FMA opens consultation on full license conditions

The process will be “more comprehensive” than transitional licensing

FMA opens consultation on full license conditions

The FMA has begun consultation on the proposed full licence conditions for Financial Advice Providers (FAPs), which will be part of the new financial advice regime set to start in early 2021.

Advisers are currently in the transitional licensing phase, which will end once the new regime begins next year. The FMA says the process of obtaining a full license will be “more comprehensive” than obtaining a transitional license, and the regulator will be carefully considering whether applicants are “capable of effectively performing the financial advice service.”

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The FMA is currently considering eight standard conditions for a full license: record keeping, internal complaints process, regulatory returns, outsourcing, professional indemnity insurance, business continuity and tech systems, ongoing capability and notification of material changes.

It is also looking at separating the license into three different classes, which will allow sole traders, nominated representatives and businesses who engage multiple advisers to choose the license that best suits their circumstances. It will also aim to streamline the assessment and licensing process.

FMA director of market engagement John Botica says the consultation will give advisers certainty around what will be expected of them once the new regime begins.

“We’re pleased to open this consultation as it will give financial advisers further clarity on their obligations under the new regime,” Botica said.

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“Our proposal to specify three classes of financial advice recognises the diversity of business structures in the industry and will allow advisers to apply for the class that’s most appropriate for them.”

Consultation is open until Friday 7 August, and the FMA will begin to take full license applications once the new legislation takes effect. It has so far granted over 800 transitional licenses which cover approximately 5,800 financial advisers – more than half of the registered and authorised financial advisers practicing in New Zealand.