Proposed extension to exemption notices supporting the Financial Advisers Act

The Financial Markets Authority (FMA) has proposed an extension to three class exemptions which support the Financial Advisers Act 2008 (FA Act). This follows the announcement of the delay to the new financial advice regime to early 2021. If the exemption notices are extended, they will continue until the start of the new financial advice regime.

Links to the FMA’s announcement are available here.

Who needs to read it?  Why?

These proposals will particularly impact brokers (i.e. persons holding client money or property) and authorised financial advisors (AFAs) offering personalised discretionary investment management services (DIMS) who currently enjoy the benefit of the exemptions under the existing exemption notices.

What does it cover?

The FMA proposed an extension to the following exemption notices:

  • Non-NZX Brokers – Client Money Exemption Notice 2017: This notice exempts non-NZX brokers from the requirement to hold client money and property separately from firm money. Brokers can hold a buffer of firm money in the client money trust account to reduce the risk of client money shortfalls.
  • NZX Brokers – Client Money and Client Property Exemption Notice 2015: This notice exempts NZX brokers from the requirement to hold client money and property separately from firm money. This permits the operation of gateway accounts for transacting with settlement systems, the use of firm money to reduce the risk of client money shortfalls and facilitate settlements in a prudent fashion.
  • Offers of Financial Products Through Authorised Financial Advisers Supplying Personalised DIMS Exemption Notice 2015: This notice exempts an offer of financial products made through AFAs who are providing a DIMS from the disclosure requirements in Part 3 of the Financial Markets Conduct Act 2013 (FMCA).

If extended, these notices would continue to exempt certain brokers or DIMS providers from specified provisions in the FA Act. The exemptions, which are due to expire in November 2020, would be extended until early 2021 to align with the delayed introduction of the new financial advice regime.

Our view

We welcome the FMA’s proposal to extend the class exemptions. The exemptions should be extended to accommodate the delay to the new financial advice regime. Relief that was originally granted for brokers and DIMS providers under the FA Act regime should continue to operate while the FA Act remains in force.

Any other person who will be impacted by the extension of the FA Act regime (for example, if they hold an authorisation or have the benefit of an exemption that would expire before the FSLAA regime comes into force) should also consider discussions with the FMA.

What next?

The FMA is asking for submissions on the proposed extension from 1 May 2020 to 22 May 2020. If you have any questions about how the proposed extension may affect your business or would like assistance in submitting a proposal, please contact one of our experts.

Who can help