FSLAA start date and disclosure requirements released
Yesterday, the Government announced both the new start date for the Financial Services Legislation Amendment Act 2019 (FSLAA) reforms to come into force and the finalised disclosure requirements for the new financial advice regime.
The media release from the Ministry of Business, Innovation and Employment (MBIE) can be found on its website. The commencement order setting the new start date and the Financial Markets Conduct (Regulated Financial Advice Disclosure) Amendment Regulations 2020 (Regulations) themselves can be found on the New Zealand Legislation website.
Who needs to read it? Why?
This announcement will be relevant to all financial advisers and those providing financial advice services. The Regulations will play a fundamental part in the new financial advice regime by setting out the disclosure requirements that will be central to it.
What does it cover?
The FSLAA regime was due to commence on 29 June 2020, but was delayed in late March due to the impacts of COVID-19. The start date has now been set for 15 March 2021, less than two months before the 1 May 2021 date that the FSLAA set for any of its own provisions that had not yet commenced to do so.
Under the FSLAA regime, one of the duties imposed on those who give regulated financial advice is to “make the prescribed information available in the prescribed manner when required to do so by the regulations”. An exposure draft of the Regulations was released in October 2019 (our discussion of which can be found on our website), and a number of changes have since been made to the now-final Regulations.
Broadly, the disclosure requirements under the FSLAA regime cover both what information must be disclosed and when and how it must be disclosed. Different sets of information must be provided:
- publicly on a website (if the provider has one) or on request;
- to the client when the nature and scope of advice to be given becomes known;
- to the client when the advice is given; and
- if a complaint is received.
Key changes made to the Regulations since the exposure draft include:
- complaint information to be disclosed if a complaint has not been resolved (to the complainant’s satisfaction) within 2 working days of receipt;
- fee information to not be disclosed when advice is given to the extent that it has already been provided when the nature and scope of advice became known;
- previous nature and scope of advice disclosure to be relied on as long as there has not been a material change to that information (removing the 12-month time limit for relying on previous disclosures);
- product providers to be identified by a collective description rather than individually in the information provided when the nature and scope of advice to be given becomes known; and
- providers to inform clients that duties and complaints information is available on a website rather than providing it,
- clarifying that:
- disclosure of information provided when the nature and scope of advice becomes known can relate to more than one individual who is likely to give advice to a client; and
- the requirement to give information when the nature and scope of advice is known will apply regardless of whether the advice is given proactively (and therefore may not be sought by the client) or on request,
- a materiality component to the requirement to disclose limitations, conflicts, commissions and incentives;
- a materiality component to the threshold requiring disclosure of material changes to information;
- a requirement to disclose duties information publicly; and
- descriptions of the purpose of various regulations,
- narrowing the:
- range of regulatory actions and proceedings that must be disclosed; and
- requirement to disclose amounts that a client may have to pay in relation to acting on the advice,
- removing the:
- requirement for a provider to keep records of its disclosure;
- requirement to disclose licensing information when the nature and scope of advice to be given becomes known;
- requirement to identify individual nominated representatives and provide their contact details in information provided when the nature and scope of advice becomes known;
- requirement to include an explanation of the purpose of the disclosure in the information provided when the nature and scope of advice to be given becomes known and when the advice is given; and
- requirement to, on request, provide information as hard or electronic copies, and instead only requiring it to be provided in writing, and
- providing for greater flexibility in when the information required to be given when the nature and scope of advice is known and when the advice is given can be disclosed (including allowing them to be given at the same time).
The Regulations have retained their flexibility, with disclosure able to be provided in different ways so long as the key information is delivered, but still have a wider coverage (applying to all types of financial advice, rather than targeting only authorised financial advisers and qualifying financial entities) than the existing regime.
Many of the changes to the Regulations are to make the provisions clearer, more streamlined, or more aligned with the wider legal framework.
Financial advice businesses will still, however, need to consider carefully how the new rules apply in some circumstances, such as where advice is given online, including as part of general advertising.
If you have any questions in relation to the FSLAA reforms or the financial advice regime more generally, please contact one of our experts.