Regulation of Financial Services Industry
People in New Zealand who are in the business of providing a “financial service” must be registered on the Financial Service Providers Register. Financial services include acting as an insurer, issuing (or participating in an issue of) financial products to the public, providing credit under a credit contract, changing foreign currency, providing brokering services, giving financial guarantees, being a licensed non-bank deposit taker or a registered bank and providing “financial adviser services”.
All providers of “financial adviser services” and “brokers” are regulated by a financial advisers’ regime. A provider of a “financial adviser service” is someone who in their ordinary course of business gives “financial advice” to a client, provides a “discretionary investment management service” to a client, or provides an “investment planning service” to a client.
The financial advisers’ regime:
(a) imposes professional conduct and competency requirements on both financial advisers and brokers;
(b) imposes disclosure obligations on certain financial advisers and brokers;
(c) imposes trust accounting obligations on brokers;
(d) requires all providers of “financial adviser services” and brokers to be registered;
(e) requires people who provide retail clients with “financial adviser services” in relation to complex financial products to be authorised or, in some cases, operate through a “qualifying financial entity”;
(f) requires people who provide financial adviser services or broking services to retail clients to be members of an approved dispute resolution scheme; and
(g) provides a regime to regulate financial advisers and brokers. From 15 March 2021, financial adviser services and broking services will be under new regulation.
The new regime changes licensing requirements and broadens the application of consumer protection duties and disclosures (including for wholesale clients). Providers will also need to have a clear connection to New Zealand to be registered on the New Zealand Financial Service Providers Register.