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Brief Counsel

Key opportunities for input on new financial regulation regime

09 July 2009

The Securities Commission, the Ministry of Consumer Affairs and the Ministry of Economic Development (MED) have all recently released discussion documents in relation to the Financial Advisers Act 2008 (FAA) and Financial Service Providers (Registration and Dispute Resolution) Act 2008 (FSPA), both of which are scheduled to be fully in force by the end of 2010.

There is an important opportunity in this consultation process to influence and to improve the shape of the new regime.  Chapman Tripp will provide Brief Counsels to assist your response.  You will receive the first of these – on the MED paper – later today and the remaining two next week.

We have already engaged successfully with MED to remedy some issues in the legislation and will be glad to assist any affected party with submissions and/or identification of further potential problems.

Disclosure requirements

While the disclosures required by the new framework will have similarities with those currently prescribed in the Securities Market Act, there will be some significant differences.  The new regime will omit some current disclosures which are addressed by the authorisation process, be tailored for a broader range of products and – importantly – will allow disclosure to be made as soon as practicable after a service is performed where it is not practicable to make the disclosure beforehand.

The FAA also establishes different tiers of disclosure according whether the adviser is:

  • authorised
  • registered but not authorised, or
  • an employee or agent of a Qualifying Financial Entity (QFE).

The actual content of the disclosure statements and the way in which disclosures are made will be prescribed by regulations made pursuant to the FAA.  MED is seeking submissions to help inform these regulations.  A copy of the discussion paper is available at: http://www.med.govt.nz/upload/68462/FAA%20disclosure%20regulations%20discussion%20document.pdf

The closing date for submissions is 12 August 2009.

Regulating and supervising financial advisers

The Securities Commission paper has a particular focus on QFEs and on the principles underlying the supervision of advisers under the FAA.  More detailed proposals in relation to Authorised Financial Advisers will be developed once the Code of Professional Conduct is implemented.  

The Registrar of Companies has been appointed as the Registrar of Financial Service Providers and will also be providing further information about registration of advisers in due course.

A copy of the discussion paper "Staff Paper on Regulating and Supervising Financial Advisers" is available at: http://www.sec-com.govt.nz/publications/documents/current-discussion-doc.shtml

Submissions are called for prior to 5.30pm on 30 July 2009.

Approved dispute resolution schemes and the reserve scheme

Any person or entity who offers a financial service must be a member of a dispute resolution scheme under the FSPA.  This will apply to all financial advisers, banks, finance companies, share brokers, KiwiSaver managers, trustees and distributors, listed companies, trustee companies, issuers, financial lenders under credit contracts, credit card operators, foreign exchange operators, futures dealers, insurance companies, money market operators and certain other included parties.  Providers have the option to form their own dispute resolution scheme and have it approved by the Minister of Consumer Affairs, or join the Government’s Reserve Scheme.

The Ministry of Consumer Affairs discussion papers seek input on the proposed form and rules of the Reserve Scheme, and draft guidelines to assist schemes applying to become Approved Dispute Resolution Schemes (ADRS).

The Ministry is anticipating that no more than half a dozen ADRS will be approved.

Copies of the Proposed Reserve Dispute Resolution Scheme under the Financial Service Providers (Registration and Dispute Resolution) Act 2008 and the Draft Guidelines to Assist Scheme applying to become an Approved Dispute Resolution Scheme under the Financial Service Providers (Registration and Dispute Resolution) Act 2008 are available at: http://www.consumeraffairs.govt.nz/businessinfo/dr/index.html

Submissions on both papers are sought by Friday 31 July 2009.  

For further advice or help with preparing a submission, please contact the lawyers featured.

Indicative timeline 

Within 3 weeks

  • Appointment of the Code Committee

30 July 2009

  • Submissions due on the Staff Paper on Regulating and Supervising Financial Advisers

31 July 2009

  • Submissions due on Proposed Reserve Dispute Resolution Scheme under the Financial Service Providers (Registration and Dispute Resolution) Act 2008
  • Submissions due on Draft Guidelines to Assist Scheme applying to become an Approved Dispute Resolution Scheme under the Financial Service Providers (Registration and Dispute Resolution) Act 2008

12 August 2009

  • Submissions due on Financial Advisers Act 2008: Disclosure Regulations

August 2009

  • Code of Conduct discussion paper released

30 September 2009

  • Finalised Dispute Resolution Scheme approval criteria released
  • Application process to become Approved Dispute Resolution Scheme opens

October 2009

  • Tender opens to provide Reserve Scheme (closes mid-November)

Last quarter of 2009

  • Applications for QFE status open

December 2009

  • Advisory Body in respect of the Reserve Scheme and successful Reserve Scheme provider announced
  • Discussion paper on Reserve Scheme levies released for consultation

Early 2010

  • Disclosure regulations finalised

February 2010

  • Submissions due for the discussion paper on Reserve Scheme levies
  • Reserve Scheme Advisory Body to commence working with Ministry of Consumer Affairs and Reserve Scheme provider to establish Reserve Scheme operating procedures

 

April 2010

  • Reserve Scheme levy regulations finalised and implemented

1 May 2010

  • Reserve Scheme established

Mid 2010

  • Applications for potential Authorised Financial Advisers open

1 December 2010

  • Full implementation of the FAA and FSPA
  • Disclosure regulations come into force

Contacts