Some of the work underway in the financial advisory sector
New regulation of DIMS
The Financial Markets Authority (FMA) is continuing to publish information to help Authorisded Fianncial Advisers (AFAs) understand how the new Financial Markets Conduct Act impacts on AFAs who provide Discretionary Investment Management Services (DIMS). For example, this March 2014 factsheet provides an update on the changes ahead and includes a flow chart to work out whether a service is personalised DIMS or class DIMS.
There is also a set of frequently asked questions regarding FMA’s approach to the regulation of DIMS from 1 December 2014. This document includes practical examples.
Regulatory Reporting Guide for AFAs
Following on from feedback received during its first round of consultation, FMA is undertaking further consultation on a revised Regulatory Reporting Guide and annual Information Return for AFAs. FMA’s expectation is that it will take less time to collect the information needed to answer the questions in the revised Information Return and it is now proposed that AFAs complete the first Information Return relating to their business as at 30 June 2014 and submit it to FMA by 30 September 2014. Submissions on the revised documentation close on 9 April.
Revised Code of Professional Conduct for AFAs
The Code Committee for Financial Advisers has been working on revisions to the Code of Professional Conduct for Authorised Financial Advisers over the past year. On 27 March 2014, the Minister of Commerce announced that a revised Code will come into force on 1 May 2014. A copy of the revised code and a summary of the key changes can be found on FMA’s website.
General information on the Financial Advisers Act
An understanding of the Financial Advisers Act 2008 is essential for all members making investment decisions or transactions on behalf of their clients. Some activities may require authorisation or registration.
The legislation covers the following business activities:
- Giving financial advice - to make a recommendation, or give an opinion to a client in relation to the acquiring or disposing of a financial product.
- Providing an investment planning service - to design (or offer to design) for a client a plan which analyses an individual's overall current and future financial situation (including investment needs), identifies their investment goals and gives a recommendation or opinion on how to realise some or all of those goals.
- Providing a discretionary investment management service - to decide which financial products to acquire or dispose of on behalf of a client, while acting under an authority granted to them (or their employer or principal) to manage some or all of the client's holdings of financial products.
Members should also be aware of the two main potential exemptions that exist for NZICA members:
- Members (only those who are Chartered Accountants) will not be considered to be providing financial adviser services when providing services in the ordinary course of business as a CA. If this exemption applies in the specific set of circumstances then the member is not required to register or become authorised to provide the relevant services.
- A service provided as an incidental part of a non-financial service is deemed not to be a financial adviser service. A service is "incidental" if it is carried out to facilitate the CA business, or is ancillary to the CA business. If this exemption applies in the specific set of circumstances then the member is not required to register or become authorised to provide the relevant services.
Members should seek legal advice, or contact NZICA, if they require assistance with their own particular circumstances. In all cases NZICA's Code of Ethics applies and members must ensure they are competent to undertake the services they are being asked to provide.
For more information, please review 2010 Chartered Accountants Journal articles for detail around which activities might constitute regulated financial advice and or whether an exemption may apply to your specific circumstances.
Become an Authorised Financial Adviser
As part of the requirements for applicants to become an Authorised Financial Adviser, FMA requires that individuals secure a signed testimonial form from their membership body. For NZICA members the form needs to be completed and signed in part 1 and then submitted for processing. Upon completion NZICA will return the completed form to the member so that they can include it with their application to FMA.
Testimonial form for NZICA members
Financial Markets Authority website
Still got questions?
Contact our Customer Service Centre.