FMA cancels financial advice provider’s transitional licence
On 10 December 2021, the Financial Markets Authority (FMA) cancelled the transitional financial advice provider (FAP) licence of Wisdom House Investment Partners Limited (Wisdom House). This is the first time the FMA has cancelled a FAP licence.
A link to the media release is available.
Who needs to read it? Why?
This update will be of significance to anyone that currently holds a FAP transitional licence, or anyone who is expecting to give financial advice in the future and are looking to apply for a FAP full licence.
All providers of regulated financial advice to retail clients will need a FAP licence.
What does it cover?
The licence cancellation comes after its sole financial adviser, Mr Yuen Pok (Paul) Loo, engaged in serious misconduct at his previous employer, financial services firm FoxPlan Ltd (FoxPlan).
- FoxPlan was censured by the FMA in July 2021 for a number of breaches, one of which being Mr Loo, a nominated representative, providing services he was not permitted to give. This included Mr Loo falsely representing himself as an authorised financial adviser, and misappropriating client money by using altered invoices so that FoxPlan’s clients would pay him directly.
- Although Mr Loo has acknowledged his misconduct and returned the misappropriated funds to FoxPlan, the FMA considered his response to be inadequate.
- Due to the serious nature of Mr Loo’s misconduct, FMA concluded that Mr Loo was not a fit and proper person to hold the position of director or senior manager.
- As Mr Loo is the sole director and adviser of Wisdom House, the FMA were not convinced Wisdom House would not be likely to contravene its licensee obligations in the future.
As a result, the FMA were satisfied that Wisdom House’s transitional FAP licence should be cancelled.
The licence cancellation sends a strong message that the FMA will be holding licensees to account where trust in the financial advice sector is undermined. It is an important reminder that particularly in relation to smaller FAP licensees, there will be direct scrutiny on the individuals involved.
The FMA has been clear that full licence applications are likely to receive more scrutiny than transitional licences, and this cancellation sets a clear benchmark that misconduct will not be tolerated. The transitional competency safe harbour ends on 16 March 2023. We recommend having a clear understanding of the new duties under the Financial Markets Conduct Act 2013 (including the prohibitions on holding out in relation to giving financial advice), along with the Code of Professional Conduct for financial advice services to ensure you will meet the competency requirements under your full licence.
If you have any questions in relation to FAP transitional licenses or would like any assistance in relation to applying for a full FAP licence, please contact one of our experts.