Important developments on disclosure requirements for financial advisers

Commerce Minister Simon Power introduced the Financial Services Providers (Pre-Implementation Adjustments) Bill (Bill) to Parliament on 8 December.

The Bill is designed to simplify the implementation of the Financial Advisers Act and reduce compliance costs that will be borne by the financial services industry in implementing the new regulatory regime. The Bill also contains technical amendments to the Financial Service Providers (Registration and Dispute Resolution) Act.

The majority of the proposed amendments to the Financial Advisers Act focus on the QFE regime. Under these proposed changes:

  • Bonus bonds, call building society shares, call debt securities and term life insurance policies are now prescribed as category 2 financial products.
  • QFEs will be able to name representatives (ie contractors and agents) whose advice they will take responsibility for.
  • Exemptions relating to companies, organisations and Crown organisations have been extended to employees of these entities.
  • The ability to provide financial advice or conduct investment transactions in relation to a QFE's category 1 products (without being an authorised financial adviser) will be extended to the QFE's named representatives. This is currently only permitted in respect of the QFE's employees.
  • QFE employees and named representatives will be able to provide financial advice or conduct investment transactions in relation to products for which the QFE is promoter under the Securities Act. Currently, the Financial Advisers Act allows this only if the QFE is the issuer of the product.


The proposed amendments to the Financial Service Providers (Registration and Dispute Resolution) Act are largely technical in nature. However, there are a couple of amendments that the industry should be aware of. These include:

  • Employers are exempted from the Act so far as they provide services for their employees to enable them to join superannuation or KiwiSaver schemes in which the employer participates (ie participating employers).
  • The territorial scope of the Act has changed. The Act will now apply to all 'licensed providers' and persons required to be registered under the Financial Advisers Act, even when they are outside New Zealand. 'Licensed provider' is defined in the Act and includes entities such as registered banks.

The changes are expected to be passed into law in the first half of 2010.

The Bill is better news for QFEs who give financial advice through a network of advisers and for promoters of securities, and in particular promoters of superannuation and KiwiSaver schemes. However, it has not gone as far as many hoped. A QFE's employees and named representatives will still need to be registered/authorised if they want to sell third party financial products where the QFE is not a promoter of the products.

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