Draft financial advice disclosure regulations released

​The Ministry of Business, Innovation and Employment (MBIE) has opened consultation on draft regulations setting the disclosure requirements under the new financial advice regime, to come into force in June 2020.

Submissions close on 8 November 2019.

Draft regulations

The disclosure requirements cover information relating to the financial advice provider’s licence, dispute resolution arrangements, nature and scope of advice, fees and expenses, potential commissions, incentives, conflicts of interest and availability of information. At all times, this information must be publicly available but a three stage process will be applied as the engagement deepens.

  • Stage 1 – certain information must be posted to the provider’s website or provided in hard copy on request.
  • Stage 2 – certain information must be provided directly to the client when the nature and scope of the advice is or ought to be known, and the adviser has reasonable grounds for concluding that the advice may be given to the client. Disclosure must be given as soon as practicable after this, and before financial advice is given.
  • Stage 3 – when the financial advice is given, any material change to the information already provided must be notified and any actual fees or expenses, commissions, incentives, conflicts of interest, dispute resolution arrangements and statutory duties must be confirmed.

If a complaint is made, disclosure is also required at that point.

There are other requirements:

  • disclosure to retail clients should be clear, concise, effective, and given prominence when presented with other information
  • disclosure must be provided in writing at the client’s request
  • written disclosure should be clearly identifiable as being from the provider, and contain the professional contact details of the person giving the financial advice, and
  • it will be a condition of a financial advice provider’s licence that a record is kept of each disclosure either by the financial advice provider or by those they engage.

Disclosure to a client will not need to be repeated or updated within a one-year period unless there has been a material change in the information or in the nature of the service being offered. 

Feedback sought

MBIE is seeking specific feedback on:

  • whether the draft regulations achieve their policy intent
  • whether the draft regulations are workable in practice for the different ways in which advice could be given, and 
  • how best to manage the transition to ensure industry compliance with the new disclosure requirements by June 2020.

Next Steps

If you would like more information on the impact of the disclosure regulations and the new financial advice regime for your business, or any assistance with preparing a submission on the draft regulations, please get in touch with one of our contacts.

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