Cut-and-Paste Answers to FAP Application Surprise Regulator


Cutting and pasting example answers from the FMA’s website into an application for a full FAP license didn’t cut any ice with the regulator when one adviser tried it.

Anita Frazer, the FMA’s Head of Compliance Services, told those taking part in a Financial Advice NZ webinar that her team has received 12 applications for full licenses, of which two have been declined.

“One applicant just copied and pasted our own [example] answers back to us,” she said. “We read them and said ‘didn’t we write that?’.

“We are now chasing up those we declined to make sure they are not giving advice, because they don’t have a license. Particularly the one who went straight for a full license and didn’t get it right at all. So they are on our radar and we are having a chat with them.”

Jon Botica, the FMA’s Director of Market Engagement, says while the licence application is not difficult or cumbersome, “…you do need to think strategically about the questions we ask”.

One area of concern for Botica is that some websites published by financial advisers have not been brought up to date to meet the requirements of the new regime.

FMA Director of Market Engagement John Botica says financial advisers not operating under a transitional Financial Advice Provider licence will need a full licence.
FMA Director of Market Engagement John Botica says some industry websites have not been updated in line with the new regime.

“We have noticed that some websites are not fully up to date, with gaps in disclosure material,” he says. “So you may see a friendly reminder from us to help you along the way.

“We are also seeing websites that have blatantly not been updated, or are blatantly still referring to old terminology. You will find us far less sympathetic toward those sorts of issues. We will be taking action.”

Seven weeks into the new regime the FMA says there is 3,007 financial advice providers, 10,743 financial advisers, and 12,287 nominated representatives.

“The majority of the advisers that were on the FSPR hasn’t changed from the numbers we see now, so talk of people leaving the industry was misplaced,” he says.

We are also seeing websites that have blatantly not been updated, or are blatantly still referring to old terminology…

“What did surprise me a little is the number of small adviser business that are spread right across New Zealand.”

Around 82% of all licensed financial advice providers have 10 or less advisers and roughly half of all financial advice providers are based in Auckland.

“That’s to be expected,” says Botica. “And I think the second biggest region is Canterbury.”

In addition, he says one third of advisers are aged 55 and over, so recommends some start to think of their succession plans.

Almost two months on from the start of the new regime on 15 March, Botica wanted to remind those working in the sector that “all obligations” under the new regime are now expected to be met.

“What we are hearing is that some think that all of the other obligations that come with having a transitional license, be they part one of the code, parts of the disclosure, all the obligations that you have within the legislation itself – that you have two years in which to transition to those – and that is just wrong,” he says.

“All obligations under the new regime took effect on 15 March. The transition period is in respect of moving to a full licence and your approach to competency.”