Financial Advisers Amendment Act 2010

10 New section 7 and subparts 1 and 1A of Part 2 substituted
  • Section 7 and subpart 1 of Part 2 are repealed and the following section and subparts substituted:

    7 Outline
    • (1) This Part is divided into 3 subparts.

      (2) Subpart 1 defines what a financial adviser service is and what financial advice is, and other key related definitions.

      (3) Subpart 1A sets out the restrictions on providing financial adviser services and the restrictions on persons holding themselves out as certain kinds of advisers.

      (4) Subpart 2 describes the disclosure and conduct obligations of a financial adviser under this Act and when they apply.

    Subpart 1Key definitions for financial adviser services

    What are financial adviser services

    8 Who is financial adviser
    • (1) A financial adviser is a person who provides a financial adviser service.

      (2) See section 16 for the types of financial advisers and sections 20D to 20F for how the Act's requirements apply in the case of a person who provides a financial adviser service on behalf of another person's business.

    9 What is financial adviser service
    • (1) A person (A) provides a financial adviser service if, in the ordinary course of a business, A provides any of the services listed in subsection (3) to a client.

      (2) A person (A) also provides a financial adviser service if, in the course of business of a financial service provider registered under the FSP Act, A provides any of the services in subsection (3) to a client.

      (3) The services are—

      • (a) giving financial advice (see section 10):

      • (b) providing an investment planning service (see section 11):

      • (c) providing a discretionary investment management service (see section 12).

      (4) A person does not provide a financial adviser service for the purposes of this Act if exempted under section 13, 14, or 148 or in the regulations.

    10 When person gives financial advice
    • (1) A person (A) gives financial advice if A makes a recommendation or gives an opinion in relation to acquiring or disposing of (including refraining from acquiring or disposing of) a financial product.

      (2) Whether or not advice is financial advice for the purposes of this Act is not affected by how the advice is given or communicated.

      (3) However, a person does not give financial advice for the purposes of this Act merely by—

      • (a) providing information (for example, the cost or terms and conditions of a financial product); or

      • (b) making a recommendation or giving an opinion relating to a class of financial products; or

      • (c) making a recommendation or giving an opinion about the procedure for acquiring or disposing of a financial product; or

      • (d) transmitting the financial advice of another person (unless A gives A's own financial advice in doing so or holds out the transmitted financial advice as A's own financial advice); or

      • (e) recommending that a person consult a financial adviser.

    11 When person provides investment planning service
    • (1) A person (A) provides an investment planning service if A designs, or offers to design, a plan for an individual that—

      • (a) is based on, or purports to be based on, an analysis of the individual's current and future overall financial situation (which must include his or her investment needs) and identification of the individual's investment goals; and

      • (b) includes 1 or more recommendations or opinions on how to realise those goals (or 1 or more of them).

      (2) A service may be an investment planning service regardless of whether the analysis and identification is of the individual's particular financial situation and goals or of the financial situations and goals attributable to the class of persons that the individual is identified as coming within.

    12 When person provides discretionary investment management service
    • (1) A person (A) provides a discretionary investment management service if A—

      • (a) decides which financial products to acquire or dispose of on behalf of a client (B); and

      • (b) in doing so is acting under an authority granted to A (or A's employer or principal) to manage some or all of B's holdings of financial products.

      (2) In determining whether A has that authority, it does not matter if B has the right to be consulted on, or to countermand, A's decisions.

    13 Exemption for incidental service
    • (1) A service is not a financial adviser service for the purposes of this Act if the service is provided only as an incidental part of another business that is not otherwise a financial service or does not have, as its principal activity, the provision of another financial service.

      (2) In addition, a service is not a financial adviser service if—

      • (a) it is provided in connection with providing credit under a credit contract; and

      • (b) both the service and the credit are provided as an incidental part of another business that is not otherwise a financial service or does not have, as its principal activity, the provision of another financial service.

      (3) In this section, a service is incidental to another business if it is carried on to facilitate the carrying out of another business, or is ancillary to another business.

      (4) Regulations may declare a class of service provided in the course of a class of business to be incidental, or that a class of business is not a financial service, for the purposes of subsection (1).

    14 Other exemptions
    • (1) None of the following is a financial adviser service for the purposes of this Act:

      • Other occupations
      • (a) a teacher, lecturer, journalist, or State services employee providing a relevant service in the course of that occupation:

      • (b) a Minister of the Crown providing a relevant service in the course of his or her duties as a Minister of the Crown:

      • (c) a member of Parliament providing a relevant service in the course of his or her duties as a member of Parliament:

      • (d) a lawyer, incorporated law firm, conveyancing practitioner, chartered accountant, tax agent, real estate agent, registered legal executive, registered valuer, or any other exempted class of service provider (as specified in the regulations) providing a relevant service in the ordinary course of business of that kind:

      • Crown-related organisations and other statutory officers and organisations
      • (e) a statutory officer, a Crown organisation (other than Public Trust), or the Reserve Bank of New Zealand—

        • (i) discharging any duties or exercising any powers of the statutory officer, the Crown organisation, or the Reserve Bank of New Zealand under any enactment; or

        • (ii) doing anything that is incidental to the discharge of the functions of the statutory officer, the Crown organisation, or the Reserve Bank of New Zealand under any enactment:

      • Non-profit organisations, workplace financial products, and trustee corporations
      • (f) a non-profit organisation providing a relevant service if the relevant service is provided, without charge, in the course of the organisation's activities:

      • (g) an employer providing a relevant service to an employee in connection with a financial product made available through the employee's workplace:

      • (h) a trustee corporation providing a relevant service in the ordinary course of providing—

        • (i) legal or financial services relating to the preparation or drafting of a will; and

        • (ii) estate management and administration services (and associated legal, financial, and other services carried out under the relevant enactment governing the trustee corporation):

      • Activities governed by other regulatory frameworks
      • (i) a principal officer of any entity providing a relevant service in the person's capacity as a principal officer:

      • (j) the offeror or target company providing a relevant service in the course of a takeover offer under the Takeovers Code:

      • (k) an independent adviser providing a relevant service in the course of that person's functions under the Takeovers Code:

      • (l) an approved rating agency providing a relevant service in connection with a rating given or to be given by it:

      • (m) any form of communication made by or on behalf of an issuer that is contained in, or given in connection with, an offer of securities that—

        • (i) does not constitute an offer of securities to the public under section 3 of the Securities Act 1978; or

        • (ii) is exempt from Part 2 (other than sections 38B and 58) of that Act under section 5(2CB) or 5(2CBA) of that Act:

      • (n) a person providing a relevant service in the course of carrying on a business of dealing in futures contracts within the scope of an authorisation under section 38(1)(a) of the Securities Markets Act 1988 or an approval under section 38(1)(b) of that Act:

      • Documents required by law
      • (o) providing or making available to a person any of the following documents or information:

        • (i) a prospectus, an investment statement, or an advertisement within the meaning of section 2A of the Securities Act 1978:

        • (ii) a document or information that is required by law to be provided or made available (for example, an annual report of a company), whether directly or as a condition of carrying out any activity or as a condition of an exemption from any enactment:

        • (iii) any other exempted document or information (as specified in the regulations):

      • Services provided to product provider
      • (p) a person providing a relevant service to a product provider in connection with a financial product of that provider in the course of an appointment by, or under a contract for services with, the product provider:

      • Other exemptions in regulations
      • (q) any other person providing a relevant service in circumstances exempted under the regulations.

      (2) If subsection (1) applies to a person (A), it applies equally to any controlling owner, director, employee, agent, or other person acting in the course of, and for the purposes of, A's business to the same extent as it applies to A.

      (3) In this section, relevant service means a service that, but for subsection (1), would be a financial adviser service.

    When financial adviser service is personalised service or class service

    15 When financial adviser service is personalised service or class service
    • (1) A financial adviser service is a personalised service if—

      • (a) it is given to, or in respect of, a named client or a client that is otherwise readily identifiable by the financial adviser; and

      • (b) either—

        • (i) the financial adviser has taken into account the client's particular financial situation or goals (or any 1 or more of them) in providing the service; or

        • (ii) a client would, in the circumstances in which the service is provided, reasonably expect the financial adviser to take into account the client's particular financial situation or goals (or any 1 or more of them).

      (2) A service is not personalised merely because the client comes within a class of persons having predefined characteristics and the financial adviser takes the fact that the client comes within that class into account.

      (3) A financial adviser service is a class service if it is not a personalised service.

    Subpart  1ARestrictions on providing financial adviser services

    16 Types of financial adviser
    • Under this Act, there are the following types of financial adviser:

      • (a) an authorised financial adviser:

      • (b) an individual who is registered but not authorised:

      • (c) a QFE adviser:

      • (d) a QFE or any other entity that is registered but does not have QFE status:

      • (e) any other person (whether an individual or an entity) who is an exempt provider.

    Restrictions on providing financial adviser services

    17 Who may provide financial adviser service
    • (1) A person must not provide a financial adviser service unless—

      • (a) the person is permitted to provide that service under sections 18 to 20; or

      • (b) the person is—

        • (i) registered or an exempt provider; and

        • (ii) acting through a person to whom paragraph (a) applies (other than a QFE adviser); or

      • (c) the person is a QFE or a member of a QFE group acting through a QFE adviser to whom paragraph (a) applies.

      (2) Contraventions of this section may give rise to an offence (see section 114).

    18 Who is permitted to provide personalised service to retail clients
    • (1) The following individuals are permitted to provide a personalised service to a retail client:

      • (a) if giving financial advice or providing a discretionary investment management service in relation to a category 1 product,—

        • (i) an authorised financial adviser:

        • (ii) a QFE adviser (but only if the QFE or a member of the QFE group is the product provider (or, in the case of a security, a promoter) of the relevant category 1 product):

      • (b) if providing an investment planning service, an authorised financial adviser:

      • (c) if giving financial advice or providing a discretionary investment management service in relation to a category 2 product,—

        • (i) an authorised financial adviser:

        • (ii) a registered individual:

        • (iii) a QFE adviser.

      (2) Subsection (1)(a)(ii) is subject to any limitation on the scope of services that may be provided by the QFE adviser under the terms and conditions for the QFE under section 67A or a determination under section 75B(4).

    19 Who is permitted to provide class service to retail clients
    • The following persons are permitted to provide a class service to a retail client:

      • (a) an authorised financial adviser:

      • (b) a QFE adviser:

      • (c) a registered person (whether an individual or an entity):

      • (d) an exempt provider (whether an individual or an entity), other than an overseas financial adviser (see paragraph (a) of the definition of exempt provider in section 5).

    20 Who is permitted to provide financial adviser service to wholesale clients
    • The following persons are permitted to provide a financial adviser service to a wholesale client:

      • (a) an authorised financial adviser:

      • (b) a QFE adviser:

      • (c) a registered person (whether an individual or an entity):

      • (d) an exempt provider (whether an individual or an entity).

    Restrictions on holding out

    20A Who may hold themselves out as authorised financial adviser
    • (1) A person (A) must not hold out (whether directly or indirectly) that A or any other person (B) is an authorised financial adviser unless A or B (as applicable) is an authorised financial adviser.

      (2) Contraventions of this section may give rise to an offence (see section 115).

    20B Who may hold themselves out as financial planner or investment planner
    • (1) A person (A) must not hold out (whether directly or indirectly) that A or any other person (B) is—

      • (a) a financial planner or an investment planner unless A or B (as applicable) is an authorised financial adviser who is authorised to provide investment planning services under section 55:

      • (b) offering a financial or an investment planning service unless A or B (as applicable) is—

        • (i) an authorised financial adviser who is authorised to provide investment planning services under section 55; or

        • (ii) acting through an authorised financial adviser who is so authorised.

      (2) Contraventions of this section may give rise to an offence (see section 115).

    20C Who may hold themselves out as QFE or having QFE status
    • (1) A person (A) must not hold out (whether directly or indirectly) that A or any other person (B) is a QFE or has QFE status unless A or B (as applicable) is a QFE or a partner entity.

      (2) Contraventions of this section may give rise to an offence (see section 115).

    Persons acting in course of business of employers and principals

    20D Application of FSP Act to employees, etc
    • Any person required, by this Act, to register to provide a financial adviser service must be treated, under the FSP Act, as being in the business of providing a financial service for the purposes of that Act (even if the person does not carry on that business).

    20E Who must be member of dispute resolution scheme
    • A person (A) who provides a financial adviser service on behalf of the business of another person (B) is exempt from the obligation under section 48 of the FSP Act to be a member of an approved dispute resolution scheme for the purposes of registration if—

      • (a) B is a member of an approved dispute resolution scheme; and

      • (b) A's obligation to be a member of an approved dispute resolution scheme arises only by virtue of the financial adviser services provided on behalf of B's business.

    20F Who is responsible for financial adviser obligations
    • (1) If a financial adviser service is provided by a person (A) on behalf of the business of another person (B), the following persons are treated as the financial adviser having the financial adviser obligation under this Act:

      • (a) if it is a personalised service provided to a retail client (unless paragraph (b) applies), both A and B:

      • (b) if A is a QFE adviser and B is the QFE or a member of a QFE group, B only:

      • (c) in any other case, B only.

      (2) If B has a financial adviser obligation under subsection (1),—

      • (a) any act or omission by A is also treated as being done by B; and

      • (b) if it is necessary to show the state of mind of B, it is sufficient to show that A had that state of mind.

      (3) However, subsection (1) does not apply to the financial adviser obligations in sections 37 and 45 (which apply to A only).

      (4) Subsections (1) to (3) do not affect the liability of A or B under any other Act or rule of law for A's actions.