What is an Authorised Body under a Financial Advice Provider licence?
From the start of the new financial advice regime on 15 March 2021, a licensed financial advice provider (FAP) can have authorised bodies operating under its licence.
An authorised body is an entity (eg company or partnership) named on a FAP’s licence conditions that can provide the licensed service without needing its own licence.
A licensed FAP must agree to an authorised body operating under its licence. The authorised body must be named on the financial advice provider’s licence application, and the licensed FAP will be required to provide information about the authorised body when it applies for its licence.
Individuals cannot be authorised bodies under a FAP licence and individual financial advice provider licence holders cannot engage authorised bodies under their licences.
Note:In most cases, an authorised body will itself be a “financial advice provider” if it gives regulated financial advice to its clients on its own account, or if it engages others to give regulated financial advice to its clients on its behalf.
As a financial advice provider, an authorised body may engage financial advisers to give advice on its behalf. An authorised body may engage nominated representatives if permitted under the licence conditions or class of licence.
All authorised bodies under a Financial Advice Provider licence must be registered on the Financial Service Providers Register (FSPR). This is a public register which is maintained by the Companies Office.
Any financial advisers you engage as an authorised body must also be registered on the FSPR.
Engaging financial advisers
When your entity engages a financial adviser, you must record details of the engagement on the Financial Service Providers Register (FSPR).
This must be done within 90 days or the financial adviser may be deregistered if they offer no other services.
Watch the short video below to see how a FAP links to a financial adviser on the FSPR or visit the Companies Office website for more information.
When a financial advice provider applies for a full licence, it will need to pay a fee of $178.25 (incl GST) to the FMA for each authorised body named on its application.
The FMA levy (payable at annual confirmation) for an authorised body will initially be $759.00 (incl GST).
Note that MBIE have announced an increase in FMA levies, which will be phased in over the next three years. For full details, including the increased levy amounts (exclusive of GST) that will apply from 15 March 2021, 1 July 2021 and 1 July 2022 see the MBIE website.
The FMA levy (payable at annual confirmation) by a licensed financial advice provider will vary depending on how the financial advice provider chooses to operate in the new regime.
Authorised bodies will also be charged a fee of $86.25 (incl. GST) at annual confirmation.
From the start of the new regime on Monday 15 March 2021, all authorised bodies under a Financial Advice Provider licence will need to comply with the transitional licence conditions. They include conditions imposed by the FMC Act, the regulations, and any standard and other conditions imposed by FMA.
1. Record Keeping
You must create in a timely manner and maintain adequate records in relation to your financial advice service.
Your records must be kept in a manner that ensures the integrity of the information and enables it to be conveniently inspected and reviewed by us. This may be electronic.
Your records may be in any language providing you create and keep an accurate summary of the record in English and, if required by us, provide a full translation of the record into English by a translator approved by us
Your records must be available for inspection by us at all reasonable times and must be kept for at least 7 years from
The date the record is made; and
The date the financial advice to which the record relates is given; and
The date any later record is made that refers to or relies on information in the record.
2. Internal complaints process
You must have an internal process for resolving client complaints relating to your financial advice service that provides for:
Complaints to be dealt with in a fair, timely and transparent manner.
Records to be kept of all complaints and any actions taken in relation to them including the dates on which each complaint was received and any action was taken in relation to that complaint.
Anyone giving advice to retail clients is subject to a new Code of Professional Conduct for financial advice services. This outlines the standards of conduct, client care, competence, knowledge, and skill you need to meet when giving regulated financial advice to retail clients in New Zealand. The Minister of Commerce and Consumer Affairs approved the Code of Conduct in May 2019. It takes effect from the start of the new regime on Monday 15 March 2021.
A person who gives financial advice must:
Part 1: Ethical behaviour, conduct and client care
1. Treat clients fairly 2. Act with integrity 3. Give financial advice that is suitable 4. Ensure the client understands the financial advice 5. Protect client information
Part 2: Competence, knowledge and skill
6. Have general competence, knowledge and skill 7. Have particular competence, knowledge, and skill for designing an investment plan 8. Have particular competence, knowledge and skill for product advice 9. Keep competence, knowledge, and skill up-to-date
If you give financial advice to retail clients, you must:
Take reasonable steps to ensure your clients understand the nature and scope of the advice being provided, including any limitations about that. For example, you must explain if you’re only able to give advice about certain products.
Where there’s a conflict of interest you must give priority to your client’s interests.
At all times exercise care, diligence and skill.
Comply with the new Code of Professional Conduct for Financial Advice Services requirements for ethical behaviour, conduct and client care and meet the competence, knowledge and skill requirements.
Only recommend financial products to clients that are offered in compliance with the FMC Act and its regulations.
Ensure you follow the new disclosure regulations and that any information you make available to clients is not false, misleading or incomplete.
Where an authorised body is a financial advice provider, itmustalso:
Make sure anyone it engages to give advice under the licence complies with all the duties listed above.
Have appropriate processes and controls in place when it engages nominated representatives. These should allow it to control the advice being given and the circumstances in which it is given.
If it engages nominated representatives, ensure that it does not give, or offer to give, any inappropriate incentives.
Comply with the standard conditions in the Financial Advice Provider licence and the general reporting condition.
Competency safe harbour
Under the transitional arrangements in the Act, there is a “Competency safe harbour” built in to the transitional period at the start of the new regime. This generally means that, if you were registered or authorised to provide advice under the Financial Adviser Act 2008 regime you have up to two years to meet any new competency requirements. In the meantime during the transitional period, you can continue to provide the advice you were legally permitted to under the Financial Adviser Act 2008. This also applies to the financial advisers engaged by you. Note that this competency safe harbour expires at the end of the transitional licensing period, two years after the new financial advice regime begins.
You must disclose certain information where you give financial advice to clients to ensure they can make informed decisions.
You can view information about the disclosure regulations on MBIE’s website.
If any of the following occurs, the authorised body under a Financial Advice Provider licence must, as soon as practicable, send a report containing details of the matter to the FMA:
The authorised body is, or it is likely that either will become, subject to an insolvency event, or a director or senior manager of the licensee or any key personnel of an authorised body is adjudicated, or is likely to be adjudicated bankrupt (whether in New Zealand or overseas).
The authorised body becomes aware that a relevant proceeding or action has been commenced or taken against the authorised body or any of the key personnel of the authorised body.
Any key personnel of the authorised body resigns, is removed or otherwise ceases to hold the office or position, or is appointed, employed or engaged.
An auditor of the authorised body resigns or otherwise ceases to hold office or is appointed (other than by way of reappointment).
The authorised body proposes to change its name or its legal structure.
The authorised body proposes to enter into a major transaction.
The authorised body becomes aware that a transaction or an arrangement has been entered into or is likely that a transaction or arrangement will be entered into that will result or has resulted in a person obtaining or losing control of the authorised body.
Liability and enforcement
The FMA is one of several organisations that has a role in enforcing the new financial advice regime.
For an overview of what this means, see the MBIE fact sheets: