Licensing takes on some of code obligations

The Financial Markets Authority is consulting on two proposed standard conditions for transitional licensing - and they are things that are currently dealt with by the code of conduct for advisers.

Tuesday, June 25th 2019, 10:39AM

The regulator is proposing to require all financial advice providers to meet record-keeping and complaints-process standards as part of their transitional licenses.

All financial advisers will have to work for a licensed financial advice provider under the new regime.

Transitional licensing will open later this year. Disclosure requirements and a new code of conduct will come into force when the new laws take effect mid-next year.

The FMA said it would ask transitional license applicants for information about the types of services and products they dealt with and who was providing advice.

It would consider whitener director and senior managers were fit and proper for their roles, whether there was any reason to believe obligations would not be me and whether the business was registered on the FSPR.

"Transitional licensing provides us with a better sense of who is operating in the market – enabling us to anticipate the number of full licence applications and resources needed for ongoing monitoring and supervision."

Full licensing will be more robust again.

Conditions of licensing will be imposed by the legislation or the FMA. Some will be standard to all and others specific to a particular business.

The FMA is considering two standard conditions for transnational licensing:  Requiring adequate written records and an internal process for resolving complaints. These are two aspects of a financial advice business that are currently covered by the code of conduct for financial advisers but will not be in the new code.

It is likely there will be additional standard conditions for full licenses.

The record-keeping standard would require businesses to demonstrate how they gave regulated financial advice to retail clients, had complied with the FMC Act, the Financial Markets Conduct Regulations and the new code.

Records would have to be kept for seven years.

"This is to ensure licence holders (and any authorised bodies) continue to meet the requirements assessed at licensing and so we can effectively monitor compliance with their obligations. In addition, this requirement will ensure adequate information is available for retail clients about the financial advice services provided to them," the FMA said.

The complaints process standard would require an internal process for resolving complaints from clients.

FMA said this would mean a process that meant complaints were acknowledged as soon as practicable, retail clients were given information about the process and how it worked, complaints were resolved and a response provided as soon as possible and a written record kept of all complaints.

"This will ensure client complaints are adequately dealt with and there is a record of any issues arising in relation to the financial advice service. It will also enable us to effectively monitor whether licence holders and authorised bodies are complying with their obligations. Having this as a licence condition (even though external dispute resolution schemes may also require it) means we can take appropriate regulatory action against the licence holder and any authorised body if they do not comply," the FMA said.

"An internal process for resolving client complaints does not have to be complex or expensive. However, it must meet the four requirements in the proposed condition. How you comply with this condition will depend on your personal preferences and the nature and scale of your business. "

Tags: Financial Services Legislation Amendment Bill licensing

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