Proposed standard conditions for AFAs - Request for comment

Introduction

• The Commission is considering setting all licence periods for between three and seven years.
• The period granted in each case will reflect the risk based assessment of the products and services provided.
• In the absence of information on which to base that assessment, the default period proposed for all advisers is five years.
• It is proposed that the following scope of activities will be set at 5 years[1]
  • Financial advice retail (Category 2): likely, however wait for further detail
  • Financial advice retail (Category 1 and 2)
  • Investment Planning Services
  • Discretionary investment management Services
  • Financial advice to wholesale clients and provision of class services

• Ensure the ABS accurately reflects business and compliance arrangements
• Provide annual confirmation to the Commission that the ABS is current
• Provide a copy of the ABS to the Commission on request

• Periodic and ongoing reporting in accordance requirements contained in the AFAs Regulatory Reporting Guide
• Likely to require reporting of factual business information, such as business volumes for different product groups and services types, numbers of customers, numbers and types of breaches, and complaints information
• Reporting will, where appropriate, be aligned with reporting requirements for AML/CFT Act

• AFA must notify the Commission in writing within five business days of any significant matter concerning the AFA’s authorisation, or financial adviser activities including:
  • Changes to the AFA’s financial services business or activities
  • Changes that may impact upon the Certificate or period of authorisation, or any exemption
  • Any serious breach by the AFA of the standard conditions, the Code, the Act or any regulations, the Securities Act or the Securities Markets Act
  • Any adverse findings, convictions, or rulings
  • Any changes to the AFA’s relationship with a QFE or employer

• Ensure that all records pertaining to financial adviser business are available for inspection. e.g. client files (Code Standards 12 and 13), CPD records and personal professional development plan (CS 17 and 18)

• Where the AFA acts as an intermediary for a client in the receipt, holding, payment, transfer of client money / client property, the AFA must act in accordance with the brokers’ conduct and trust accounting obligations in Part 3A

• Where the AFA is responsible for supervising trainee financial advisers, the AFA must act professionally and must ensure there is an appropriate level of supervision of the trainee
• The supervising AFA must ensure that the trainee does not provide services to clients that can only be provided by AFAs

• The AFA must not state or imply that the Commission has endorsed or approved the AFA’s business

• The Commission intends to issue a Certificate of Authorisation to each AFA. This will include FAS Scope, period of authorisation, standard conditions and any modifications
• The AFA must display his or her Certificate of Authorisation at all times in a prominent place at the principal place of business.