If you provide a personalised service to a retail client, you must disclose certain information.The principle behind disclosure is to provide the essential information your client needs to make an informed decision.
It must not be misleading, deceptive or confusing. Any additional information you decide to provide to a client must not be misleading, deceptive or confusing either. For example, if you decide to provide accompanying information about your qualifications, make sure your client understands the relevance to the service they are considering. Disclosure must be made before the advice or service is provided, or if that is not practicable, as soon as practicable after the service is provided (Financial Advisers Act 2008 section 22(1)). Disclosure obligations are set out in the Financial Advisers (Disclosure) regulations 2010. AFAs also need to comply with Standard 7 in the Code of Professional Conduct for AFAs, which may require additional information to be provided to clients.QFEs are subject to additional requirements set out in a QFE's standard conditions.
RFA disclosure statement and AFA primary disclosure statement
RFA disclosure statements and the AFA primary disclosure documents must follow the prescribed format outlined in the regulations. This makes it easier for consumers to compare the services being offered by different advisers.
The explanatory notes that make up part of the regulations provide a starting point for understanding the requirements. You may not add any information to the prescribed form other than unobtrusive information such as a corporate logo. In addition you should note the following:
Use your legal name which should be the same name listed on the Financial Service Provider's Register. This ensures a client can easily check details on the register.
You must provide the document to your client in person or send it by email. You cannot just post it on your website or provide a link to the website. Links may break and if you update your disclosure statement your client won't have access to the version that applied at the time you provided advice.
Your statement can include an electronic signature so long as such a signature meets the requirements of the Electronic Transactions Act 2002. These include requirements such as the signature adequately identifying the adviser and the person receiving the disclosure document consenting to being given a document with a scanned signature. Please see the Electronic Transactions Act for detail on the requirements.
You cannot provide a joint disclosure statement with another adviser. Although the Act refers to joint disclosure, regulations to enable this are not in currently in place.
AFA secondary disclosure statement
The intent of the secondary disclosure document is to describe the specific nature of the products and services you are recommending to your client. You should do this clearly and concisely and in a manner that brings the required information to the attention of your client. The information that needs to be disclosed is set out in the regulations. In line with Code Standard 7, you should also consider whether any additional information should be provided to help your client make an informed decision about investing. The secondary disclosure statement does not have to contain all the products and services an AFA is able to provide (along with the related information) if this would result in a lengthy and confusing document for clients. It must, however, contain the information that is relevant to the products and services to be provided to the particular client. The secondary disclosure may be made in one or more documents. This flexibility can help an adviser choose the best way to make the information available to the client.
Joint disclosure statements
You cannot provide a joint disclosure statement with another adviser. Although the Act refers to joint disclosure, regulations to enable this are not currently in place.
AFA advertisements and disclosure
If you're an AFA, advertisements about your financial adviser services must state a disclosure statement is available, on request and free of charge (see section 30 of the Financial Advisers Act).
Disclosure for telephone advice
You cannot provide a telephone disclosure for Category 1 products. For Category 2 products, you do not have to give a disclosure statement when personalised advice is given via telephone or video conference if certain information is provided orally before the advice is given. This information is:
That you are an AFA/RFA/QFE adviser
The name of your dispute resolution scheme
That you can provide full disclosure if the client requests it
Anything else FMA has specified in terms and conditions for AFAs and QFEs
You can give this information directly, by way of a pre-recorded message, or by other electronic means.
Disclosure when an adviser acts on behalf of someone else
If you are acting on behalf of another person, for example your employer, you still have disclosure obligations. See our guidance question and answers for more information on this area.
Further assistance and reviewing disclosure statements
As the regulator, we cannot provide definitive advice on how legislation applies to individual circumstances so we cannot review individual disclosure statements. We expect professional advisers to be able to form their own views and take advice where necessary, but we will assist by publishing explanatory material such as this web page. From time to time, we may ask to see individual advisers' disclosure statements as part of our monitoring, or if there has been a complaint about an adviser.