by Susan Edmunds
Changes to the way DIMS are regulated require anyone who provides DIMS to retail clients to be licensed. Existing class DIMS providers have until June to apply for a class licence and until December 1 next year to update their client documentation. New providers needed to comply from the beginning of December.
But there are exceptions and exemptions. One allows advisers to provide DIMS on a contingency basis without being licensed, such as in a known temporary period or urgent situation.
Advisers can have a standing authority to make decisions on their clients’ behalf in unexpected situations, as long as that doesn’t become the normal method of managing their clients’ assets.
The FMA says: “For example, your client may suffer a medical crisis and you are unable to receive instructions as your client is incapacitated. The investment authority would need to state that you have the authority to provide DIMS for any temporary period to cover any absence, incapacity or contingency when you cannot reasonably obtain instructions from the client.”
These temporary periods cannot be for more than six months in any 12-month period and an adviser cannot claim the contingency exemption if they, or someone associated with them, already provides DIMS to that client. The FMA says: “If you are a director of a financial adviser company and your senior manager has investment authority to provide DIMS to that client, you won't be able to provide contingency DIMS to the same client.”
Another exemption allows advisers until December next year to update their documentation in line with the new rules if they are already offering personalised DIMS to retail clients.
The FMA says this applies when advisers have a bespoke investment strategy specific to a client’s financial position and goals and make investment decisions for the client. It does not include personalised advice around a strategy designed for a class of investors.
Even a single class client means advisers cannot rely on this transitional provision. The FMA will review advisers’ updated business statements.
In all cases, the client’s portfolio must be held by the client or an independent custodian from next June.
Spokesman Andrew Park said advisers who were unsure about how the exemptions would apply should get in touch with the FMA in the new year.
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