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Regulatory upheaval calms in 2014

Most advisers won’t have to deal with much new regulation this year but there are other law changes they should keep an eye on.

Friday, January 17th 2014, 6:00AM

by Niko Kloeten

The verdict, from financial services law specialist Jeremy Muir, should come as a relief for financial services participants who have spent the past few years grappling with the biggest law changes in the history of their industry.

The regulation, introduced by the Financial Advisers Act and Financial Service Providers Act, requires financial service providers to be registered and advisers who provide advice on category one products to be authorised. 

After several years preparing for the regulations, which came into effect in mid-2011, advisers have spent the past couple dealing with ongoing compliance issues arising from the new regime.

But Muir, a partner at law firm Minter Ellison Rudd Watts, says most of those issues have been settled and there are few big changes coming up that directly affect adviser businesses, except for those who operate a discretionary investment management service (DIMS). 

“I think it depends how broadly you define what’s of interest to advisers,” he says of what advisers can expect to see this year. 

“Obviously the Financial Advisers Act is in place and there are no immediate plans to make large-scale amendments other than a few tweaks as part of the Financial Markets Conduct Act, particularly around DIMS,” he says.

“For the day-to-day financial adviser the Financial Advisers Act is pretty much in place.  It becomes a matter of how it is interpreted and how it is enforced.”

To that end Muir says there could be more guidance issued this year by the Financial Markets Authority, which has recently outlined its interpretation on the thorny issue of providing “limited advice”.

Another thing to watch out for is a new version of the code of conduct for authorised financial advisers, which is expected to be released sometime this year.  The revised code needs to be approved first by the FMA and then by the Minister of Commerce.

But Muir says there are plenty of other regulatory changes affecting the financial services sector advisers should be keeping an eye on, particularly in regard to the Financial Markets Conduct Act.

One issue he says will be relevant to investment advisers is the new disclosure regime for investment products, including the introduction of product disclosure statements (PDS), over a two-year period starting in December this year. “It won’t just be the PDS, which is intended to be a shorter document that serves a certain purpose.  So much more information is going to be put out there by regular reporting by an online register.”

Niko Kloeten can be contacted at niko@goodreturns.co.nz

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