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Chance to learn from licensing mistakes

Advisers who have to go through the entity licensing process could do well to learn from early Financial Markets Conduct Act license applicants and not submit applications that contain the words “insert company name here”.

Friday, May 26th 2017, 6:00AM

by Susan Edmunds

Liam Mason, FMA director of regulation

The Financial Markets Authority has released a guide to licensing, after the initial wave of license applications under the FMCA.

By December 2016, financial service providers caught by the new regime had to be licensed.

The FMA received a total of 253 license applications, of which 201 resulted in a granted license. Eleven were unsuccessful and 41 withdrawn. Fourteen of those withdrawn were personalised DIMS and full DIMS applications.

Financial advisers will have to go through a similar process when the Financial Services Legislation Amendment Bill comes into force and requires entity licensing.

An FMA spokesman said the report showed the benefits of a flexible approach to help different business models.

“This will be very important given the range of entities that will be covered in the changes to financial advice. Beyond that, it is difficult to draw specific parallels as the details of the licensing requirements for financial advisers are not yet known. The FMA will be producing guidance once the legislative process is complete.”

The report said some FMCA applications were prepared by consultants.

“When we spoke to the applicants, sometimes they could not describe their business operations and the operation of their key processes. We felt many applicants use of consultants replaced, rather than supplemented, the understanding of their business structure. We also saw several applications which shared identical financial information, and were prepared by the same consultant,” it said.

“We understand that working with external consultants can be helpful during a licensing application. However, it is important that any new policies are fit for purpose, tailored to your business model, and outline why your business has taken a particular approach. It was easy to identify applications that were over-reliant on consultant’s templates. Some applicants presented documents that still said: ‘Insert company name here’.”

It said it sometimes found information on websites and other advertising materials that did not meet regulatory requirements.

“Applicants should regularly review all printed and online marketing materials to make sure all statements meet the legal requirements and are not misleading.”

There had been a few applications where the applicant lacked the financial and human resources required for the service or could not provide additional information requested.

It had also learned lessons from the experience: It adjusted its processes as it gained experience, engaging more frequently with applicants and holding face-to-face meetings earlier. 

Liam Mason, FMA director of regulation, said: “Licensing must be a challenge so New Zealanders can be sure licensed firms meet the standards set by law.  However, the process to get a licence should be as straightforward as possible and we have learned valuable lessons. Our aim is to foster and encourage the collaborative relationships we have built with licensed companies through our monitoring and supervision work.”

New applicants should know their legal requirements, identify any gaps, apply online and meet with the FMA early, it said.

Tags: FMA

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