Exposure draft of legislation released
17 Feb 2017
The exposure draft of the Financial Services Legislation Amendment Bill has been released along with a consultation paper which provides commentary on the Bill and seeks feedback on the Bill as well as the proposed arrangements for transitioning to the new regime.
There are a number of key changes from earlier proposals.
Authorised financial advisers, registered financial advisers and qualifying financial entities will be replaced by financial advisers, or financial advice representatives.
Earlier indications had been that MBIE was proposing an “agent” designation.
Financial advice providers – which can be a person or a firm – will be licensed to provide a financial advice service.
“Financial advice product” will replace what are currently described as category one and two products.
All advisers will have to meet disclosure requirements but today’s documents say the details of those requirements will sit within regulations rather than primary legislation.
After submissions close, MBIE will analyse the feedback and submissions received.
Through 2017, it will engage with the industry and consumers to develop draft regulations for disclosure.
MBIE also wants feedback on proposed arrangements for transitioning to the new regime. The bill proposes that all existing industry participants would need to be engaged by a firm with a transitional licence by February 2019. Two years later, they will need to have a full licence.
A code working group will be appointed in the first half of this year to produce a new code of conduct.
It is currently expected that the new Code of Conduct will be approved by August 2018 and the new regime will take effect six months later. Existing industry participants will have an additional two years to meet any new competence, knowledge and skill standards that are set in the code.
It is expected that the code will allow for different types of advice. MBIE said it could allow for different competency standards for general insurance compared to investment advice.
The release today reaffirms a number of principles that have been extensively discussed through the consultation period:
- Anyone providing financial advice will be required to put the interests of the client first and to only provide advice where competent to do so.
- All financial advice will also be subject to a code of conduct.
- Anyone (or any robo-advice platform) providing financial advice will need to operate under a licence granted by the Financial Markets Authority (FMA).
- To ensure this does not impose undue costs on industry or Government, licensing will be done at the firm level.
- The regime will be simplified and unhelpful barriers will be removed. For example, the requirement for advice to be given by a natural person will be removed, enabling robo-advice. The definitions of class and personalised advice and different categories of products will be removed, creating a level playing field for all types of advice.
MBIE said the main purpose of consulting on the draft bill was to check whether the drafting achieves the policy intent or could have any unintended consequences.
"In addition, some detailed policy questions remain and we are seeking feedback on these throughout the consultation document."
Licensed firms will be subject to the Financial Markets Conduct Act's compliance and enforcement tools. Individuals will still be dealt with by the Financial Advisers Disciplinary Committee and MBIE is consulting on whether financial advice providers should also be subject to this.
- Good Returns