptive terms for the three categories of licence, and not use the ‘class’ concept at all.

“What would be wrong with having a single adviser licence, a multi-adviser licence, and an unrestricted or comprehensive licence? At least then the licence name signals the manner of advice consumers are going to get from their provider based on what’s on the tin.”


However, the FMA is inviting comments on its proposed standard conditions for financial advice providers by way of a six-week consultation period that ends on 7 August.

An FMA spokesperson says: “The consultation asks for feedback on our proposed approach to divide a financial service into three licence classes.

“We welcome comments and feedback on any aspect of the proposed classes and are pleased to see a good level of interest and range of comments being made. We encourage all advisers to consider the options raised in the paper and provide their feedback.”

The FMA’s proposed three classes of FAP licence:

  • Class A is for financial advice providers (FAPs) who have just the one financial adviser providing financial advice on their behalf, or who don’t engage any financial advisers or nominated representatives to provide financial advice, but instead provide it direct on their own account.
  • Class B is for FAPs who provide financial advice on their own account and/or through one or more financial advisers (but not through nominated representatives). These FAPs are able to include authorised bodies within their licence, with financial advisers able to be directly engaged by the FAP or authorised body (or with specific approval from the FMA, indirectly engaged through an interposed person).
  • Class C is for FAPs wishing to provide regulated financial advice to retail clients in any manner permitted by law. This is the only class of licence that permits the engagement of nominated representatives.

From 15 March 2021, anyone who offers financial advice to retail clients must either hold a transitional financial advice provider licence, or be engaged by a licenced financial advice provider.

Read more at Dentons Kensington Swan.