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Financial Advisers Bill 192-2 (2007), Government Bill

  • enacted

Financial Advisers Bill

Government Bill

192—2

As reported from the Finance and Expenditure Committee

Commentary

Recommendation

The Finance and Expenditure Committee has examined the Financial Advisers Bill and recommends that it be passed with the amendments shown.

Introduction

The Financial Advisers Bill seeks to establish a new regulatory regime for financial advisers, by establishing standards for and requiring oversight of those who provide financial advice.

This bill is part of a suite of measures to implement the recommendations of the Government’s review of Financial Products and Providers. We are currently considering the Financial Service Providers (Registration and Dispute Resolution) Bill (the FSPB), which would provide a framework for the measures contained in both this bill and the Reserve Bank of New Zealand Amendment Bill (No 3), by introducing a registration system and a dispute resolution regime for all financial service providers. We have already reported on the Reserve Bank of New Zealand Amendment Bill (No 3), which would impose standards, disclosure requirements, and accountability measures on non-bank deposit takers. This bill deals with similar matters in relation to financial advisers.

As introduced the Financial Advisers Bill would impose certain conduct and disclosure obligations on financial advisers, and provide the Securities Commission and the courts with enforcement powers similar to those in the Securities Markets Act 1988. The Securities Commission and approved professional bodies would work together to create and monitor standards for financial advisers under a co-regulatory model.

This commentary focuses on the main amendments we recommend to the bill. It does not cover minor or technical amendments.

Focus of recommended amendments

We recommend significant amendments to the bill, which would result in the deletion of parts 1 to 5 of the bill as introduced, and their replacement with new parts 1 to 5.

The key amendments we recommend are intended to clarify the application of the bill, and to target the regime so that it would be applied to advisers in a practical and effective way. We also recommend amendments to provisions for the institutional arrangements for supervising the financial advisory sector.

Application of the regime—two-tiered approach

We recommend amendments to introduce a two-tiered approach to the application of the regulatory regime, drawing a distinction between different types of financial advice. We also recommend amendments to clarify the definitions of financial advice and financial adviser, to provide more certainty about the application of the bill.

The bill as introduced proposes treating all financial advisers equally. It therefore includes detailed definitions of “financial advice” and “financial adviser” in an effort to limit the range of people who might be captured by the legislation. We consider this detailed approach confusing and uncertain for consumers and those who would be subject to the regime. We are also concerned that this approach runs the risk of omitting or capturing certain groups unintentionally, and does not acknowledge differences in types of financial advice that are offered, or the different degrees of risk they represent for consumers.

We considered at length how to address these issues, examining the kinds of activities and occupations the bill would or should impose obligations on, and whether or not the regime would be appropriately targeted. We considered, but rejected, a proposal for an occupational basis for defining the application of the regime.

The amendments we recommend would simplify the definition of financial advice to make it clear who would be subject to the regime. They would also target the application of the regime according to the type of financial advice provided, by imposing different obligations on financial advisers depending on the complexity and degree of risk of the financial products on which they advise.

These proposed amendments acknowledge that not all advice exposes consumers to the same level of risk, and would ensure that the requirements of the regulatory regime were commensurate with the risk attaching to particular advice.

Two categories of financial advice would be provided for in the bill: category 1 products (complex products such as a security other than a call debt security or a bank term deposit, a property or a futures contract) could be delivered only by financial advisers who were specially authorised under the bill. Financial advisers dealing with category 2 products (simple products such as a call debt security, a bank term deposit, an insurance product that is not a security, and a consumer credit contract), which expose consumers to less risk, would not require specific authorisation, but would be subject to generic conduct and disclosure obligations.

All individual financial advisers would be required to register as financial service providers under the FSPB, and would be subject to its registration and dispute resolution provisions.

Qualifying financial entity status

We recommend amendments to include institutional accreditation in the regime. We are concerned that otherwise the new regime might impose excessive compliance requirements and costs on firms with large numbers of employees who give financial advice. The amendments we recommend would allow the Securities Commission to grant “qualifying financial entity” (QFE) status to organisations that meet the eligibility criteria set out in the bill. Such organisations would be held accountable under the bill for the conduct and disclosure obligations of employees offering financial advice on category 2 products. Any employee or agent who offered advice on category 1 products would still need individual authorisation, but the QFE would be responsible for ensuring that such employees were authorised.

Regulatory model

We recommend amendments to replace the proposed co-regulatory model (where approved professional bodies would set and monitor standards, with high-level supervision from the Securities Commission) with a sole regulatory model (with the Securities Commission as the sole regulator).

In the bill as introduced, the primary responsibility for supervision of financial advisers would lie with industry-led professional bodies approved by the Securities Commission. No restraint is placed on the number of approved professional bodies that could exist, and we are concerned that individual financial advisers might be able to avoid being held accountable by moving from one such body to another.

In addition, whilst we acknowledge that the industry must play a key role in the regulatory regime, we do not consider that all regulatory matters need be industry-led. We note that the FSPB proposes that the dispute resolution regime consist primarily of approved industry-led regimes. We are concerned about approved professional bodies being responsible for disciplinary action also.

We recommend placing the responsibility for monitoring industry standards, and for determining breaches and enforcing penalties, with the Securities Commission. The Securities Commission would also be responsible for authorising financial advisers, granting QFE status, and (through the Commissioner) recommending the approval of a code of conduct developed by a code committee of industry representatives.

Obligations on financial advisers

We recommend deleting part 2 and inserting a new part 2, which would provide the basis for the two-tiered approach discussed above, and would set out the disclosure and conduct requirements for financial advisers.

Application of the bill (sub part 1)

Sub part 1, comprising new clauses 8 to 19, would define the key terms in the application of the legislation—“financial adviser”, “financial adviser service” and “financial advice”—and specify the kinds of activities financial advisers could undertake.

We recommend that a financial adviser be defined simply as a person who performs a financial adviser service (new clause 8). Such services would include giving financial advice, making an investment transaction, and providing a financial planning service (new clause 10).

The amended bill would provide for three types of financial adviser, with corresponding restrictions on their activities:

  • a financial adviser both registered under the FSP legislation and authorised by the Securities Commission under this bill, who would be allowed to provide financial advice on either a category 1 or category 2 product (new clauses 9, 10, and 15)

  • a registered financial adviser who was not authorised by the Securities Commission, who would be allowed to provide financial advice on a category 2 product only (new clauses 9, 10, and 16)

  • a financial adviser who was neither registered nor authorised, but worked for a qualifying financial entity, who would be allowed to provide financial advice on a category 2 product (new clauses 9, 10, and 17).

New clause 5 sets out the two categories of financial products. Category 1 would include a security other than a call debt security or a bank term deposit; any estate or interest in land that is contained in a certificate of title or eligible for issue of title; a futures contract; or any other product specified by regulation. Category 2 products would include a call debt security, a bank term deposit, an insurance product that is not a security, and a consumer credit contract. We also recommend that both categories be permitted to include other products as defined by regulation. In recommending that both categories include new products, we are mindful that new products are developed from time to time, and this provision is intended to allow flexibility to accommodate them.

New clause 12 would specify exclusions from the regime. This clause reinstates some provisions contained in clauses 7(c), 7(d) and 8 in the bill as introduced, and sets out additional exclusions. These exclusions would take account of the new definition of a financial adviser service (which includes investment transactions and financial planning services as well as financial advice), and exclude from the regime tax agents, budget advisors providing free budgetary advice for a not-for-profit budget service, real estate agents who would be subject to the provisions of the Real Estate Agents Act (when passed), Crown entities and organisations, the Reserve Bank, employers who pass on information about KiwiSaver, and any other person listed in regulations. These additional exemptions are intended to avoid subjecting occupational groups such as real estate agents to two separate conduct regimes, and to provide more clarity and certainty in the application of the regime.

New clause 13 clarifies the meaning of financial advice, and replicates provisions in clause 6(3) of the bill as introduced. Financial advice would not include, for example, information in a prospectus, investment statement, advertisement, or disclosure statement, or the simple provision of information (provided without opinion, recommendation, or guidance). The bill as introduced gave more detail on what might constitute financial advice, but we consider that the degree of detail involved in this approach could be unhelpful and confusing.

We consider that the tiered approach we propose, together with the institutional accreditation feature, and a clear list of exemptions, would ensure that the regime was appropriately applied, and enable providers of financial adviser services and consumers to understand more readily where obligations would arise and how obligations would affect them.

As an example, a chain store employee who offered advice to a customer on a hire purchase agreement would come within the application of this bill, as hire purchase is a credit contract and accordingly a category 2 financial product. The employee would need to be registered under the FSP legislation, since any financial advice constitutes a financial service. If the chain store had been granted QFE status (and was therefore registered under the FSP legislation) the individual employee who provided the advice would not need to be registered.

In the event of a complaint, a customer would have redress through the dispute resolution scheme under the FSP legislation. If the chain store were registered (as a QFE), the chain store and not the employee would incur the obligations and liabilities under the Financial Advisers legislation and the FSP legislation.

If the chain store was not a QFE, both the employer or principal and the employee would need to be registered. This means that consumers would have a right of redress against the employer where they contributed to the wrong-doing of the employee (new clause 18).

Disclosure obligations

New clauses 20 to 30 (sub part 2) set out the disclosure obligations with which financial advisers would be required to comply. These clauses would reinstate clauses 12 to 24 of the bill as introduced, leaving most of the disclosure obligations largely unchanged. However, the application of particular disclosure obligations would differ in accordance with the tiered approach we recommend.

New clause 22 would reinstate the obligations set out in clauses 13 to 19 as introduced, but would apply only to authorised financial advisers. In addition, authorised financial advisers would be required under this clause to disclose any matters that might be required as a condition of authorisation.

New clause 24 sets out disclosure obligations for financial advisers in relation to category 2 products. These disclosure requirements would be less onerous, and would require disclosure only of the status of the financial adviser (whether authorised or not), dispute resolution arrangements, and contact details. These obligations in our view are commensurate with the lower risk associated with category 2 products.

New clause 25 sets out disclosure requirements for QFEs. This provision would require the disclosure of dispute resolution arrangements, along with any matters required to be disclosed as a condition of the granting of QFE status.

We recommend these amendments to ensure that all matters which might be required to be disclosed would be set out explicitly in the bill (new clauses 20 to 30), rather than left to be set by regulation. The specific requirements for disclosure would subsequently be able to be prescribed by regulation, but these could only include matters that are listed in new clauses 22(2), 24 and 25, to suit the three types of advisers.

Under new clause 141, the Commission would be able to grant exemptions from disclosure obligations. The Commission would be required to notify such exemptions (clause 142), and might revoke or vary such exemptions (clause 143).

We recommend the addition of new clause 30, which would allow groups of two or more financial advisers to make joint disclosure statements. This amendment would allow for the diversity of working arrangements in the financial advisory sector.

Conduct obligations

New clauses 31 to 46 (sub part 2) would reinstate clauses 26 to 30 and 32 to 35 of the bill as introduced, and set out the conduct obligations on financial advisers.

Again, we recommend that the application of the conduct obligations reflect the three types of financial advisers under the proposed tiered system. We recommend retaining clauses 26 to 28 (new clauses 32 to 34) as common conduct obligations, which would fall on all three types of financial adviser. These obligations would include the duty to exercise care, diligence and skill, and the duty not to engage in misleading or deceptive conduct or to advertise in a misleading, deceptive, or confusing way. The duty to exercise due skill and care could be enforced by private action for breach of statutory duty. Engaging in deliberately misleading or deceptive conduct or advertising would be an offence under the bill.

New clause 35 obliges authorised financial advisers to comply with the code of conduct which would be provided for under the legislation (new clause 35). New clauses 36 to 43 reinstate the obligations under clauses 29, 30, and 32 of the bill as introduced, but would apply to authorised financial advisers only. These include obligations for receiving or holding clients’ money on trust and accounting for clients’ property (incurred regarding category 1 products), and compliance with the terms and conditions of their authorisation (new clause 43). Failure to comply with these terms and conditions would constitute an offence.

New clauses 44 to 46 set out conduct obligations which would apply to QFEs (which were not provided for under the bill as introduced). QFEs would be required to comply with the terms and conditions of their QFE status, and could not mislead or deceive regarding the service provided by their employees or agents (including advertising). A breach of these obligations would also constitute an offence under the legislation.

The conduct obligations can be explained in terms of how they would apply to the chain store employee who offers advice to a customer on a hire purchase contract. The employee would not need to be authorised, as hire purchase is a category 2 product. Because the employee was not authorised, the common conduct obligations only would apply. Penalties could be applied to a breach of these obligations. If the chain store were a QFE, the employee would not be liable for any breach of conduct obligations. The QFE would be held liable under provisions which are discussed in detail in our discussion of part 3.

Authorised financial advisers and qualifying financial entities

Structure

We recommend deleting part 3 of the bill and inserting a new part 3 setting out the process for authorising financial advisers and granting QFE status, the powers of the Securities Commission in relation to authorised financial advisers and QFEs, and the compliance and reporting obligations of QFEs.

Authorisation of financial advisers (sub part 1)

We recommend amendments (new clause 52) that would require the Securities Commission to authorise financial advisers if they met the criteria set out in new clauses 50 and 51. The criteria would include fulfilling the requirements to be registered (or entitlement to be registered) as a financial service provider under the FSP legislation, meeting competency standards specified in the code, being a person of good character, not being barred from applying for authorisation, and having not been convicted of an offence punishable by six months’ imprisonment or more where the Commission was satisfied that the offence reflected on the fitness of the applicant to act as an authorised adviser.

New subclauses 52(1) and (2) would allow the Commission to specify the timeframes for and the terms and conditions of authorisation. The Commission would be required to notify the Registrar of Financial Service Providers of the authorisation (new clause 53).

New clause 54 would set out the circumstances under which the Securities Commission could terminate authorisation. It could do so on expiry of the term of authorisation, in response to a request for termination by the authorised financial adviser, upon the cessation of the authorised financial adviser’s registration under the FSP legislation, or upon cancellation of the authorisation as a consequence of a default on the adviser’s part (under new clause 56).

The circumstances in which we consider an authorisation should be cancelled are set out in clause 56. These include ceasing to be eligible for authorisation, breaching the legislation (other than code requirements under new clause 35), breaching the terms and conditions of authorisation, on the recommendation of the disciplinary committee, or failing to pay fees or levies as required. We recommend that breaches of the code of conduct (under new clause 35) not be subject automatically to the cancellation power of the Commission. Such breaches would be subject to the complaints and disciplinary proceedings, which are set out separately in part 4.

Under clause 56, in the event of a default by an authorised financial adviser, the Commission would also be able to suspend an authorisation, or debar the financial adviser from re-applying for authorisation for a specified period, to amend the terms and conditions of authorisation, or to take no action at all. In making this decision, the Commission would be required to provide the authorised financial adviser with a reasonable opportunity to be heard (new clause 57). These provisions are intended to allow the Commission to make fully informed decisions and take action appropriate to the default. The Commission would also have the power to direct a financial adviser to comply with the terms and conditions of their authorisation, and set conditions for their compliance (new clause 58). Failure to comply at that point would constitute an offence.

New clause 56(4) would require the Commission to notify the Registrar of any suspension or cancellation of an authorisation. The Commission could also publicly notify any action taken.

A financial adviser who has had their authorisation terminated by the Commission would not be automatically prevented from providing financial services on category 2 products. This recognises that category 2 products do not expose consumers to the same level of risk. However, the requirement to notify the Registrar of cancellation, together with the information-sharing provisions under new clause 114, are intended to ensure that the Registrar could be made aware of grounds for potential deregistration under the FSP legislation where appropriate.

Qualifying financial entity (sub part 2)

New clause 72 would make it clear that any financial adviser who gave advice on a category 2 financial product, who was acting as an employee or agent of a QFE, would not be liable for contravention of a financial adviser obligation. Any obligations would fall on the QFE including the requirement for membership of a dispute resolution scheme under the FSP legislation. This obligation would apply to financial services provided by QFEs in respect of category 2 products.

All obligations and liabilities under the legislation in respect of the provision of financial adviser services for category 1 products would continue to fall on individual financial advisers. However, if the QFE is aware of a breach by any employee of a financial obligation, it must include this in its annual report to the Commission (new clause 74).

A QFE would have three responsibilities in respect of staff who provide a financial advisory service for category 1 products:

  • to ensure that each of their staff required to provide such services are authorised

  • to provide the Commission with a list of names of those persons authorised

  • to keep the list up to date.

We acknowledge that there may be instances in which a genuine mistake or misunderstanding may occur on the part of a QFE or their staff in relation to advisory status, resulting in a staff member providing a financial adviser service in respect of category 1 products without authorisation. We recommend an exemption from an offence for the staff member in such circumstances under clause 110(2), and an exemption for QFEs from an offence for failing to meet its obligations if it believed on reasonable grounds that the staff member was not providing a financial service (clause 127(2)).

New clauses 60 to 67 would set out the process for granting qualifying financial entity status. We recommend that the Securities Commission be required to notify the Registrar of Financial Service Providers of any QFE status granted. Under new clause 68, the Commission would be able to exercise powers in relation to a QFE default similar to those it would be able to exercise in relation to an authorised financial adviser default (new clause 56); and like an authorised financial adviser, a QFE would need to be offered a reasonable opportunity to be heard in respect of a default (new clause 69). QFEs would have ongoing compliance and reporting obligations (new clauses 73 to 74), including a requirement to report annually to the Securities Commission.

Regulation of financial advisers

We recommend the deletion of part 4 and the insertion of a new part 4 which would set out the institutional arrangements and processes for regulating financial advisers.

Commissioner for financial advisers (sub part 1)

We recommend that a Commissioner for Financial Advisers be appointed (by the Governor-General on the recommendation of the Minister) as a member of the Securities Commission (new clause 76) in recognition of the significant new function given to the Commission under this legislation. The Commissioner’s functions would include appointing a code committee, recommending for approval the draft code of conduct prepared by the code committee, proposing changes to the code, chairing the disciplinary committee, overseeing the work of the Commission in respect of financial advisers, and carrying out any other functions imposed by legislation (new clause 77).

The Securities Commission could exercise any of its powers under the Securities Act 1978 in performing its new functions (new clause 140).

The code committee’s main tasks would be to produce a draft code of conduct for consideration by the Commissioner and to keep the code under review (new clause 79). The Minister would ultimately be responsible for approving the code on the recommendation of the Commissioner (new clauses 84 to 88). We are recommending that members of the code committee be appointed from industry representatives, with one person to represent consumer interests (new clause 80). We consider it important that the industry be involved in developing and maintaining the code to ensure that appropriate and realistic standards are developed.

We also recommend that the bill specify the minimum content of the code. New clause 82 would require the code to provide minimum standards of professional conduct and to allow for different standards for different classes of financial adviser. The committee would be required to consult the industry in preparing the code, and to allow anyone affected by the code to make submissions (new clause 83).

The code would come into force on a date nominated by the Commission after the Minister’s approval had been notified in the Gazette (new clause 90). New clause 91 sets out a process for approving changes to the code.

Complaints and disciplinary proceedings (sub part 2)

Our recommended amendments to the bill would provide for a complaints process and disciplinary proceedings tailored to the different needs of the three types of registered providers—financial adviser, authorised financial adviser, and QFEs.

The Commission would be required to receive or initiate any complaints about the conduct of any financial adviser (new clause 92). The complaints process would distinguish between breaches of the code (under new clause 35) and other breaches of conduct or disclosure requirements, or of the terms and conditions of the grant of QFE status or authorisation.

New clauses 94 to 98 set out the process for dealing with complaints about an authorised financial adviser. If the Commission considered that the conduct complained about contravened the code of conduct it would have to refer the complaint to the disciplinary committee (to be established under this legislation) and notify the financial adviser in question (new clauses 94 and 95).

New clauses 96 and 98 set out the process for convening a disciplinary committee hearing. Sanctions and penalties against the financial adviser in question could include cancellation of their authorisation, suspension or disqualification, censure and constraints on future performance as a financial adviser (for up to three years), and the imposition of training requirements or a fine. Where the sanction related to authorisation status the committee could recommend cancellation or suspension to the Commission. In all other cases the committee would be empowered to take action itself.

The disciplinary committee would be appointed by the responsible Minister for the express purpose of investigating complaints referred by the Commission, conducting disciplinary proceedings and imposing penalties (new clauses 99 to 100). This committee would have four to six members, who would represent the financial adviser industry and the legal profession; the Commissioner would be appointed as the chairperson (new clause 101). Rules governing the proceedings of the disciplinary committee, including the hearing of evidence and the summonsing of witnesses, are set out in new clauses 102 to 108.

For breaches of requirements other than the code, new clause 93 would provide latitude for the Securities Commission to determine whether to refer the matter to the dispute resolution scheme or to prosecute under the offence provisions. The Commission could also share information with the Registrar if it judged the breach sufficiently serious to bring into question the eligibility of the financial adviser to remain registered (new clause 144).

Offences (sub part 3)

We recommend that the bill provide that it be an offence to perform a financial adviser service without being registered under the Financial Service Providers (Registration and Dispute Resolution) legislation, with a maximum penalty of $5,000 for an individual or $10,000 for an organisation. A financial adviser who was an employee or agent of a QFE would be exempt from this requirement. We recommend some latitude in the case of genuine error, for example if a business had ceased to be a QFE and the employee or agent was unaware of this change in status.

Anyone convicted under new clause 109 for performing a financial adviser service without being registered would be exempt from the offences provision under clause 10(3) of the FSP legislation, to ensure that the same offence would not be subject to more than one offence provision.

We recommend a similar offence provision for failure to maintain registration on the part of an employer or principal (new clause 111).

It would also be an offence to provide a financial adviser service for a category 1 product without authorisation (new clause 110). This would not apply to anyone employed by a QFE who performed such a service without authorisation, however, because the QFE would be responsible under the legislation for ensuring that staff or agents who provided services for category 1 products were authorised. Failure on the part of the QFE to ensure their staff were properly authorised would constitute an offence under new clause 127, but we recommend the provision of a defence in cases of genuine error (new clause 127(2)).

Failure of financial advisers (and QFEs) to comply with disclosure requirements would also be an offence (new clause 112), as would failure to comply with conduct requirements (new clauses 113 to 114), with terms and conditions of QFE status, or with obligations and directions (new clauses 123 to 128). A number of offences would also be set out to cover the handling of clients’ money or property by authorised advisers (new clauses 115 to 122).

General provisions

Appeal of decisions

New clause 131 makes it clear that there would be a right of appeal to the District Court against any decision of the Commission. The court could determine or modify a decision (new clause 134), or refer it back to the Commission for reconsideration (new clause 136). It could also award costs (new clause 137), and make orders to prohibit the names or particulars of those involved from being published (new clause 138).

Information sharing

New clause 144 would empower the Commission to share information in relation to its powers and functions under this legislation with the Registrar, the Commerce Commission, the New Zealand Police, an approved dispute resolution scheme, licensing authorities as listed in schedule 2 of the FSP legislation, and an overseas regulator.

Regulations

We recommend that regulation making powers provided by new clause 147 differ from those in the bill as introduced (clause 130) which we consider to be too wide and unfettered. In particular, we recommend that all disclosure requirements be set out explicitly in the primary legislation (clauses 20 to 30), and that powers to make exemptions be limited. We are concerned that leaving these matters to be dealt with by regulation would not provide sufficient clarity or certainty for those affected by the regime.

Any regulations would have to take account of the new tiered approach towards financial advisers. Detailed rules of the new regulatory regime would be developed under new clause 147 to include the prescribing of disclosure requirements for authorised financial advisers, financial advisers, and QFEs; the form of application for authorising financial advisers and for granting QFE status; annual reporting requirements for QFEs; procedure for the code committee and the disciplinary committee; and other matters necessary to give effect to the legislation.

We expect that the responsible Minister would consult on the development of regulations under these provisions.

We recommend that the Governor-General also be empowered in new clause 148 to make regulations relating to fees, charges, and costs incurred by the Commission in connection with its performance under this legislation, and authorising the Commission to require payment for any costs incurred.

Review of operation of the legislation

New clause 154 would require the operation of the Act to be reviewed within five years. The findings of the review would be reported to the responsible Minister, who would in turn be required to present a copy of the report to the House. We recommended a similar review provision for the Reserve Bank of New Zealand Amendment Bill (No 3) and the Financial Service Providers (Registration and Dispute Resolution) Bill given the novelty of some of the features of both regimes; we consider that a similar case can be made regarding this bill, and that a co-ordinated approach should be taken to reviewing the new regulatory framework for the financial sector.

Comments from the Securities Commission

We sought and received comment from the Securities Commission on the bill and the amendments we are recommending. The Commission made several suggestions for minor and technical changes which we have adopted, and they are reflected in the amendments we are recommending. We have also acknowledged and agreed to the alignment of the maximum fines with those set out in the Securities Act and in the bill itself.

The Commission also made several suggestions for more significant changes on the operation of the regime, as it would affect their functions and powers under the legislation. Such changes would affect the proposed provisions in the bill as they relate to enforcement, the complaints and disciplinary proceedings, the status of the committees, and the functions and powers of the Commissioner of Financial Advisers.

One of the suggestions put forward by the Commission is that it should have civil powers under this regime also, as it has in regard to its other operations. We were advised that such an approach could be confusing for consumers and those who are to be subject to the regime. We were advised that the disciplinary regime (with consumer complaints and criminal offences available) which would be established under this legislation is preferable and an appropriate way to deal with such complaints. However we think there may be merit in considering the matters raised by the Commission further.

Appendix

Committee process

The Financial Advisers Bill was referred to the committee on 19 February 2008. The closing date for submissions was 4 April 2008. We made two interim reports on the bill, both of which contained proposals for amendments that we were considering at that time. We sought submissions on each of these reports. The closing dates for further submissions were 16 May 2008 and 22 August 2008.

We received and considered 114 submissions from interested groups and individuals on the bill as introduced, and a further 82 submissions after re-opening the call for submissions (55 from submitters on the bill as introduced). We heard from 62 groups and individuals. We received further comment from 77 submitters on the main changes we outlined in our second interim report. We received advice from the Ministry for Economic Development. The Regulations Review Committee reported to us on the powers contained in clause 130, paragraphs (1)(b) and (1)(j) of the bill as introduced.

Committee membership

Charles Chauvel (Chairperson)

Hon Bill English

Jeanette Fitzsimons

Craig Foss

Hon Mark Gosche

Hone Harawira

Rodney Hide

Moana Mackey

Dr the Hon Lockwood Smith (Deputy Chairperson)

Hon Paul Swain

Chris Tremain

Judy Turner

R Doug Woolerton

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Hon Lianne Dalziel

Financial Advisers Bill

Government Bill

192—2

Contents

1 Title

1 Title

2 Commencement

2 Commencement

Part 1
Preliminary provisions

3 Purpose of Act

4 Overview of Act

5 Interpretation

6 Meaning of advice, financial advice, and financial decision

7 Meaning of financial adviser

8 Act does not apply to lawyer who performs financial adviser service in course of professional practice

9 Act binds the Crown

Part 2
Regulation of financial advisers

10 Prerequisites for performing financial adviser service for member of public

11 Financial adviser service performed by non-individual financial adviser deemed to be performed by individual as well in certain cases

Disclosure by financial advisers

12 Financial adviser’s disclosure obligation

13 Financial adviser must disclose experience, qualifications, professional standing, etc

14 Financial adviser must disclose certain criminal convictions, etc

15 Financial adviser must disclose fees

16 Financial adviser must disclose other interests and relationships

17 Financial adviser must disclose details of financial products about which advice given

18 Financial adviser must disclose procedures for handling client’s money or other property

19 Disclosure in relation to indemnity insurance

20 How disclosure must be made

21 Disclosure must not be misleading

22 Disclosure of additional information

23 No compliance with disclosure obligations if disclosure statement out of date

24 Advertisement must refer to disclosure statement

Financial advisers’ conduct obligations

25 Financial adviser must act with integrity

26 Financial adviser must exercise care, diligence, and skill

27 Financial adviser must not engage in misleading or deceptive conduct

28 Advertisement by financial adviser must not be deceptive, misleading, or confusing

29 Financial adviser must not recommend or receive money for acquisition of securities if offer for subscription illegal

30 Financial adviser must pay client’s money into separate trust account

31 Financial adviser holds client’s property on trust

32 Restrictions on use of client’s money or property

33 Financial adviser must account for client’s money or property

34 Financial adviser must keep records of client’s money and other property

35 Protection of client’s money held on trust

Part 3
Approved professional bodies

36 What is approved professional body

Approval of approved professional body

37 Application for approval

38 Pre-application consultation with Commission

39 Minister must refer application to Commission

40 Notification and publication of application

41 Recommendation by Commission

42 Criteria for recommendation

43 Minister must decide application

44 Notification and publication of decision

45 Re-application by unsuccessful applicant

46 Withdrawal of approval

47 Publication of withdrawal of approval

48 Effect of withdrawal of approval on members of professional body

Members of approved professional body

49 Disqualified person must not be member of approved professional body

50 List of members

51 Approved professional body must notify Registrar of Financial Service Providers of change in membership

Exercise of Minister’s powers

52 Minister may consult in exercise of powers under Act

Rules of approved professional body

53 Content of rules

54 Characteristics of rules

55 Rules must be publicly available

Change of rules

56 Commission approval required for rule change initiated by approved professional body

57 Approved professional body may apply to Minister for approval of rule change

58 Rule change proposed by Commission

59 Approved professional body may object to rule change proposed by Commission

60 Minister must decide whether to approve or refuse rule change if approved professional body objects

Role of Commission

61 Approved professional body must notify Commission of investigation into member misconduct

62 Commission may direct approved professional body to adhere to rules

63 Approved professional body must make annual report to Commission

64 Approved professional body must give Commission other information and assistance on request

65 Approved professional body’s power to disclose further information to Commission

Protection of approved professional body

66 Protection from liability

Part 4
Enforcement and remedies

Subpart 1—Commission’s enforcement powers

Prohibition and corrective orders

67 When Commission may make prohibition and corrective orders

68 Terms of prohibition and corrective orders

Disclosure order

69 When Commission may make disclosure order

70 Terms of disclosure order

Temporary financial adviser banning orders

71 When Commission may make temporary banning orders for financial adviser activities

72 Terms of temporary banning order for financial adviser services

Process for Commission’s orders

73 Commission must follow steps before making orders

74 Commission may shorten steps for specified orders

75 Commission must give notice after making orders

General provisions

76 General provisions on Commission’s orders

Subpart 2—Court’s enforcement powers

Injunctions

77 What Court may injunct

78 When Court may grant injunctions and interim injunctions

79 Undertaking as to damages not required by Commission

Corrective order

80 When Court may grant corrective order

81 Terms of corrective order

Disclosure order

82 When Court may make disclosure order

83 Terms of disclosure order

Subpart 3—Civil remedies

Overview of civil remedies

84 Overview of civil remedies

Pecuniary penalty order and declaration of contravention

85 When Court may make pecuniary penalty order and declaration of contravention

86 Purpose and effect of declaration of contravention

87 What declaration of contravention must state

88 Maximum amount of pecuniary penalty

89 Considerations for Court in determining pecuniary penalty

90 Court must order that recovery from pecuniary penalty be applied to Commission’s actual costs

Compensatory orders

91 When Court may make compensatory orders

92 Terms of compensatory orders

Civil remedy order for contravention of financial advisers’ obligation

93 When Court may make civil remedy order for contravention of financial advisers’ obligation

94 Terms of civil remedy order for contravention of financial advisers’ obligation

Inter-relationship of civil remedies

95 More than 1 civil remedy order may be made for same conduct

96 Only 1 pecuniary penalty order may be made for same conduct

General

97 Standard of proof for civil remedies

98 Time limit for applying for civil remedies

Financial adviser bans

99 When Court may make banning orders for financial adviser activities

100 Terms of financial adviser banning order

101 Persons automatically banned from financial adviser activities

102 General provisions for bans and banning orders

Orders to preserve assets to satisfy claims

103 When Court may prohibit payment or transfer of money, securities, or other property

104 What orders may be made

105 Interim orders

106 Relationship with other law

Subpart 4—Offences

107 Offence of performing financial adviser service for member of public without being member of approved professional body and registered

108 Offence if false representation as to membership of approved professional body or registration

109 Offence for failure to comply with financial advisers’ disclosure obligation

110 Offence of deceptive, misleading, or confusing disclosure

111 Offence of deceptive, misleading, or confusing advertisement

112 Offence of recommending or receiving money in connection with offer of securities when subscription illegal

113 Offence of contravening requirement that financial adviser hold client’s money in separate trust account

114 Offence of breaching restrictions on use of client’s money or property

115 Offence of failing to account for client’s money or property

116 Offence in relation to records of client’s money or property

117 Offence of failing to comply with Commission’s orders

118 Offence of contravening financial adviser banning order

119 Offence of contravening section 101 (automatic banning)

120 Offence of contravening Court order under section 104 or 105

Subpart 5—General

121 Time for laying information for summary offences

122 Evidence not otherwise admissible

123 Court may order payment of Commission’s costs

124 Orders to secure compliance

125 Giving notice of applications for Court orders

126 General provisions as to Court’s orders

127 Persons entitled to appear before Court

128 Knowledge of matters presumed if employee or agent knows matters

129 No pecuniary penalty and fine for same conduct

Part 5
Miscellaneous

130 Regulations

131 Breach of exemption conditions

132 Regulations or exemptions in respect of specified overseas jurisdictions

133 No contracting out

134 Territorial scope

135 No liability under Fair Trading Act 1986 if not liable under this Act

136 Commission may grant exemptions

137 Commission must notify reasons for exemption

138 Commission may vary or revoke exemption

139 Commission may exercise powers under Securities Act 1978

140 Amendments to Securities Act 1978

141 Amendments to the Securities Markets Act 1988

142 Transitional provision for existing offences and contravention under Securities Markets Act 1988

Part 1
Preliminary provisions

3 Purpose of Act

4 Overview of Act

5 Interpretation

6 Act binds the Crown

Part 2
Financial advisers and their disclosure and conduct obligations

7 Outline of this Part

Subpart 1—Who are financial advisers and what they can do

8 Who is financial adviser

9 Types of financial adviser

10 What is financial adviser service

11 When person gives financial advice

12 When advice or transaction by certain persons is not performing financial adviser service

13 Meaning of financial advice clarified

Restriction on performing financial adviser service

14 Who may perform financial adviser service

15 Individual who is authorised financial adviser

16 Individual who is registered

17 Individual who is QFE employee or agent

18 Employer or principal of financial adviser must be registered

19 Client’s rights preserved against employer or principal of financial adviser

Subpart 2—Financial advisers’ disclosure and conduct obligations

Disclosure obligations

20 What is disclosure obligation

21 Financial adviser must make disclosure before performing financial adviser service

22 Disclosure by authorised financial adviser

23 How disclosure must be made by authorised financial adviser

24 Disclosure by financial adviser performing financial adviser service in relation to category 2 product

25 Disclosure by qualifying financial entity

26 Disclosure must not be misleading, deceptive, or confusing

27 Disclosure of additional information

28 No compliance with disclosure obligations if disclosure out of date

29 Advertisement advertising financial adviser services by authorised financial adviser must refer to disclosure statement

30 Disclosure by 2 or more financial advisers in joint disclosure statement

Conduct obligations

31 What is conduct obligation

Conduct obligations that apply to all financial advisers

32 Financial adviser must exercise care, diligence, and skill

33 Financial adviser must not engage in misleading or deceptive conduct

34 Advertisement by financial adviser must not be misleading, deceptive, or confusing

Conduct obligations that apply to authorised financial advisers only

35 Authorised financial adviser must comply with code

36 Authorised financial adviser must not recommend or receive money for acquisition of securities if offer for subscription illegal

37 Authorised financial adviser must pay client’s money into separate trust account

38 Authorised financial adviser must account for client’s money or property

39 Authorised financial adviser must keep records of client’s money and other property

40 Restrictions on use of client’s money or property

41 Protection of client’s money or property held on trust

42 Meaning of received or held

43 Authorised financial adviser must comply with terms and conditions of his or her authorisation

Conduct obligations that apply to QFEs only

44 QFE must comply with terms and conditions of grant of QFE status

45 QFE must not engage in misleading or deceptive conduct in relation to financial adviser service by employee or agent

46 Advertisement by QFE of financial adviser service must not be misleading, deceptive, or confusing

Part 3
Authorised financial advisers and qualifying financial entities

47 Outline of this Part

Subpart 1—Authorised financial advisers

48 Who is authorised financial adviser

49 Who may apply to be authorised

50 Application to be authorised

51 Eligibility to be authorised

52 Commission must approve or decline application for authorisation

53 Commission must notify Registrar of authorisation

54 Termination of authorisation

55 Renewal of authorisation

Commission’s powers in relation to default by authorised financial adviser

56 Commission’s powers in relation to default by authorised financial adviser

57 Reasonable opportunity to be heard

58 Commission may give authorised financial adviser direction

59 Other provisions concerning Commission’s powers in relation to default by authorised financial adviser

Subpart 2—Qualifying financial entities

60 What is qualifying financial entity (QFE)

61 Who may apply for QFE status

62 Application for QFE status

63 Eligibility for QFE status

64 Commission must approve or decline application for QFE status

65 Commission must notify Registrar of grant of QFE status

66 Termination of QFE status

67 Renewal of QFE status

Commission’s powers in relation to default by QFE

68 Commission’s powers in relation to QFE default

69 Reasonable opportunity to be heard

70 Commission may give QFE direction

71 Other provisions concerning Commission’s powers in relation to QFE default

Liability of employee or agent

72 Exemption from liability for employee or agent of QFE

QFE’s obligations

73 QFE’s ongoing compliance obligations

74 QFE must provide annual report to Commission

Part 4
How financial advisers are regulated

75 Outline of this Part

Subpart 1—Commissioner for Financial Advisers, code of professional conduct, and code committee

Commissioner for Financial Advisers

76 Commissioner for Financial Advisers

77 Functions of Commissioner

Code committee

78 Commissioner must establish code committee

79 Functions of code committee

80 Membership of code committee

81 Proceedings of code committee

Code of professional conduct for authorised financial advisers

82 Content of code

83 Code committee must prepare code

84 Commissioner’s approval of draft code

85 Commissioner may require revision or consultation

86 Commissioner’s approval of revised draft code

87 Deadline for Commissioner’s approval of draft code

88 Minister’s approval required

89 Deadline for Minister's approval of draft code

90 Code comes into force by Gazette notice

Changes to code

91 Changes to code

Subpart 2—Complaints and disciplinary proceedings

Who deals with complaints

92 Complaint about financial adviser

93 Investigation by Commission

Complaint about authorised financial adviser

94 Complaint about authorised financial adviser

95 Commission must give notice of complaint to financial adviser concerned

96 Content of Commission’s notice of complaint

97 Disciplinary committee may discipline authorised financial adviser for breach of code

98 Reasonable opportunity to be heard

Disciplinary committee

99 Minister must establish disciplinary committee

100 Functions of disciplinary committee

101 Membership of disciplinary committee

102 Proceedings of disciplinary committee

103 Disciplinary committee may hear evidence in disciplinary proceeding

104 District Court may authorise Commissioner to summon witnesses on disciplinary matters

105 Issuing of summons by Commissioner

106 Serving of summons

107 Witnesses' fees, allowances, and expenses

108 Protection for members of disciplinary committee and others in disciplinary proceeding

Subpart 3—Offences

Offences: registration and authorisation

109 Offence of performing financial adviser service without being registered

110 Offence of performing financial adviser service in relation to category 1 product without being authorised

111 Offences in relation to employer or principal failing to maintain registration

Disclosure offences: financial advisers and QFEs

112 Failure to make disclosure under or in accordance with disclosure obligation

Conduct offences: financial advisers

113 Offence of misleading or deceptive conduct by financial adviser

114 Offence of misleading, deceptive, or confusing advertisement by financial adviser

Offences: authorised financial advisers only

115 Offence of recommending or receiving money in connection with offer of securities when subscription illegal

116 Offence of contravening requirement that authorised financial adviser pay client’s money into separate trust account

117 Offence of failing to account for client’s money or other property

118 Offence in relation to records of client’s money or property

119 Offence of breaching restrictions on use of client’s money or property

120 Offence of failing to comply with terms and conditions of authorisation

121 Offence of failing to comply with Commission’s direction

122 Offence of contravening condition of disciplinary committee’s order

Offences: QFEs only

123 Offence of failing to comply with terms and conditions of QFE status

124 Offence of misleading or deceptive conduct in relation to financial adviser service by employee or agent

125 Offence of misleading, etc, advertisement of financial adviser service by employee or agent

126 Offence of failing to comply with Commission’s direction

127 Offence of failing to comply with obligations in relation to authorised financial advisers

128 Offence of failing to provide annual report

Miscellaneous offences

129 Offence of false declaration, etc, in support of application for authorisation or grant of QFE status

130 Failure to comply with summons by Commissioner to attend disciplinary committee hearing

Part 5
General provisions

Appeal of decisions

131 Right of appeal

132 Notice of right of appeal

133 Decision to have effect pending determination of appeal

134 Procedure on appeal

135 Court's decision final

136 Court may refer matter back for reconsideration

137 Orders as to costs

138 Orders as to publication of names

139 Appeal on question of law

Securities Commission: general powers

140 Commission may exercise powers under Securities Act 1978

Exemptions

141 Commission may grant exemptions

142 Commission must notify reasons for exemption

143 Commission may vary or revoke exemption

Information sharing

144 Information sharing

Fees and levies

145 Commission's fees, charges, and costs

146 Operational levy

Regulations

147 General regulations

148 Regulations relating to fees, charges, and costs

Other matters

149 No contracting out

150 Territorial scope

151 Breach of exemption conditions

152 Exemption or regulation in respect of specified overseas jurisdictions

153 Time for laying information for summary offences

154 Ministry must review and report on operation of Act

Other legislation affected

155 KiwiSaver Act 2006 amended

156 Securities Act 1978 amended

157 Securities Markets Act 1988 amended

158 Sharebrokers Act 1908 repealed

159 Securities Markets (Investment Advisers and Brokers) Regulations 2007 revoked

Transitional provisions

160 Transitional provisions for existing offences and contravention under Securities Markets Act 1988

The Parliament of New Zealand enacts as follows:

1 Title

  • This Act is the Financial Advisers Act 2007.

1 Title

  • This Act is the Financial Advisers Act 2007.

2 Commencement

  • (1) This Act comes into force on a date to be appointed by the Governor-General by Order in Council.

    (2) One or more Orders in Council may be made appointing different dates for the commencement of different provisions.

2 Commencement

  • (1) This Act comes into force on a date to be appointed by the Governor-General by Order in Council.

    (2) One or more Orders in Council may be made appointing different dates for the commencement of different provisions.

Part 1
Preliminary provisions

3 Purpose of Act

  • The purpose of this Act is,—

    • (a) by requiring disclosure of financial advisers’ conflicts of interests, fees, and competency, to ensure that members of the public can make informed decisions about whether to use a financial adviser and whether to follow a financial adviser’s financial advice; and

    • (b) by requiring competency of financial advisers, to ensure that there are available to members of the public financial advisers who have the experience, expertise, and integrity to match effectively a member of the public to a financial product that best meets that person’s need and risk profile; and

    • (c) to ensure that financial advisers are held accountable for any financial advice that they give and there are incentives for financial advisers to manage appropriately conflicts of interest.

4 Overview of Act

  • This Act is divided in 5 Parts which are—

    • (a) Part 1—Preliminary provisions: the most important of these are the definitions found in sections 5 to 7:

    • (b) Part 2—Regulation of financial advisers: this Part deals with what a financial adviser must and must not do:

    • (c) Part 3—Approved professional bodies: a financial adviser must be a member of an approved professional body and this Part specifies what are approved professional bodies and how they gain (or lose) approval:

    • (d) Part 4—Enforcement and remedies: this Part deals with the ways in which a financial adviser’s obligations under the Act can be enforced, with the remedies that a person has if a financial adviser contravenes the Act, and (in subpart 4) with offences under the Act:

    • (e) Part 5—Miscellaneous: in this Part are found the usual miscellaneous provisions including the making of regulations, exemption powers, and amendments to other Acts.

5 Interpretation

  • (1) In this Act, unless the context otherwise requires,—

    acquire includes—

    • (a) obtain by buying or subscribing; and

    • (b) agree to acquire

    advertisement means a form of communication that—

    • (a) refers to a financial adviser or financial adviser service or is reasonably likely to induce persons to seek a financial adviser service; and

    • (b) is authorised or instigated by, or on behalf of, a financial adviser or prepared with the co-operation of, or by arrangement with, a financial adviser; and

    • (c) is to be, or has been, distributed to a person

    advice has the meaning given to it in section 6

    approved dispute resolution scheme means a dispute resolution scheme that is approved under the Financial Service Providers (Registration and Dispute Resolution) Act 2007

    approved professional body has the meaning given to it in section 36

    bank in New Zealand means a registered bank as defined in section 2 of the Reserve Bank of New Zealand Act 1989 that carries on in New Zealand the business of banking

    business includes any profession, trade, or undertaking, whether or not carried on with the intention of making a pecuniary profit

    chartered accountant has the meaning given to it in section 2 of the Institute of Chartered Accountants Act 1996

    client means a member of the public for whom a financial adviser service is performed

    Commission means the Securities Commission established under the Securities Act 1978

    company means a company, or an overseas company, within the meaning of section 2(1) of the Companies Act 1993

    Court means, in relation to any matter, the Court before which the matter is to be determined

    director means a director as defined in section 126 of the Companies Act 1993

    dispose of includes—

    • (a) dispose of by selling, allotting, withdrawing from, or terminating; and

    • (b) agree to dispose of

    document means—

    • (a) any material, whether or not it is signed or otherwise authenticated, that bears symbols (including words and figures), images, or sounds from which symbols, images, or sounds can be derived, and includes—

      • (i) a label, marking, or other writing which identifies or describes a thing of which it forms part, or to which it is attached:

      • (ii) a book, map, plan, graph, or drawing:

      • (iii) a photograph, film, or negative; and

    • (b) information electronically recorded or stored, and information derived from that information

    financial advice has the meaning given to it in section 6

    financial adviser has the meaning given to it in section 7

    financial adviser service means—

    • (a) the giving of financial advice in the course of business; or

    • (b) the receipt, handling, payment, or investment of money or other property in the course of business if that receipt, handling, payment, or investment is connected to, the result of, or performed in anticipation of, a financial decision; or

    • (c) both (a) and (b)

    financial advisers’ conduct obligation means any of the obligations set out in sections 25 to 35

    financial advisers’ disclosure obligation means any of the obligations set out in sections 13 to 24

    financial advisers’ obligation means a financial advisers’ conduct obligation or a financial advisers’ disclosure obligation

    financial decision has the meaning given to it in section 6(5)

    financial product means any facility or instrument through which a financial decision is implemented

    lawyer has the same meaning as in section 6 of the Lawyers and Conveyancers Act 2006 except that, before section 6 comes into force, lawyer means a barrister or solicitor as defined in section 2 of the Law Practitioners Act 1982

    Minister means the Minister of the Crown who, under the authority of any warrant or with the authority of the Prime Minister, is for the time being responsible for the administration of this Act

    Ministry means the department of State that, with the authority of the Prime Minister, is for the time being responsible for the administration of this Act

    non-individual entity includes a company, an unincorporated body, a trust, and a partnership

    person includes a non-individual entity

    prescribed means prescribed by regulations made under this Act

    principal officer, in relation to a non-individual entity, means a director or a person who occupies a position equivalent to that of a director (such as a trustee or a partner)

    record includes—

    • (a) any file, register, ledger, book of account, or passbook, and any reproduction or copy of any of them or of any entry in any of them; and

    • (b) any apparatus or equipment in or on which information is recorded, stored, or embodied in any form so as to be capable of being retrieved, reproduced, or processed by any means; and

    • (c) any material by means of which information is supplied to, or derived from, any such apparatus or equipment

    registered means registered under the Financial Services Providers (Registration and Dispute Resolution) Act 2007

    reporting year means, in relation to an approved professional body, the reporting year nominated in its application for approval as an approved professional body

    security—

    • (a) means—

      • (i) any interest in, or right to participate in, any capital, assets, earnings, royalties, or other properties of any person:

      • (ii) any interest in, or right to be paid, money that is, or is to be, deposited with, lent to, or otherwise owing by, any person (whether or not the interest or right is secured by a charge over any property):

      • (iii) any renewal or variation of the terms or conditions of any existing security; but

    • (b) excludes—

      • (i) a security exempted from Part 2 of the Securities Act 1978 under any of paragraphs (b) to (h) of section 5(1) of that Act; and

      • (ii) a call debt security as defined in regulations made under that Act; and

      • (iii) a bank term deposit as defined in regulations made under this Act

    State services has the meaning given to it in section 2 of the State Sector Act 1988

    State services employee means an employee or chief executive in any part of the State services, whether paid by salary, wages, or otherwise

    trust account means, in relation to a financial adviser, any trust account at a bank in New Zealand that is a trust account in the name of that financial adviser

    trust account records—

    • (a) means records relating to a trust account; and

    • (b) includes any information that relates to a trust account and that is recorded or stored by means of any tape recorder, computer, or other device, and any material subsequently derived from information so recorded or stored.

    (2) For the purpose of deciding whether a person (A) performs a financial adviser service for a member of the public, unless the context otherwise requires, member of the public does not include—

    • (a) a relative or a close business associate of A or, if A is a non-individual entity, a relative or close business associate of a principal officer of A; or

    • (b) a person whose principal business is the investment of money or who, in the course of and for the purposes of that person’s business, habitually invests money; or

    • (c) a person for whom a financial adviser service is performed in relation to a sum of money that exceeds $500,000 or in relation to other property that is worth more than $500,000.

    (3) Any term that is used in this Act and not defined, but that is defined under the Securities Act 1978 or the Securities Markets Act 1988, has the meaning given to it under whichever of those Acts applies and is appropriate.

6 Meaning of advice, financial advice, and financial decision

  • (1) Advice means a recommendation, opinion, or guidance that is given in the course of business but does not include a recommendation, an opinion, or guidance given—

    • (a) by a person whose principal occupation is that of a teacher, journalist, or State services employee, and the advice is given in the course of that person’s principal occupation; or

    • (b) by a Minister of the Crown in the course of that person’s duties as a Minister of the Crown; or

    • (c) by a member of Parliament in the course of that person’s duties as a member of Parliament; or

    • (d) by a chartered accountant in the course of that person’s professional practice as a chartered accountant if the advice is a necessary incident of professional accounting advice; or

    • (e) by a member of the board of a statutory entity under the Crown Entities Act 2004 in the course of that person’s duties as a member of the board and in accordance with the Crown Entities Act 2004 and the statutory entity’s own Act.

    (2) For the avoidance of doubt, the provision of information, whether orally or in writing, is not advice unless it is accompanied by a recommendation, an opinion, or guidance.

    (3) Financial advice—

    • (a) means any advice relating to the financial implications of a financial decision; and

    • (b) includes information as to the financial advantage or disadvantage of a financial product or a financial decision; but

    • (c) does not include advice about the procedure for taking or implementing a financial decision; and

    • (d) does not include any of the following:

      • (i) a prospectus; or

      • (ii) an investment statement; or

      • (iii) an authorised advertisement; or

      • (iv) a bank disclosure statement; or

      • (v) a document or documents issued in lieu of a prospectus or investment statement in accordance with an exemption under the Securities Act 1978; or

      • (vi) a disclosure statement that is required under the Credit Contracts and Consumer Finance Act 2003; and

    • (e) does not include collecting financial information from a member of the public.

    (4) Whether advice is financial advice or not is not affected by—

    • (a) how the advice is given or communicated; or

    • (b) whether the advice is specific to a particular person or persons or whether it is given to the public at large, for example, through the media or other promotion.

    (5) Financial decision includes any decision made or contemplated by a person in relation to any of the following steps:

    • (a) saving money:

    • (b) investing, holding, or realising money or property:

    • (c) borrowing money:

    • (d) incurring a debt:

    • (e) giving a security, including a guarantee or indemnity:

    • (f) taking out insurance:

    • (g) making financial provision for the future.

7 Meaning of financial adviser

  • In this Act, financial adviser—

    • (a) means a person who—

      • (i) is a member of an approved professional body and is registered; and

      • (ii) performs a financial adviser service in the course of the business of that person or of another person; and

    • (b) includes a person who is deemed under section 11 to perform a financial adviser service; but

    • (c) does not include a person who only transmits financial advice given by the issuer or a promoter or a trustee (within the meaning of the Securities Act 1978 or the Unit Trusts Act 1960) or a statutory supervisor (within the meaning of the Securities Act 1978) of the particular securities to which the financial adviser service relates; and

    • (d) does not include—

      • (i) the offeror or target company in a takeover offer made under the Takeovers Code in force under the Takeovers Act 1993; or

      • (ii) an independent adviser in the exercise of that person’s functions under that code.

8 Act does not apply to lawyer who performs financial adviser service in course of professional practice

  • This Act does not apply to a lawyer who performs a financial adviser service in the course of that person’s professional practice as a lawyer.

9 Act binds the Crown

  • This Act binds the Crown.

Part 2
Regulation of financial advisers

10 Prerequisites for performing financial adviser service for member of public

  • (1) A person must not perform a financial adviser service for a member of the public unless that person is—

    • (a) a member of an approved professional body; and

    • (b) registered.

    (2) A person must not perform a financial adviser service for a member of the public if that person is a disqualified person under section 13 of the Financial Service Providers (Registration and Dispute Resolution) Act 2007.

    (3) A person who contravenes subsection (1) or (2) commits an offence (see section 107).

11 Financial adviser service performed by non-individual financial adviser deemed to be performed by individual as well in certain cases

  • If a non-individual entity in the course of its business performs a financial adviser service for a member of the public through an employee or other agent who is individually a member of an approved professional body and registered, the financial adviser service is deemed to be performed by the individual personally as well as by the entity.

Disclosure by financial advisers

12 Financial adviser’s disclosure obligation

  • (1) A financial adviser must not perform a financial adviser service for a member of the public unless the adviser has first made disclosure to that person in accordance with—

    • (a) sections 13 to 24; and

    • (b) any further requirements specified by regulations made under section 130(1)(b).

    (2) A person who contravenes subsection (1) commits an offence (see section 109).

    (3) The requirement in subsection (1) that disclosure must be made before the financial adviser service is performed does not apply to the extent that—

    • (a) disclosure subsequent to performance of a financial adviser service is permitted by regulations made under section 130(1)(c); and

    • (b) the disclosure is made in accordance with those regulations.

    Compare: 1988 No 234 s 41A

13 Financial adviser must disclose experience, qualifications, professional standing, etc

  • A financial adviser must disclose—

    • (a) the following information in relation to any qualifications of the adviser that are relevant to the performance of a financial adviser service:

      • (i) the nature of the qualifications; and

      • (ii) when those qualifications were obtained; and

      • (iii) a brief description of the extent to which the adviser has kept up to date the knowledge gained in obtaining those qualifications; and

    • (b) a brief description of the adviser’s experience as a financial adviser; and

    • (c) the name of the approved professional body of which the financial adviser is a member; and

    • (d) the approved dispute resolution scheme of which the financial adviser is a member.

    Compare: 1988 No 234 s 41B

14 Financial adviser must disclose certain criminal convictions, etc

  • (1) A financial adviser must disclose whether, during the period of 5 years before the financial adviser service is performed, the financial adviser—

    • (a) has been the subject of an adverse finding by a court in any proceeding that has been taken against the financial adviser in the adviser’s professional capacity; or

    • (b) has been expelled from, or has been prohibited from being a member of, an approved professional body; or

    • (c) has been adjudicated bankrupt.

    (2) In the case of a financial adviser that is a non-individual entity, the financial adviser must—

    • (a) make disclosure under subsection (1) for each principal officer of the financial adviser; and

    • (b) disclose whether, during the period of 5 years before the financial adviser service is performed, the financial adviser has been placed in statutory management, voluntary administration, or receivership.

    Compare: 1988 No 234 s 41C

15 Financial adviser must disclose fees

  • A financial adviser must disclose the nature and level of the fee that will be charged to the person for whom the financial adviser performs the financial adviser service.

    Compare: 1988 No 234 s 41D

16 Financial adviser must disclose other interests and relationships

  • (1) A financial adviser must disclose whether or not the adviser or an associated person has, or will or may have, any interest or relationship that a reasonable person would find reasonably likely to influence the adviser in performing the financial adviser service.

    (2) This includes an obligation to disclose—

    • (a) any relevant remuneration as defined in subsection (4); and

    • (b) whether the adviser is an associated person of, or has any other financial or other relationship with, any person connected with the financial product (if any) to which the financial adviser service relates; and

    • (c) a relationship with any other person (other than a professional body) who may reasonably be expected to influence the provision or content of the financial adviser service; and

    • (d) any other direct or indirect pecuniary or other interest in giving the financial advice.

    (3) A financial adviser must disclose the following information:

    • (a) the nature and extent of the interest or relationship; and

    • (b) in the case of remuneration, to the extent practicable, the amount or rate of the remuneration and the name of the person from whom the remuneration has been, or will or may be, received.

    (4) In this section,—

    relevant remuneration means any remuneration that the adviser or an associated person has received, or will or may receive, directly or indirectly, from a person other than the client in connection with the giving of the financial advice or a transaction resulting from the giving of the advice

    remuneration means a commission, fee, or other benefit or advantage, whether pecuniary or not, and whether direct or indirect; but does not include a salary or wages of a fixed amount.

    Compare: 1988 No 234 s 41E

17 Financial adviser must disclose details of financial products about which advice given

  • A financial adviser must disclose—

    • (a) the types of financial products about which the adviser gives advice; and

    • (b) if the adviser gives advice only about financial products of a particular financial product provider or particular financial product providers, a statement to this effect and the name of each of the financial product providers concerned.

    Compare: 1988 No 234 s 41F

18 Financial adviser must disclose procedures for handling client’s money or other property

  • (1) Before handling client money or other client property, a financial adviser must disclose to the client a brief description of the following procedures of the adviser relating to the handling of client money or other client property:

    • (a) how payment or delivery of money or delivery of property should be made to the adviser; and

    • (b) what records will be kept by the adviser in relation to the money or property, whether the client has access to those records, and the terms of that access; and

    • (c) whether or not the handling of client money and property will be audited by an auditor and, if so, the name of the auditor; and

    • (d) any other information that must be disclosed under regulations made under this Act.

    (2) For the purposes of subsection (1)(c), auditor means a person who would, if the financial adviser were an issuer of securities, be a qualified auditor within the meaning of section 2C of the Securities Act 1978.

    Compare: 1988 No 234 s 41I

19 Disclosure in relation to indemnity insurance

  • A financial adviser who gives financial advice in relation to acquiring or disposing of (or not acquiring or disposing of) securities must disclose whether the financial adviser has professional indemnity insurance, and the nature and scope of that insurance.

    Compare: 1988 No 234 s 41B(d)

20 How disclosure must be made

  • (1) Disclosure under this Part must be made in a disclosure statement.

    (2) The disclosure statement must—

    • (a) be in writing; and

    • (b) state when it was prepared; and

    • (c) state the name, address, and business telephone number of the financial adviser; and

    • (d) be either received by the client, or delivered or sent to the client, at the client’s last known address or an address (including an electronic address) specified by the client for this purpose; and

    • (e) comply with any regulations prescribing the form or the contents of the statement.

    Compare: 1988 No 234 s 41J

21 Disclosure must not be misleading

  • Disclosure under this Part must not be deceptive, misleading, or confusing at the time that it is made.

    Compare: 1988 No 234 s 41K

22 Disclosure of additional information

  • (1) A disclosure statement may be accompanied by disclosure of additional information.

    (2) Additional information that accompanies a disclosure statement must not be deceptive, misleading, or confusing.

    Compare: 1988 No 234 s 41L

23 No compliance with disclosure obligations if disclosure statement out of date

  • (1) A financial adviser who has previously given a member of the public a disclosure statement does not comply with the disclosure obligations under this Part if the disclosure statement is out of date when the financial adviser performs a financial adviser service for that person.

    (2) The disclosure statement is out of date if—

    • (a) since the date of the disclosure statement there has been a material change in any matter that must be disclosed in the disclosure statement; and

    • (b) a reasonable person in the position of the person for whom the financial adviser service is performed would consider that the change would materially affect any of the following decisions by that person:

      • (i) to proceed with a financial adviser service to be performed by that adviser:

      • (ii) to proceed with financial advice already given by the adviser:

      • (iii) about the weight that the person gives to financial advice by that adviser:

      • (iv) to postpone or countermand the performance of a financial adviser service.

    (3) Subsection (1) does not apply if, before the financial adviser service is performed, the financial adviser gives the person concerned—

    • (a) a new disclosure statement that is up to date; or

    • (b) additional written information that, when read with the original disclosure statement, updates the disclosure statement.

    Compare: 1988 No 234 s 41M

24 Advertisement must refer to disclosure statement

  • Any advertisement by a financial adviser advertising that person’s services as a financial adviser must state that a disclosure statement is available, on request and free of charge.

    Compare: 1988 No 234 s 41N

Financial advisers’ conduct obligations

25 Financial adviser must act with integrity

  • A financial adviser must act with integrity when performing a financial adviser service.

26 Financial adviser must exercise care, diligence, and skill

  • A financial adviser, when performing a financial adviser service, must exercise the care, diligence, and skill that a reasonable financial adviser would exercise in the same circumstances, taking into account, but without limitation, the nature and requirements of the financial adviser’s client and the nature of the service performed for the client.

27 Financial adviser must not engage in misleading or deceptive conduct

  • A financial adviser must not engage in conduct in relation to the performance of a financial adviser service that is misleading or deceptive or likely to mislead or deceive.

    Compare: 1988 No 234 s 13(1)

28 Advertisement by financial adviser must not be deceptive, misleading, or confusing

  • An advertisement by a financial adviser must not be deceptive, misleading, or confusing.

    Compare: 1988 No 234 s 41O

29 Financial adviser must not recommend or receive money for acquisition of securities if offer for subscription illegal

  • (1) A financial adviser must not recommend to a member of the public that that person acquire securities, and must not receive money from a member of the public in respect of the acquisition of securities, if,—

    • (a) when the securities were or are offered for subscription, the offer was or is illegal; and

    • (b) the illegality has not been remedied; and

    • (c) the financial adviser knows or ought to know that, when the securities were or are offered for subscription, the offer was or is illegal.

    (2) A person who contravenes subsection (1) commits an offence (see section 112).

    Compare: 1988 No 234 s 41S

30 Financial adviser must pay client’s money into separate trust account

  • (1) A financial adviser who receives money on behalf of a client receives the money on trust and must ensure that the money is paid promptly into a separate trust account held with a bank in New Zealand.

    (2) A person who knowingly contravenes subsection (1) commits an offence (see section 113).

    Compare: 2006 No 1 s 110(1)

31 Financial adviser holds client’s property on trust

  • A financial adviser who receives property on behalf of a client holds that property on trust.

32 Restrictions on use of client’s money or property

  • (1) A person must not use or apply money or other property held on trust for a client by a financial adviser in any way except—

    • (a) as expressly directed by the client in writing; or

    • (b) as otherwise provided by this Part.

    (2) A person who knowingly contravenes subsection (1) commits an offence (see section 114).

33 Financial adviser must account for client’s money or property

  • (1) A financial adviser who receives or holds the money or other property of a client on trust must account properly to the client for that money or property.

    (2) A person who knowingly contravenes subsection (1) commits an offence (see section 115).

    Compare: 2006 No 1 s 111

34 Financial adviser must keep records of client’s money and other property

  • (1) A financial adviser who receives or holds on trust the money of a client must keep trust account records that disclose clearly the position of the money in the trust account.

    (2) A financial adviser who receives or holds on trust the property of a client other than money must keep records that—

    • (a) identify the property; and

    • (b) show the date when the property was received; and

    • (c) if the property has been disposed of, show when the property was disposed of and to whom.

    (3) A financial adviser must keep the records required by this section in a manner that enables those records to be conveniently and properly audited or inspected.

    (4) A person who knowingly contravenes any of subsections (1) to (3) commits an offence (see section 116).

    Compare: 2006 No 1 s 112(1)

35 Protection of client’s money held on trust

  • The money of a client that is received or held by a financial adviser on trust—

    • (a) must not be used to pay the debts of any other creditor of the financial adviser; and

    • (b) must not be attached or taken in execution under the order or process of any court at the instance of another creditor of the financial adviser.

    Compare: 2006 No 1 s 113(1)

Part 3
Approved professional bodies

36 What is approved professional body

  • An approved professional body is an entity that has been approved by the Minister in accordance with this Part and whose approval has not been withdrawn.

Approval of approved professional body

37 Application for approval

  • (1) A proposed professional body may apply to the Minister for approval as an approved professional body.

    (2) The proposed professional body must submit with its application the following:

    • (a) its rules:

    • (b) an outline of its governance structure and other internal processes:

    • (c) its reporting year:

    • (d) any other information that is required by regulations made under this Act:

    • (e) the prescribed fee (if any).

38 Pre-application consultation with Commission

  • (1) Before submitting an application for approval to the Minister, a proposed professional body may consult and be assisted by the Commission as to the appropriateness of its rules, governance structure, and other internal processes.

    (2) If consulted by an applicant, the Commission must assist the applicant as to the matters referred to in subsection (1).

39 Minister must refer application to Commission

  • On receiving an application for approval, the Minister must refer it to the Commission for a recommendation by the Commission as to whether or not the proposed professional body’s rules, governance structure, and other internal processes meet the criteria set out in section 42.

40 Notification and publication of application

  • On receiving an application for approval, the Minister must also—

    • (a) give notice in the Gazette that the application for approval has been received; and

    • (b) ensure that the text of the application and the supporting documents are made available to the public by making copies of it available for inspection, free of charge,—

      • (i) at the head office of the Ministry (during ordinary office hours); and

      • (ii) for a reasonable period on an Internet site in an electronic form that is publicly available (at all reasonable times).

41 Recommendation by Commission

  • (1) The Commission must, within 90 days after an application has been referred to it by the Minister under section 39,—

    • (a) recommend to the Minister that the proposed professional body’s rules, governance structure, and other internal processes meet the criteria set out in section 42; or

    • (b) recommend to the Minister that the proposed professional body’s rules, governance structure, and other internal processes do not meet the criteria set out in section 42.

    (2) If the Commission makes a recommendation under subsection (1)(b), the Commission must also state, as part of its recommendation, in what respects the proposed professional body’s rules, governance structure, and other internal processes do not meet the criteria set out in section 42.

    (3) The Commission must send its recommendation to the proposed professional body at the same time that it makes its recommendation to the Minister.

42 Criteria for recommendation

  • The criteria for a recommendation under section 41 are that—

    • (a) the proposed professional body’s rules comply with sections 53 and 54; and

    • (b) it is capable of enforcing compliance by its members with this Act, its rules, and any other relevant legislation; and

    • (c) its rules are consistent with the purposes of this Act set out in section 3.

43 Minister must decide application

  • (1) The Minister must decide the application by approving it or by rejecting it.

    (2) In deciding whether to approve or reject the application, the Minister must take into account—

    • (a) the recommendation of the Commission; and

    • (b) whether it is in the public interest to approve the application.

44 Notification and publication of decision

  • The Minister must, as soon as practicable after deciding the application,—

    • (a) notify the proposed professional body in writing of the decision; and

    • (b) ensure that the decision and the Commission’s recommendation is—

      • (i) published in the Gazette; and

      • (ii) made available to the public by making copies of it available for inspection, free of charge,—

        • (A) at the head office of the Ministry (during ordinary office hours); and

        • (B) for a reasonable period on an Internet site in an electronic form that is publicly available (at all reasonable times).

45 Re-application by unsuccessful applicant

  • A proposed professional body whose application has been rejected may at any time re-apply under section 37.

46 Withdrawal of approval

  • (1) The Minister may, by written notice to an approved professional body, withdraw his or her approval.

    (2) The withdrawal of approval takes effect when the Minister sends the notice.

    (3) The Minister may withdraw approval if—

    • (a) the Commission has recommended that approval be withdrawn, and the Minister considers that it is in the public interest to withdraw approval; or

    • (b) the approved professional body has requested the Minister to withdraw approval.

    (4) The Commission may recommend that approval be withdrawn if the Commission is satisfied after proper inquiry that the approved professional body—

    • (a) is incapable of enforcing compliance by its members with this Act, its rules, or any other relevant legislation; or

    • (b) does not have the capacity to operate in a manner that is consistent with the purposes of this Act set out in section 3; or

    • (c) has failed to follow a directive given to it by the Commission to adhere to its own rules; or

    • (d) has persistently failed to co-operate with the Commission or 1 or more other approved professional bodies.

    (5) The Minister must notify the Registrar of Financial Service Providers as soon as practicable of the withdrawal of approval.

47 Publication of withdrawal of approval

  • The Minister must, as soon as practicable after withdrawing the approval of an approved professional body,—

    • (a) publish the withdrawal in the Gazette; and

    • (b) make copies of it available for inspection by the public, free of charge,—

      • (i) at the head office of the Ministry (during ordinary office hours); and

      • (ii) for a reasonable period on an Internet site in an electronic form that is publicly available (at all reasonable times).

48 Effect of withdrawal of approval on members of professional body

  • A person who is a member of a body at the time that the body’s approval as an approved professional body has been withdrawn by the Minister is deemed to be a member of an approved professional body for a period of 90 days after the withdrawal of approval.

Members of approved professional body

49 Disqualified person must not be member of approved professional body

  • (1) A person who is a disqualified person under section 13 of the Financial Service Providers (Registration and Dispute Resolution) Act 2007 must not be a member of an approved professional body.

    (2) An approved professional body must take reasonable steps to ensure that a person referred to in subsection (1) is not accepted by the approved professional body as a member of it.

    (3) An approved professional body must, as soon as practicable after becoming aware that a member is a person referred to in subsection (1), revoke that person’s membership of the approved professional body.

50 List of members

  • (1) Every approved professional body must maintain a list of its current members.

    (2) The list must contain the following details in respect of its current members:

    • (a) full name; and

    • (b) business address; and

    • (c) date of registration; and

    • (d) the approved dispute resolution scheme to which the member belongs; and

    • (e) any other information that may be prescribed by regulations made under this Act.

51 Approved professional body must notify Registrar of Financial Service Providers of change in membership

  • An approved professional body must, as soon as practicable, notify the Registrar of Financial Service Providers—

    • (a) of the details in section 50(2)(a) to (d) of each new member; and

    • (b) of any change in any of those details in respect of a current member; and

    • (c) of any person who ceases to be a member.

Exercise of Minister’s powers

52 Minister may consult in exercise of powers under Act

  • In exercising his or her powers under this Act, the Minister may consult the Securities Commission and any affected party, including an approved professional body.

Rules of approved professional body

53 Content of rules

  • An approved professional body must have rules, and those rules must include—

    • (a) a rule stating that members of the approved professional body are bound by the rules of that body and must comply with them; and

    • (b) rules prescribing a minimum standard of competence for membership of the approved professional body; and

    • (c) rules prescribing ongoing professional development standards that must be met by a member for that person to continue as a member of the approved professional body; and

    • (d) rules providing for the monitoring of members of the approved professional body in order to enforce compliance with its rules; and

    • (e) rules that prescribe a minimum standard of conduct and ethics for a member of the approved professional body; and

    • (f) rules (and processes under those rules) for facilitating co-operation and the sharing of information with the Commission and any other approved professional body for the purposes of—

      • (i) an investigation relating to a member; or

      • (ii) an investigation relating to the member of another approved professional body; or

      • (iii) the Commission’s role of enforcement under Part 4; and

    • (g) rules protecting the interests of members of the public who deal with members of the approved professional body; and

    • (h) rules ensuring that the body treats its members, and applicants for membership, in a fair and consistent manner; and

    • (i) rules ensuring that members have a fair opportunity to participate in the election of the governing body of the approved professional body; and

    • (j) rules ensuring that members have a fair opportunity to participate in the governance and administration of the approved professional body; and

    • (k) in relation to a complaint against a member of the approved professional body, rules—

      • (i) stating the information that must be provided by the complainant; and

      • (ii) prescribing the way in which the information must be evaluated; and

      • (iii) prescribing the way in which the decision whether or not to proceed with the complaint must be made and implemented; and

      • (iv) if the complaint is proceeded with, prescribing the further steps that must be taken in investigating the complaint; and

    • (l) in relation to an allegation of misconduct by a member of the approved professional body or a complaint that is proceeded with under the rules required under paragraph (k), rules prescribing the further steps that must be taken in the investigation of that conduct or complaint; and

    • (m) in relation to a disciplinary matter against a member of an approved professional body, rules—

      • (i) establishing a body to deal with the matter; and

      • (ii) prescribing the way in which the matter must be considered and decided on; and

      • (iii) prescribing the way in which decisions on the matter must be implemented; and

      • (iv) prescribing penalties for misconduct; and

      • (v) requiring the approved professional body to report the result of the matter to the Commission; and

    • (n) rules requiring the members of the approved professional body to participate in an approved dispute resolution scheme; and

    • (o) rules establishing the governance structure of the approved professional body; and

    • (p) in the case of a member who is a non-individual entity,—

      • (i) rules prescribing the standards and processes for—

        • (A) ensuring the competence of that member’s officers and employees; and

        • (B) overseeing the activities of that member’s officers and employees to ensure compliance by the member with this Act, the rules of the approved professional body, and any other relevant legislation; and

      • (ii) rules for ensuring the financial solvency of that member; and

      • (iii) a rule requiring that member periodically to advise the approved professional body of the names of its employees who are financial advisers.

54 Characteristics of rules

  • The rules of an approved professional body must—

    • (a) be consistent with this Act; and

    • (b) be consistent with the Commerce Act 1986.

55 Rules must be publicly available

  • An approved professional body must ensure that its rules are available for inspection by the public, free of charge,—

    • (a) at its business offices (during ordinary office hours); and

    • (b) if practicable, on an Internet site in an electronic form that is publicly available (at all reasonable times).

Change of rules

56 Commission approval required for rule change initiated by approved professional body

  • (1) This section applies when an approved professional body wishes to change its rules.

    (2) An approved professional body must not change its rules without first obtaining the approval of—

    • (a) the Commission; or

    • (b) the Minister, if the Commission has refused approval of the rule change.

    (3) The Commission must approve a rule change if the proposed new or amended rule meets the criteria set out in sections 53 and 54.

    (4) The Commission approves the change if—

    • (a) it has received notice in writing of the proposed change; and

    • (b) it either—

      • (i) expressly approves the rule change by notice in writing to the approved professional body; or

      • (ii) does not, within the deliberation period, notify the approved professional body in writing that the rule change is not approved.

    (5) In subsection (4), the deliberation period is the period of 28 days after receipt by the Commission of notice of the rule change (the 28-day period), or such longer period, not exceeding 90 days after receipt by the Commission of notice of the rule change, that is notified by the Commission to the approved professional body before the expiry of the 28-day period.

    (6) If the Commission decides that the rule change does not meet the criteria set out in sections 53 and 54, it must notify the Minister and the approved professional body of its decision and its reasons for deciding that the rule change does not meet those criteria.

    (7) The Commission must publish—

    • (a) the proposed rule change, as soon as practicable after receiving the notice referred to in subsection (4)(a); and

    • (b) its decision whether or not to approve the rule change, as soon as practicable after making that decision.

    (8) In subsection (7), publish means to make available for inspection, free of charge, for a reasonable period on an Internet site in an electronic form that is publicly available (at all reasonable times).

57 Approved professional body may apply to Minister for approval of rule change

  • (1) If the Commission does not approve a rule change under section 56(4), the approved professional body may apply in writing to the Minister for approval of the rule change.

    (2) The Minister must approve or refuse to approve the rule change taking into account—

    • (a) the reasons of the Commission referred to in section 56(6); and

    • (b) whether it is in the public interest to approve the rule change.

    (3) The Minister must—

    • (a) give written notice to the approved professional body and the Commission of his or her decision; and

    • (b) publish the Minister’s decision and the reasons of the Commission referred to in section 56(6) in the Gazette; and

    • (c) make copies of the Minister’s decision and the Commission’s reasons available for inspection by the public, free of charge,—

      • (i) at the head office of the Ministry (during ordinary office hours); and

      • (ii) for a reasonable period on an Internet site in an electronic form that is publicly available (at all reasonable times).

58 Rule change proposed by Commission

  • (1) The Commission may notify an approved professional body of a change to the approved professional body’s rules proposed by the Commission.

    (2) The notice must be in writing and must contain the Commission’s reasons for proposing the rule change.

    (3) The proposed rule change must, in the opinion of the Commission, be necessary or desirable for the rules of the approved professional body to meet the criteria set out in sections 53 and 54.

    (4) The proposed rule change is effective at the end of the period of 28 days after receipt by the approved professional body of the notice, unless the approved professional body objects under section 59.

59 Approved professional body may object to rule change proposed by Commission

  • (1) An approved professional body that has received a notice referred to in section 58(2) may object to the proposed rule change by sending the Commission a written notice of objection.

    (2) The notice must be sent before the period of 28 days referred to in section 58(4) expires.

    (3) The approved professional body may annex to the notice documents in support of its objection.

60 Minister must decide whether to approve or refuse rule change if approved professional body objects

  • (1) If an approved professional body objects in accordance with section 59, the Commission must refer to the Minister—

    • (a) the notice of the proposed rule change referred to in section 58(2); and

    • (b) a statement by the Commission that the proposed rule change is necessary for the rules of the approved professional body to meet the criteria in sections 53 and 54; and

    • (c) a copy of the approved professional body’s notice of objection and any supporting documents.

    (2) The Minister must provide a reasonable opportunity for the approved professional body to make written submissions in opposition to the proposed rule change.

    (3) The Minister must approve or refuse to approve the proposed rule change taking into account—

    • (a) the documents referred to in subsection (1) and the approved professional body’s submissions (if any); and

    • (b) whether it is in the public interest to approve the rule change.

    (4) The Minister must—

    • (a) give written notice to the approved professional body and the Commission of his or her decision; and

    • (b) publish the Minister’s decision and the Commission’s reasons for proposing the rule change in the Gazette; and

    • (c) make copies of the decision available for inspection by the public, free of charge,—

      • (i) at the head office of the Ministry (during ordinary office hours); and

      • (ii) for a reasonable period on an Internet site in an electronic form that is publicly available (at all reasonable times).

    (5) If the Minister approves the proposed rule change, the rule change is effective when the approved professional body receives the notice referred to in subsection (4)(a).

Role of Commission

61 Approved professional body must notify Commission of investigation into member misconduct

  • (1) An approved professional body must notify the Commission of the commencement of any investigation by the approved professional body of an allegation of misconduct against a member.

    (2) The notice must state whether the approved professional body requires, or is likely to require, the assistance of the Commission in conducting the investigation.

    (3) The approved professional body may at any time request the Commission to assist in conducting the investigation, and if requested the Commission may assist.

62 Commission may direct approved professional body to adhere to rules

  • (1) This section applies if the Commission receives a complaint, or otherwise has reason to believe, that an approved professional body is failing to comply with its own rules.

    (2) The Commission—

    • (a) must give the approved professional body notice of the allegation of failure to comply with its own rules and a reasonable opportunity to respond; and

    • (b) may, after considering any response that the approved professional body makes and concluding that the allegation is true, by written notice—

      • (i) direct the approved professional body to adhere to its rules; and

      • (ii) stipulate any steps that the approved professional body must take in order to adhere to its rules; and

      • (iii) require the approved professional body to report to the Commission within 28 days of the date of the notice stating how and by when the Commission’s directive will be implemented.

    (3) The Commission is not required not take any steps under this section if it considers that the complaint is frivolous or vexatious.

63 Approved professional body must make annual report to Commission

  • (1) Within 30 working days after the end of its reporting year, an approved professional body must send to the Commission—

    • (a) a written report for the past reporting year in relation to the activities of the approved professional body during that year; and

    • (b) its audited financial statements for the past reporting year that comply with generally accepted accounting practice.

    (2) The report must contain the information, and be accompanied by the documents, prescribed by regulations made under this Act.

64 Approved professional body must give Commission other information and assistance on request

  • (1) An approved professional body must give to the Commission or any person authorised by the Commission information, assistance, and access to the approved professional body’s facilities if the Commission reasonably requests it to carry out its duties.

    (2) The Commission must require that information, assistance, or access by notice in writing to the approved professional body.

    Compare: 1988 No 234 s 36ZK

65 Approved professional body’s power to disclose further information to Commission

  • An approved professional body may provide to the Commission any information that the approved professional body considers may assist the Commission in the performance of the Commission’s functions.

    Compare: 1988 No 234 s 36ZL(1)

Protection of approved professional body

66 Protection from liability

  • (1) An approved professional body is not liable for anything it may do or fail to do in the course of the exercise or intended exercise of its functions or duties under this Act, unless it is shown that it acted in bad faith or without reasonable care.

    (2) An officer, an employee, or a person acting on behalf of an approved professional body is not liable for anything he or she may do or say or fail to do or say in the course of the exercise or intended exercise of the approved professional body’s functions or duties under this Act, unless it is shown that he or she acted in bad faith.

    Compare: 1988 No 234 s 47

Part 4
Enforcement and remedies

Subpart 1—Commission’s enforcement powers

Prohibition and corrective orders

67 When Commission may make prohibition and corrective orders

  • The Commission may make a prohibition order or a corrective order, or both, in accordance with this subpart if it is satisfied that, by engaging in any conduct, a person has contravened, or would contravene, a financial advisers’ obligation or exemption.

    Compare: 1988 No 234 s 42

68 Terms of prohibition and corrective orders

  • (1) A prohibition order may prohibit or restrict the making of any statement or distributing of any document by or on behalf of the person for the purpose of preventing a contravention or further contravention of the relevant prohibition, obligation, or exemption.

    (2) A corrective order may direct the person in contravention to publish, at the person’s own expense, in the manner and at the times specified in the order, corrective statements that are specified in, or are to be determined in accordance with, the order.

    Compare: 1988 No 234 s 42A

Disclosure order

69 When Commission may make disclosure order

  • The Commission may make a disclosure order in accordance with this subpart if it is satisfied that a person has contravened a financial advisers’ disclosure obligation or exemption.

    Compare: 1988 No 234 s 42B

70 Terms of disclosure order

  • A disclosure order may order—

    • (a) the person in contravention to disclose in accordance with the order information for the purpose of securing compliance with the relevant obligation or exemption:

    • (b) the person in contravention to publish, at the person’s own expense, in the manner and at the times specified in the order, corrective statements that are specified in, or are to be determined in accordance with, the order.

    Compare: 1988 No 234 s 42C

Temporary financial adviser banning orders

71 When Commission may make temporary banning orders for financial adviser activities

  • The Commission may make a temporary banning order against a person in accordance with this subpart if the Commission is satisfied that—

    • (a) the person has persistently contravened this Act, the Securities Act 1978, or the Securities Markets Act 1988; or

    • (b) the person has been prohibited in an overseas jurisdiction from carrying on activities that the Commission is satisfied are substantially similar to any of the activities referred to in section 72.

    Compare: 1988 No 234 s 42D

72 Terms of temporary banning order for financial adviser services

  • A temporary banning order may prohibit or restrict the person from doing all or any of the following things, without the leave of the Commission, for a period stated in the order of 14 days or less:

    • (a) performing a financial adviser service for a member of the public:

    • (b) acting as a principal officer or promoter of, or in any way, whether directly or indirectly, being concerned or taking part in the management of any non-individual entity that is a financial adviser (other than a non-individual entity that does not carry on business in New Zealand):

    • (c) acting as an employee or agent of a financial adviser in a capacity that allows the person to take part in performing a financial adviser service for a member of the public.

    Compare: 1988 No 234 s 42E

Process for Commission’s orders

73 Commission must follow steps before making orders

  • (1) The Commission may make an order under this subpart only if it first takes the following steps:

    • (a) gives the person to whom the order is directed written notice of—

      • (i) the nature of the alleged contravention; and

      • (ii) the proposed terms of the order; and

      • (iii) the reasons for the proposed order; and

    • (b) gives that notice at least—

      • (i) 24 hours before the Commission makes the order, in the case of an order specified in section 74; or

      • (ii) 48 hours before the Commission makes the order, in the case of any other disclosure order; or

      • (iii) 7 days before the Commission makes the order, in the case of any other prohibition or corrective order; and

    • (c) gives each person to whom notice of the order must be given an opportunity to make written submissions within that notice period; and

    • (d) also gives each of those persons an opportunity to have the matter determined following a meeting of the Commission after the expiry of that notice period and the opportunity to be heard and represented by counsel at that meeting (but this paragraph does not apply to an order specified in section 74); and

    • (e) has regard to any written submissions made to it within that notice period and (if applicable) written or oral submissions made at a meeting of the Commission.

    (2) However, the Commission may shorten these steps in accordance with section 74 for an order specified in that section.

    Compare: 1988 No 234 s 42F

74 Commission may shorten steps for specified orders

  • (1) If the Commission thinks it necessary or desirable in the public interest for any of the orders set out in subsection (3) to be made more urgently than section 73 permits, it—

    • (a) may give less than 24 hours’ notice before it makes the order, and the notice may be oral, not written; and

    • (b) may give persons an opportunity to make only oral submissions, not written, to a member, officer, or employee of the Commission (as the Commission determines).

    (2) However, the Commission must include in the notice under that section the reasons for acting urgently and must otherwise comply with the steps set out in that section.

    (3) The orders are—

    • (a) a prohibition or corrective order for a financial advisers’ obligation or exemption if that order is stated to apply for a period of 14 days or less:

    • (b) a temporary banning order.

    Compare: 1988 No 234 s 42G

75 Commission must give notice after making orders

  • (1) If the Commission makes an order under this subpart, the Commission—

    • (a) must, as soon as is reasonably practicable, give written notice to the person to whom the order is directed of—

      • (i) the terms of the order; and

      • (ii) the reasons for the order; and

    • (b) may also give notice to any other person of those matters.

    (2) The Commission must also, as soon as practicable after the making of a temporary banning order, give notice on its website (and may give public notice by any other means also) of the name of the person against whom the order is made and the period or dates for which the ban applies.

    Compare: 1988 No 234 s 42H

General provisions

76 General provisions on Commission’s orders

  • (1) The Commission may make an order under this subpart on the terms and conditions that the Commission thinks fit.

    (2) The Commission may vary an order in the same way as it may make the order under this subpart.

    (3) The Commission may revoke an order or suspend an order on the terms and conditions it thinks fit.

    (4) An order made under this subpart is subject to appeal only in accordance with section 69P of the Securities Act 1978.

    Compare: 1988 No 234 s 42I

Subpart 2—Court’s enforcement powers

Injunctions

77 What Court may injunct

  • The Court may, on application by the Commission or any other person, grant an injunction restraining a person from engaging in conduct that constitutes or would constitute a contravention of a provision of this Act.

    Compare: 1988 No 234 s 42K

78 When Court may grant injunctions and interim injunctions

  • (1) The Court may grant an injunction restraining a person from engaging in conduct of a particular kind if—

    • (a) it is satisfied that the person has engaged in conduct of that kind; or

    • (b) it appears to the Court that, if an injunction is not granted, it is likely that the person will engage in conduct of that kind.

    (2) The Court may grant an interim injunction restraining a person from engaging in conduct of a particular kind if in its opinion it is desirable to do so.

    (3) Subsections (1)(a) and (2) apply whether or not it appears to the Court that the person intends to engage again, or to continue to engage, in conduct of that kind.

    (4) Subsections (1)(b) and (2) apply whether or not the person has previously engaged in conduct of that kind or there is an imminent danger of substantial damage to any other person if that person engages in conduct of that kind.

    Compare: 1988 No 234 s 42L

79 Undertaking as to damages not required by Commission

  • (1) If the Commission applies to the Court for the grant of an interim injunction under this subpart, the Court must not, as a condition of granting an interim injunction, require the Commission to give an undertaking as to damages.

    (2) However, in determining the Commission’s application for the grant of an interim injunction, the Court must not take into account that the Commission is not required to give an undertaking as to damages.

    Compare: 1988 No 234 s 42M

Corrective order

80 When Court may grant corrective order

  • The Court may, on application by the Commission or any other person, make a corrective order if it is satisfied that a person has contravened a financial advisers’ obligation or exemption.

    Compare: 1988 No 234 s 42N(b)

81 Terms of corrective order

  • A corrective order may direct the person in contravention to publish, at the person’s own expense, in the manner and at the times specified in the order, corrective statements that are specified in, or are to be determined in accordance with, the order.

Disclosure order

82 When Court may make disclosure order

  • The Court may, on application by the Commission or any other person, make a disclosure order if it is satisfied that a person has contravened a financial advisers’ disclosure obligation or exemption.

    Compare: 1988 No 234 s 42P

83 Terms of disclosure order

  • A disclosure order may order—

    • (a) the person in contravention to disclose in accordance with the order information for the purpose of securing compliance with the relevant obligation or exemption:

    • (b) the person in contravention to publish, at the person’s own expense, in the manner and at the times specified in the order, corrective statements that are specified in, or are to be determined in accordance with, the order.

    Compare: 1988 No 234 s 42Q

Subpart 3—Civil remedies

Overview of civil remedies

84 Overview of civil remedies

  • (1) The following remedies (civil remedy orders) are available for a contravention of a financial advisers’ obligation or exemption (except if otherwise provided) under this subpart:

    • (a) a pecuniary penalty order and declaration of contravention (on application by the Commission only):

    • (b) a compensatory order:

    • (c) a specific civil remedy order under section 93.

    (2) This section is a guide only to the general scheme and effect of this subpart.

    Compare: 1988 No234 s 42R

Pecuniary penalty order and declaration of contravention

85 When Court may make pecuniary penalty order and declaration of contravention

  • If the Commission applies for a pecuniary penalty order against a person under this Act, the Court—

    • (a) must determine whether the person has contravened a financial advisers’ obligation or exemption; and

    • (b) must make a declaration of contravention (see sections 86 and 87) if satisfied that the person has contravened a financial advisers’ obligation or exemption; and

    • (c) may order the person to pay a pecuniary penalty that the Court considers appropriate to the Crown (see sections 88 and 89) if satisfied that the person has contravened a financial advisers’ obligation or exemption and that the contravention—

      • (i) materially prejudices the interests of a member of the public for whom the person has performed a financial adviser service; or

      • (ii) is likely to materially damage the integrity or reputation of any of New Zealand’s financial markets; or

      • (iii) is otherwise serious.

    Compare: 1988 No 234 s 42T(1)

86 Purpose and effect of declaration of contravention

  • (1) The purpose of a declaration of contravention is to enable an applicant for a compensatory order to rely on the declaration of contravention in the proceedings for that order, and not be required to prove the contravention.

    (2) Accordingly, a declaration of contravention is conclusive evidence of the matters that must be stated in it under section 87.

    Compare: 1988 No 234 s 42U

87 What declaration of contravention must state

  • A declaration of contravention must state the following:

    • (a) the Court that made the declaration; and

    • (b) the financial advisers’ obligation to which the contravention relates or, if the contravention is of an exemption, both the term or condition contravened and the financial advisers’ obligation to which the exemption relates; and

    • (c) the person who engaged in the contravention; and

    • (d) the conduct that constituted the contravention and, if a transaction constituted the contravention, the transaction.

    Compare: 1988 No 234 s 42V

88 Maximum amount of pecuniary penalty

  • The maximum amount of a pecuniary penalty for a contravention of a financial advisers’ obligation or exemption is $1,000,000.

    Compare: 1988 No 234 s 42W

89 Considerations for Court in determining pecuniary penalty

  • In determining an appropriate pecuniary penalty, the Court must have regard to all relevant matters, including—

    • (a) any purpose and criteria stated in this Act that apply to the financial advisers’ obligation; and

    • (b) the nature and extent of the contravention; and

    • (c) the likelihood, nature, and extent of any damage to the integrity or reputation of any of New Zealand’s financial markets because of the contravention; and

    • (d) the nature and extent of any loss or damage suffered by a person referred to in section 85(c)(i); and

    • (e) the circumstances in which the contravention took place; and

    • (f) whether or not the person in contravention has previously been found by the Court in proceedings under this Act to have engaged in any similar conduct.

    Compare: 1988 No 234 s 42Y

90 Court must order that recovery from pecuniary penalty be applied to Commission’s actual costs

  • If the Court orders that a person pay a pecuniary penalty, and the proceedings were brought (in whole or in part) by the Commission, the Court must also order that the penalty must be applied first to pay the Commission’s actual costs in bringing the proceedings.

    Compare: 1988 No 234 s 42Z

Compensatory orders

91 When Court may make compensatory orders

  • (1) The Court may make a compensatory order, on application by the Commission or any other person, if the Court is satisfied that—

    • (a) there is a contravention of a financial advisers’ obligation or exemption; and

    • (b) a person (the aggrieved person) has suffered, or is likely to suffer, loss or damage because of the contravention.

    (2) The Court may make a compensatory order whether or not the aggrieved person is a party to the proceedings.

    Compare: 1988 No 234 s 42ZA(1),(2)

92 Terms of compensatory orders

  • If section 91 applies, the Court may make any order it thinks just to compensate an aggrieved person in whole or in part for the loss or damage, or to prevent or reduce that loss or damage, including an order (without limitation) to—

    • (a) direct the person in contravention to pay to the aggrieved person the amount of the loss or damage:

    • (b) direct the person in contravention to refund money or return property to the aggrieved person:

    • (c) if a contract has been entered into between the person in contravention and the aggrieved person,—

      • (i) vary the contract or any collateral arrangement as specified in the order and, if the Court thinks fit, declare the contract or arrangement to have had effect as so varied on and after a date before the order was made, as specified in the order:

      • (ii) cancel the contract and, if the Court thinks fit, declare the cancellation to have had effect on and after a date before the order was made, as specified in the order:

      • (iii) require the person in contravention to take any action the Court thinks fit to reinstate the parties as near as may be possible to their former positions.

    Compare: 1988 No 234 s 42ZB

Civil remedy order for contravention of financial advisers’ obligation

93 When Court may make civil remedy order for contravention of financial advisers’ obligation

  • (1) The Court may make a civil remedy order described in section 94 against a financial adviser, on application by an entitled person, if the Court is satisfied that—

    • (a) the adviser has contravened a financial advisers’ obligation or exemption; and

    • (b) if the adviser had complied with that obligation or exemption, a reasonable person in the position of the entitled person would have—

      • (i) not used that adviser or proceeded with financial advice given by that adviser; or

      • (ii) not paid or delivered money or property to that adviser; or

      • (iii) acted in a way that was materially different from the way the entitled person acted in relation to any financial adviser service performed for that person by the financial adviser.

    (2) An entitled person is any member of the public for whom the financial adviser has performed a financial adviser service.

    (3) It does not matter whether or not the financial adviser has previously contravened a financial advisers’ obligation or exemption, or whether or not the entitled person has suffered any loss as a result of the contravention.

    Compare: 1988 No 234 s 42ZC

94 Terms of civil remedy order for contravention of financial advisers’ obligation

  • (1) A civil remedy order under section 90 may order the financial adviser to pay to the entitled person an amount determined by the Court.

    (2) The maximum amount of a civil remedy order under subsection (1) is,—

    • (a) in the case of an individual, $100,000; and

    • (b) in the case of a body corporate, $300,000.

    Compare: 1988 No 234 s 42ZD

Inter-relationship of civil remedies

95 More than 1 civil remedy order may be made for same conduct

  • The Court may make a civil remedy order of 1 kind against a person even though the Court has made another civil remedy order of a different kind against the person for the same conduct.

    Compare: 1988 No 234 s 42ZG

96 Only 1 pecuniary penalty order may be made for same conduct

  • If conduct by a person constitutes a contravention of 2 or more financial advisers’ obligations, proceedings may be brought against that person for the contravention of any 1 or more of those obligations, but no person is liable to more than 1 pecuniary penalty order for the same conduct.

    Compare: 1988 No 234 s 42ZH

General

97 Standard of proof for civil remedies

  • The proceedings under this subpart are civil proceedings and the usual rules of the Court and rules of evidence and procedure for civil proceedings apply (including the standard of proof).

    Compare: 1988 No 234 s 42ZI

98 Time limit for applying for civil remedies

  • (1) An application for a pecuniary penalty order or a civil remedy order under section 93 may be made at any time within 3 years after the date on which the matter giving rise to the contravention was discovered or ought reasonably to have been discovered.

    (2) The usual time limits apply to all applications for other civil remedy orders.

    (3) However, an application for a compensatory order in respect of the contravention may be made at any time within 6 months after the date on which a declaration of contravention is made, even if the usual time limit has expired.

    Compare: 1988 No 234 s 42ZJ

Financial adviser bans

99 When Court may make banning orders for financial adviser activities

  • The Court may, on application by the Commission or any other person, make a financial adviser banning order against a person if the Court is satisfied that—

    • (a) the person has been convicted of an offence against this Act or a pecuniary penalty order has been made against the person for a contravention of this Act; or

    • (b) the person has been convicted of an offence against any of sections 58, 59, and 59A of the Securities Act 1978 or a pecuniary penalty order has been made against the person under that Act; or

    • (c) the person has been convicted of a crime involving dishonesty as defined in section 2(1) of the Crimes Act 1961; or

    • (d) the person has persistently contravened this Act, the Securities Act 1978, or the Securities Markets Act 1988; or

    • (e) the person has been prohibited in an overseas jurisdiction from carrying on activities that the Court is satisfied are substantially similar to any of the activities referred to in section 100.

    Compare: 1988 No 234 s 43K

100 Terms of financial adviser banning order

  • A financial adviser banning order may prohibit or restrict the person from doing all or any of the following things, without the leave of the Court, for a period stated in the order of 10 years or less:

    • (a) performing a financial adviser service for a member of the public:

    • (b) being a principal officer or promoter of, or in any way, whether directly or indirectly, being concerned or taking part in the management of, any non-individual entity (other than a non-individual entity that does not carry on business in New Zealand):

    • (c) being an employee or agent of a financial adviser in a capacity that allows the person to take part in performing a financial adviser service for a member of the public.

    Compare: 1988 No 234 s 43L

101 Persons automatically banned from financial adviser activities

  • (1) This section applies to a person if—

    • (a) the person has been convicted of an offence under this Act or a pecuniary penalty order has been made against the person for a contravention of this Act; or

    • (b) the person has been convicted of a crime involving dishonesty as defined in section 2(1) of the Crimes Act 1961.

    (2) The person must not, for the period of 5 years after the conviction or making of the order, without the leave of the Court,—

    • (a) perform a financial adviser service for a member of the public:

    • (b) be a principal officer or promoter of, or in any way, whether directly or indirectly, be concerned or take part in the management of, any non-individual entity that is a financial adviser (other than a non-individual entity that does not carry on business in New Zealand):

    • (c) be an employee or agent of a financial adviser in a capacity that allows the person to take part in performing a financial adviser service for a member of the public.

    Compare: 1988 No 234 s 43N

102 General provisions for bans and banning orders

  • (1) The Registrar of the Court must, as soon as practicable after the making of a banning order by a Court under this Part,—

    • (a) give notice to the Registrar of Companies, the Registrar of Financial Service Providers, and the Commission that the order has been made; and

    • (b) if the person against whom the order is made is a member of an approved professional body, give notice to that body that the order has been made; and

    • (c) give notice in the Gazette of the name of the person against whom the order is made and the period or dates for which the ban applies.

    (2) A person intending to apply for the leave of the Court to override a ban imposed by or under section 99 or 101 must give to the Commission not less than 14 days’ written notice of that person’s intention to apply.

    (3) The Commission, and any other person that the Court thinks fit, may attend and be heard at the hearing of the application.

    Compare: 1988 No 234 s 43O

Orders to preserve assets to satisfy claims

103 When Court may prohibit payment or transfer of money, securities, or other property

  • (1) This section applies if—

    • (a) an investigation is being carried out under this Act in relation to an act or omission by a person, being an act or omission that constitutes or may constitute a contravention of this Act; or

    • (b) a prosecution has begun against a person for a contravention of this Act; or

    • (c) a civil proceeding has begun against a person under this Act.

    (2) The Court may, on application by the Commission or by an aggrieved person, make 1 or more of the orders listed in section 104 if the Court considers it necessary or desirable to do so for the purpose of protecting the interests of an aggrieved person.

    (3) In this section and section 104,—

    aggrieved person means any person to whom a relevant person is liable

    liable means liable, or may be or become liable, to pay money (whether in respect of a debt, by way of damages or compensation, or otherwise) or to account for other property

    relevant person means a person referred to in subsection (1).

    Compare: 1988 No 234 s 43P

104 What orders may be made

  • (1) The orders that may be made under section 103 are—

    • (a) an order prohibiting the relevant person from transferring, charging, or otherwise dealing with money, securities, or other property held or controlled by the relevant person:

    • (b) an order prohibiting a person who is indebted to the relevant person or to an associated person of the relevant person from making a payment in total or partial discharge of the debt to, or to another person at the direction or request of, the person to whom the debt is owed:

    • (c) an order prohibiting a person holding money, securities, or other property, on behalf of the relevant person or on behalf of an associated person of the relevant person, from paying all or any of the money, or transferring, or otherwise parting with possession of, the securities or other property, to, or to another person at the direction or request of, the person on whose behalf the money, securities, or other property is or are held:

    • (d) an order prohibiting the taking or sending out of New Zealand by a person of money of the relevant person or of an associated person of the relevant person:

    • (e) an order prohibiting the taking, sending, or transfer by a person of securities or other property of the relevant person, or of an associated person of the relevant person, from a place in New Zealand to a place outside New Zealand (including the transfer of securities from a register in New Zealand to a register outside New Zealand):

    • (f) an order requiring the relevant person, or any person holding money, securities, or other property on behalf of the relevant person or an associated person of the relevant person, to pay or transfer money, securities, or other property to a specified person to be held on trust pending determination of the investigation, prosecution, or civil proceeding:

    • (g) an order appointing,—

      • (i) if the relevant person is a natural person, a receiver or trustee, having any powers that the Court orders, of the property or of part of the property of that person; or

      • (ii) if the relevant person is a body corporate, a receiver or receiver and manager, having any powers that the Court orders, of the property or of part of the property of that person:

    • (h) if the relevant person is a natural person, an order requiring that person to deliver up to the Court his or her passport and any other documents that the Court thinks fit:

    • (i) if the relevant person is a natural person, an order prohibiting that person from leaving New Zealand without the consent of the Court.

    (2) A reference in subsection (1)(e) or (g) to property of a person includes a reference to property that the person holds otherwise than as sole beneficial owner, for example,—

    • (a) as trustee for, as nominee for, or otherwise on behalf of or on account of another person; or

    • (b) in a fiduciary capacity.

    (3) An order may be expressed to operate for a specified period or until the order is discharged by a further order under this section.

    Compare: 1988 No234 s 43Q

105 Interim orders

  • (1) If an application is made to the Court for an order under section 103, the Court may, if in the opinion of the Court it is desirable to do so, before considering the application, grant an interim order, being an order of the kind applied for that is expressed to have effect pending the determination of the application.

    (2) The Court must not require the applicant or any other person, as a condition of granting an interim order under this section, to give an undertaking as to damages.

    (3) In determining an application for the grant of an interim order, the Court must not take into account that the applicant is not required to give an undertaking as to damages.

    Compare: 1988 No 234 s 43R

106 Relationship with other law

  • (1) Nothing in sections 103 to 105 affects the powers that the Court has apart from those sections.

    (2) This section has effect subject to the Insolvency Act 2006.

    Compare: 1988 No 234 s 43S

Subpart 4—Offences

107 Offence of performing financial adviser service for member of public without being member of approved professional body and registered

  • (1) A person (A) who contravenes section 10 commits an offence.

    (2) If A contravenes section 10 only because A is not registered (but A is a member of an approved professional body), it is a defence if A proves on a balance of probabilities that A did not know, and ought not reasonably to have known, that A was not registered.

    (3) A person who commits an offence under subsection (1) is liable on summary conviction,—

    • (a) in the case of an individual, to a fine not exceeding $100,000; or

    • (b) in the case of a body corporate, to a fine not exceeding $300,000.

108 Offence if false representation as to membership of approved professional body or registration

  • (1) A person (A) commits an offence if A falsely represents, whether by words or conduct, that A is a member of an approved professional body.

    (2) A person (A) commits an offence if A falsely represents, whether by words or conduct, that A is registered.

    (3) A person (A) commits an offence if A falsely represents, whether by words or conduct, that A is not a disqualified person under section 13 of the Financial Service Providers (Registration and Dispute Resolution) Act 2007.

    (4) It is a defence to a charge under subsection (2) if A did not know, and ought not reasonably to have known, that A was not registered.

    (5) A person who commits an offence under subsection (1), (2), or (3) is liable on summary conviction,—

    • (a) in the case of an individual, to a fine not exceeding $100,000; or

    • (b) in the case of a body corporate, to a fine not exceeding $300,000.

109 Offence for failure to comply with financial advisers’ disclosure obligation

  • (1) Every person who is aware or ought reasonably to be aware of information that the person must disclose under an financial advisers’ disclosure obligation, and who fails to disclose that information in accordance with Part 2, commits an offence.

    (2) A person who commits an offence under subsection (1) is liable on summary conviction,—

    • (a) in the case of an individual, to a fine not exceeding $100,000; or

    • (b) in the case of a body corporate, to a fine not exceeding $300,000.

    Compare: 1988 No 234 s 41P

110 Offence of deceptive, misleading, or confusing disclosure

  • (1) A financial adviser who makes disclosure that contravenes section 21 or 22 commits an offence.

    (2) However, the adviser does not commit an offence under subsection (1) if the adviser proves that, at the time when the disclosure was made, the adviser believed on reasonable grounds that the disclosure was not deceptive, misleading, or confusing.

    (3) The defence in subsection (2) does not prevent the Commission from making a prohibition or corrective order under section 67 or a disclosure order under section 69, or the Court from granting an injunction under section 77, or making a corrective order under section 80 or a disclosure order under section 82.

    (4) A person who commits an offence under subsection (1) is liable on summary conviction,—

    • (a) in the case of an individual, to a fine not exceeding $100,000; or

    • (b) in the case of a body corporate, to a fine not exceeding $300,000.

    Compare: 1988 No 234 s 41Q

111 Offence of deceptive, misleading, or confusing advertisement

  • (1) A financial adviser commits an offence if an advertisement—

    • (a) contravenes section 28; and

    • (b) has been distributed to a person; and

    • (c) was—

      • (i) authorised or instigated by, or on behalf of, the adviser; or

      • (ii) prepared with the co-operation of, or by arrangement with, the adviser.

    (2) However, the adviser does not commit an offence under subsection (1) if the adviser proves that, at the time when the advertisement was distributed, the adviser believed on reasonable grounds that the advertisement was not deceptive, misleading, or confusing.

    (3) The defence in subsection (2) does not prevent the Commission from making a prohibition or corrective order under section 67 or a disclosure order under section 69, or the Court from granting an injunction under section 77, or making a corrective order under section 80 or a disclosure order under section 82.

    (4) A person who commits an offence under subsection (1) is liable on summary conviction to a fine not exceeding $300,000 and, if the offence is a continuing one, to a further fine not exceeding $10,000 for every day or part of a day during which the offence is continued.

    Compare: 1988 No 234 s 41R

112 Offence of recommending or receiving money in connection with offer of securities when subscription illegal

  • A financial adviser who contravenes section 29 commits an offence and is liable on summary conviction,—

    • (a) in the case of an individual, to a fine not exceeding $100,000; or

    • (b) in the case of a body corporate, to a fine not exceeding $300,000.

113 Offence of contravening requirement that financial adviser hold client’s money in separate trust account

  • A financial adviser who knowingly contravenes section 30(1) commits an offence and is liable on summary conviction,—

    • (a) in the case of an individual, to a fine not exceeding $100,000; or

    • (b) in the case of a body corporate, to a fine not exceeding $300,000.

114 Offence of breaching restrictions on use of client’s money or property

  • A financial adviser who knowingly contravenes section 32(1) commits an offence and is liable on summary conviction,—

    • (a) in the case of an individual, to a fine not exceeding $100,000; or

    • (b) in the case of a body corporate, to a fine not exceeding $300,000.

115 Offence of failing to account for client’s money or property

  • A financial adviser who knowingly contravenes section 33(1) commits an offence and is liable on summary conviction,—

    • (a) in the case of an individual, to a fine not exceeding $100,000; or

    • (b) in the case of a body corporate, to a fine not exceeding $300,000.

116 Offence in relation to records of client’s money or property

  • A financial adviser who knowingly contravenes any of section 34(1) to (3) commits an offence and is liable on summary conviction,—

    • (a) in the case of an individual, to a fine not exceeding $100,000; or

    • (b) in the case of a body corporate, to a fine not exceeding $300,000.

117 Offence of failing to comply with Commission’s orders

  • (1) A person who contravenes an order made by the Commission under subpart 1 of Part 4 commits an offence.

    (2) No person may be convicted of an offence against subsection (1) if—

    • (a) the person proves that the contravention occurred without the person’s knowledge or without the person’s knowledge of the order; or

    • (b) the contravention was in respect of matters that, in the Court’s opinion, were immaterial; or

    • (c) the Court thinks that the contravention, in the circumstances of the case, ought reasonably to be excused.

    (3) A person who commits an offence under this section is liable on summary conviction to a fine not exceeding $30,000.

    Compare: 1988 No 234 s 42J

118 Offence of contravening financial adviser banning order

  • A person who acts in contravention of a financial adviser banning order under section 99 commits an offence and is liable on conviction on indictment,—

    • (a) in the case of an individual, to imprisonment for a term not exceeding 3 years or to a fine not exceeding $100,000, or to both; or

    • (b) in the case of a body corporate, to a fine not exceeding $300,000.

    Compare: 1988 No 234 s 43M

119 Offence of contravening section 101 (automatic banning)

  • A person who acts in contravention of section 101 commits an offence and is liable on conviction on indictment,—

    • (a) in the case of an individual, to imprisonment for a term not exceeding 3 years or to a fine not exceeding $100,000, or to both; or

    • (b) in the case of a body corporate, to a fine not exceeding $300,000.

    Compare: 1988 No 234 s 43N(3)

120 Offence of contravening Court order under section 104 or 105

  • A person commits an offence who contravenes an order by the Court under section 104 or 105 that is applicable to the person and is liable on conviction on indictment,—

    • (a) in the case of an individual, to imprisonment for a term not exceeding 3 years or to a fine not exceeding $100,000, or to both; or

    • (b) in the case of a body corporate, to a fine not exceeding $300,000.

    Compare: 1988 No 234 s 43T

Subpart 5—General

121 Time for laying information for summary offences

  • (1) Any information for an offence against this Act punishable on summary conviction may be laid at any time within 3 years after the date of the offence.

    (2) Subsection (1) applies despite section 14 of, or anything else to the contrary in, the Summary Proceedings Act 1957.

    Compare: 1988 No 234 s 43U

122 Evidence not otherwise admissible

  • In the exercise of its jurisdiction under this Act, the Court may receive in evidence any statement, document, or information that would not be otherwise admissible that may in its opinion assist it to deal effectively with the matter.

    Compare: 1988 No 234 s 43V

123 Court may order payment of Commission’s costs

  • If the Commission brings proceedings under this Part and the Court makes any order against a person under this Part, the Court may also order that person to pay the Commission’s costs and expenses in bringing the proceedings.

    Compare: 1988 No 234 s 43W

124 Orders to secure compliance

  • The Court may, for the purpose of securing compliance with any other order it makes under this Part, direct a person to do or refrain from doing a specified act.

    Compare: 1988 No 234 s 43X

125 Giving notice of applications for Court orders

  • Before making an order under this Part, the Court may direct the person making the application for the order to—

    • (a) give notice of the application to those persons the Court thinks fit:

    • (b) publish notice of the application in the manner the Court thinks fit.

    Compare: 1988 No 234 s 43Y

126 General provisions as to Court’s orders

  • (1) An order under this Part may be made on the terms and conditions the Court thinks fit.

    (2) The Court may revoke, vary, or suspend an order made under this Part on the terms and conditions the Court thinks fit.

    Compare: 1988 No 234 s 43Z

127 Persons entitled to appear before Court

  • The following persons are entitled to appear and be heard at the hearing of an application to the Court under this Part:

    • (a) the applicant:

    • (b) a person who is alleged to have suffered, or to be likely to suffer, loss or damage because of an alleged contravention (whether that person or another person makes the allegation):

    • (c) the Commission:

    • (d) a person directed to be given notice of the application:

    • (e) with the leave of the Court, any other person.

    Compare: 1988 No 234 s 43ZA

128 Knowledge of matters presumed if employee or agent knows matters

  • In any proceedings under this Act, it is presumed, in the absence of proof to the contrary, that a person knew, at a material time, of any matter if, at that time, an employee or agent of that person knew of the matter in his or her capacity as employee or agent.

    Compare: 1988 No 234 s 43ZB

129 No pecuniary penalty and fine for same conduct

  • A person cannot be ordered to pay a pecuniary penalty and be liable for a fine under this Act for the same conduct.

    Compare: 1988 No 234 s 43ZC

Part 5
Miscellaneous

130 Regulations

  • (1) The Governor-General may, by Order in Council made on the recommendation of the Minister in accordance with subsection (3), make regulations—

    • (a) prescribing fees and charges to be paid for the purposes of this Act, or a means by which fees and charges may be calculated or ascertained:

    • (b) prescribing any further disclosure requirements (see section 12(1)(b)):

    • (c) permitting disclosure subsequent to performance of a financial adviser service (see section 12(3)):

    • (d) prescribing any further information that must be disclosed under section 18(1):

    • (e) prescribing the form or any further contents of the disclosure statement (see section 20(2)(e)):

    • (f) prescribing further information that must be submitted by a proposed professional body in its application for approval as an approved professional body (see section 37(2)(d)):

    • (g) prescribing the information that must be contained in an approved professional body’s list of current members (see section 50(2)(e)):

    • (h) prescribing the information and documents that must be contained in the annual report of an approved professional body (see section 63(2)):

    • (i) requiring a financial adviser who gives financial advice in relation to acquiring or disposing of (or not acquiring or disposing of) securities to—

      • (i) have a minimum level of professional indemnity insurance, and prescribing the amount of that minimum level; or

      • (ii) give an undertaking that the financial adviser has adequate professional indemnity insurance for the protection of the persons to whom the financial adviser gives financial advice:

    • (j) exempting (on terms and conditions, if any) any person or class or persons, any class of transactions, or any class of financial adviser service from any compliance with any financial advisers’ disclosure obligation or obligations or any other requirement of the Act:

    • (k) prescribing how information disclosed in a disclosure statement must be set out:

    • (l) prescribing a form for use as a disclosure statement:

    • (m) prescribing the procedure for the change by an approved professional body of its reporting year, and the terms and conditions on which the approved professional body may make the change:

    • (n) providing for any other matters contemplated by this Act, necessary for its administration, or necessary for giving it full effect.

    (2) Without limiting subsection (1)(a), regulations made under that paragraph may—

    • (a) prescribe fees and charges that the Commission may require to be paid to it—

      • (i) in connection with the exercise by the Commission of any power or function conferred on it by this Act:

      • (ii) on an application to the Commission to exercise any power or function conferred on it by or under this Act:

    • (b) authorise the Commission to require payment of any costs incurred by the Commission.

    (3) The Minister must consult with the Commission before making a recommendation under subsection (1).

131 Breach of exemption conditions

  • The breach of a term or condition of an exemption provided by regulations made under this Act or by notice under section 136 is a breach of the obligation for which the exemption applies.

    Compare: 1988 No 234 s 49E

132 Regulations or exemptions in respect of specified overseas jurisdictions

  • Without limiting section 130 or 136, exemptions under regulations made under section 130 or exemptions made under section 136 may extend to all, or classes of, persons, transactions, or other matters in relation to specified overseas jurisdictions.

    Compare: 1988 No 234 s 49F

133 No contracting out

  • The provisions of this Act have effect no matter what any agreement may say.

    Compare: 1988 No 234 s 41V

134 Territorial scope

  • (1) This Act applies to the performance of a financial adviser service for a person who is in New Zealand, regardless of—

    • (a) where any resulting financial decision by that person is implemented:

    • (b) where the financial adviser is resident, is incorporated, or carries on business.

    (2) For the purposes of this Act, financial advice is given, or an advertisement is made, to a person in New Zealand if the advice or the advertisement is received by a person in New Zealand, unless the financial adviser shows that it took all reasonable steps to ensure that members of the public in New Zealand do not receive the advice or the advertisement.

    (3) Section 25 applies to financial advice offered to, or the receipt or holding of client money or other client property on behalf of, or an advertisement made to a person outside New Zealand by a person who is resident, is incorporated, or carries on business in New Zealand.

    Compare: 1988 No 234 s 41U

135 No liability under Fair Trading Act 1986 if not liable under this Act

  • (1) A court hearing a proceeding brought against a person under the Fair Trading Act 1986 must not find that person liable for conduct that is regulated by this Act if that person would not be liable for that conduct under this Act.

    (2) Except as provided in subsection (1), nothing in this Act affects the liability of a person under any other law or enactment.

    Compare: 1988 No 234 s 41W

136 Commission may grant exemptions

  • The Commission may, in its discretion and on the terms and conditions (if any) that it thinks fit, by notice in the Gazette exempt—

    • (a) any person or class of persons, any transaction or class of transactions, or any class of financial advice (for example, financial advice given by telephone) from compliance with any financial advisers’ disclosure obligation or obligations; and

    • (b) any person from the requirement in section 10(1)(a) of membership of an approved professional body before financial advice is given to a member of the public.

137 Commission must notify reasons for exemption

  • (1) The Commission’s reasons for granting an exemption (including why the exemption is appropriate) must be notified in the Gazette together with the exemption.

    (2) However, the Commission may defer notifying or not notify the reasons for granting an exemption if the Commission is satisfied that it is proper to do so on the ground of commercial confidentiality.

    Compare: 1988 No 234 s 48A

138 Commission may vary or revoke exemption

  • (1) The Commission may vary the exemption in the same way as it may grant the exemption under section 136.

    (2) The Commission may revoke the exemption by notice in the Gazette.

    Compare: 1988 No 234 s 48B

139 Commission may exercise powers under Securities Act 1978

  • (1) The Commission may exercise any of its powers under the Securities Act 1978 in performing its functions under this Act.

    (2) Part 3 of the Securities Act 1978 applies to—

    • (a) to the exercise by the Commission of any of its powers under the Securities Act 1978 in the performance of its functions under this Act; and

    • (b) the exercise of its powers under section 64.

    Compare: 1988 No 234 s 44

140 Amendments to Securities Act 1978

  • (1) This section amends the Securities Act 1978 as amended by the Securities Markets Amendment Act 2006.

    (2) Section 10(1) is amended by inserting the following paragraph after paragraph (cab):

    • “(cac) to keep under review practices and activities of financial advisers and approved professional bodies, and to comment on those practices and activities to any appropriate body; and”.

    (3) Section 10(1)(b) is amended by inserting “financial advisers,” after “securities,” in the first place where it appears.

    (4) Section 10(1)(d) is amended by inserting “and the law and practice relating to financial advisers” after “securities”.

    (5) Section 69L(1) is amended by inserting the following paragraph after paragraph (i):

    • “(ia) at a meeting for the purposes of section 71 of the Financial Advisers Act 2007, the persons to whom notice of the order must be given under that section:”.

    (6) Schedule 1 is amended by omitting the item “Securities Markets Act 1988 Part 4” and substituting the item “Financial Advisers Act 2007”.

141 Amendments to the Securities Markets Act 1988

  • (1) This section amends the Securities Markets Act 1988 as amended by the Securities Markets Amendment Act 2006.

    (2) Section 2(1) is amended by repealing the following definitions: advertisement, advice advertisement, broker advertisement, investment advice and advice, investment adviser and adviser, investment advisers’ disclosure obligations and investment advisers’ obligations, investment broker and broker, investment brokers’ disclosure obligations and investment brokers’ obligations, investment brokers service, investment money and money, and investment property and property.

    (3) Paragraph (e) of the definition of security in section 2(1) is repealed.

    (4) Part 4 is repealed.

    (5) Sections 42B(d), 42D, 42E, 42G(3)(b), 42N(b), 42P(c), 42S(f), 42T(2)(b), 42ZC, 42ZD, 43D, 43E(1)(a), 43E(3)(a) and (b), 43K, 43L, 43M, and 43N are repealed.

    (6) Sections 48(1)(c) and 49C are repealed.

142 Transitional provision for existing offences and contravention under Securities Markets Act 1988

  • (1) This section applies to an offence committed under, or a contravention of, the Securities Markets Act 1988 before section 141 comes into force.

    (2) The Securities Markets Act 1988 continues to have effect as if it had not been amended by this Act for the purpose of—

    • (a) investigating an offence or contravention to which this section applies:

    • (b) commencing or completing proceedings for an offence or contravention to which this section applies:

    • (c) imposing a penalty or other remedy, or making an order, in relation to an offence or contravention to which this section applies.

Part 1
Preliminary provisions

3 Purpose of Act

  • The purpose of this Act is to promote the sound and efficient delivery of financial advice, and to encourage public confidence in the professionalism and integrity of financial advisers, by—

    • (a) requiring disclosure by financial advisers, so ensuring that investors and consumers can make informed decisions about whether to use a financial adviser and whether to follow a financial adviser’s advice; and

    • (b) requiring competency of financial advisers, so ensuring that there are available to investors and consumers financial advisers who have the experience, expertise, and integrity to match effectively a person to a financial product that best meets that person’s need and risk profile; and

    • (c) ensuring that financial advisers are held accountable for any financial advice that they give and there are incentives for financial advisers to manage appropriately conflicts of interest.

4 Overview of Act

  • This Act is divided into 5 Parts which are—

    • (a) Part 1 (Preliminary provisions):

    • (b) Part 2 (Financial advisers and their disclosure and conduct obligations):

    • (c) Part 3 (Authorised financial advisers and qualifying financial entities):

    • (d) Part 4 (How financial advisers are regulated):

    • (e) Part 5 (General provisions).

5 Interpretation

  • In this Act, unless the context otherwise requires,—

    advertisement means a form of communication that—

    • (a) refers to a financial adviser or financial adviser service or is reasonably likely to induce persons to seek a financial adviser service; and

    • (b) is authorised or instigated by, or on behalf of, a financial adviser or QFE or prepared with the co-operation of, or by arrangement with, a financial adviser or QFE; and

    • (c) is to be, or has been, distributed to a person

    approved dispute resolution scheme has the same meaning as in section 4 of the FSP Act

    authorised means authorised by the Commission under section 52

    authorised advertisement has the same meaning as in section 38 of the Securities Act 1978

    authorised financial adviser means a person described in section 48

    bank in New Zealand means a registered bank that carries on in New Zealand the business of banking

    bank term deposit means a fixed term deposit product offered by a registered bank in New Zealand

    business includes any profession, trade, or undertaking, whether or not carried on with the intention of making a profit

    call debt security has the meaning given to it in the regulations

    category 1 product means—

    • (a) a security (other than a security that is a category 2 product); or

    • (b) any estate or interest in land for which a separate certificate of title can be issued under the Land Transfer Act 1952 or the Unit Titles Act 1972; or

    • (c) a futures contract; or

    • (d) any other product specified by the regulations

    category 2 product means—

    • (a) a call debt security; or

    • (b) a bank term deposit; or

    • (c) an insurance product that is not a security; or

    • (d) a consumer credit contract as defined in section 11 of the Credit Contracts and Consumer Finance Act 2003; or

    • (e) any other product specified by the regulations

    chartered accountant has the same meaning as in section 2 of the Institute of Chartered Accountants of New Zealand Act 1996

    client means a person for whom a financial adviser service is performed

    code means the code of professional conduct brought into force under section 90

    college of education has the same meaning as in section 159 of the Education Act 1989

    Commission means the Securities Commission established under the Securities Act 1978

    Commissioner for Financial Advisers or Commissioner means the person appointed under section 76(3)

    conduct obligation means an obligation described in section 31

    Crown organisation has the same meaning as in section 6 of the Lawyers and Conveyancers Act 2006

    director means a director as defined in section 126 of the Companies Act 1993

    disclosure obligation means the obligation described in section 20

    dispose of includes—

    • (a) dispose of by allotting, withdrawing from, or terminating; and

    • (b) agree to dispose of

    document means—

    • (a) any material, whether or not it is signed or otherwise authenticated, that bears symbols (including words and figures), images, or sounds from which symbols, images, or sounds can be derived, and includes—

      • (i) a label, marking, or other writing that identifies or describes a thing of which it forms part, or to which it is attached:

      • (ii) a book, map, plan, graph, or drawing:

      • (iii) a photograph, film, or negative; or

    • (b) information electronically recorded or stored, and information derived from that information

    entity does not include an individual

    financial adviser has the meaning set out in section 8

    financial adviser obligation means an obligation of a financial adviser under this Act, the regulations, or the code

    financial adviser service has the meaning set out in section 10

    financial planning service means a service that analyses an individual's current financial situation, identifies his or her financial goals, and develops financial options for realising those goals

    financial product means a category 1 product or a category 2 product

    FSP Act means the Financial Service Providers (Registration and Dispute Resolution) Act 2008

    futures contract has the same meaning as in section 37(1) of the Securities Markets Act 1988

    general education system has the same meaning as in section 120 of the Education Act 1989

    individual means a natural person

    investment statement has the same meaning as in section 38C of the Securities Act 1978

    investment transaction means the receipt, handling, payment, or investment of money or other property by one person on behalf of another person in relation to acquiring or disposing of a financial product

    lawyer has the same meaning as in section 6 of the Lawyers and Conveyancers Act 2006

    lecturer means a person who is employed by a university, polytechnic, or college of education to teach or instruct students of the university, polytechnic, or college of education

    licensed service has the same meaning as in section 4 of the FSP Act

    Minister means the Minister of the Crown who, under the authority of any warrant or with the authority of the Prime Minister, is for the time being responsible for the administration of this Act

    Ministry means the department of State that, with the authority of the Prime Minister, is for the time being responsible for the administration of this Act

    overseas regulator means a body in another country with functions corresponding to those of the Commission under this Act

    polytechnic has the same meaning as in section 159(1) of the Education Act 1989

    prescribed means prescribed by regulations made under this Act

    principal officer means a director or a person who occupies a position equivalent to that of a director (such as a trustee or partner)

    prospectus has the same meaning as in section 2(1) of the Securities Act 1978

    qualifying financial entity or QFE means an entity described in section 60

    real estate agent means a person who is a licensee under the Real Estate Agents Act 2008

    record includes—

    • (a) any file, register, ledger, book of account, or passbook, and any reproduction or copy of them or any entry in any of them; and

    • (b) any apparatus or equipment in or on which information is recorded, stored, or embodied in any form so as to be capable of being retrieved, reproduced, or processed by any means; and

    • (c) any material by means of which information is supplied to, or derived from, any such apparatus or equipment

    register means the register of financial service providers maintained under the FSP Act

    registered means registered under the FSP Act and registration has a corresponding meaning

    registered bank has the same meaning as in section 2(1) of the Reserve Bank of New Zealand Act 1989

    Registrar means the Registrar of Financial Service Providers

    regulations means regulations made under this Act

    related company has the same meaning as in section 2(3) of the Companies Act 1993

    security—

    • (a) means—

      • (i) any interest in, or right to participate in, any capital, assets, earnings, royalties, or other properties of any person:

      • (ii) any interest in, or right to be paid, money that is, or is to be, deposited with, lent to, or otherwise owing by any person (whether or not the interest or right is secured by a charge over any property):

      • (iii) any renewal or variation of the terms or conditions of any existing security; but

    • (b) does not include a security exempted from Part 2 of the Securities Act 1978 under any of paragraphs (b) to (h) of section 5(1) of that Act

    State services has the meaning given to it in section 2 of the State Sector Act 1988

    State services employee means an employee or chief executive in any part of the State services, whether paid by salary, wages, or otherwise

    Takeovers Code means the takeovers code in force under the Takeovers Act 1993

    tax agent has the same meaning as in section 3(1) of the Tax Administration Act 1994

    teacher means a person in a teaching position in the general education system

    teaching position has the same meaning as in section 120 of the Education Act 1989

    trust account means, in relation to an authorised financial adviser, any trust account at a bank in New Zealand that is—

    • (a) a trust account in the name of the financial adviser; or

    • (b) if the financial adviser is the employee or agent of another person (A) and performs a financial adviser service in the course of A's business, a trust account in A's name or the name of the financial adviser

    trust account records—

    • (a) means records relating to a trust account; and

    • (b) includes any information that relates to a trust account and that is recorded or stored by means of any tape recorder, computer, or other device, and any material subsequently derived from information so recorded or stored

    university has the same meaning as in section 159 of the Education Act 1989.

6 Act binds the Crown

  • This Act binds the Crown.

Part 2
Financial advisers and their disclosure and conduct obligations

7 Outline of this Part

  • (1) This Part is divided into 2 subparts.

    (2) Subpart 1 defines who financial advisers are, defines what is a financial adviser service and what is financial advice, and sets out who is permitted to perform a financial adviser service.

    (3) Subpart 2 describes the obligations of a financial adviser under this Act: to make disclosure and comply with conduct obligations.

Subpart 1—Who are financial advisers and what they can do

8 Who is financial adviser

  • A financial adviser is an individual who performs a financial adviser service for the purposes of this Act.

9 Types of financial adviser

  • Under this Act there are 3 types of financial adviser:

    • (a) a financial adviser who is authorised and registered (an authorised financial adviser: see section 48); and

    • (b) a financial adviser who is registered but who is not authorised; and

    • (c) a financial adviser who is neither authorised nor registered but who is an employee or agent of a qualifying financial entity (a QFE: see section 60).

10 What is financial adviser service

  • A person (A) performs a financial adviser service if, in the course of business, A—

    • (a) gives financial advice; or

    • (b) makes an investment transaction; or

    • (c) provides a financial planning service.

11 When person gives financial advice

  • A person (A) gives financial advice (and so performs a financial adviser service) if A makes a recommendation or gives an opinion or guidance in relation to acquiring or disposing of (including refraining from acquiring or disposing of) a financial product.

12 When advice or transaction by certain persons is not performing financial adviser service

  • A person does not perform a financial adviser service in the following cases:

    • (a) a teacher, lecturer, journalist, or State Services employee giving advice in the course of that occupation; or

    • (b) a Minister of the Crown giving advice in the course of his or her duties as a Minister of the Crown; or

    • (c) a member of Parliament giving advice in the course of his or her duties as a member of Parliament; or

    • (d) a lawyer giving advice or making an investment transaction in the course of his or her professional practice as a lawyer if the advice or transaction is a necessary incident of legal practice; or

    • (e) a chartered accountant giving advice or making an investment transaction in the course of his or her professional practice as a chartered accountant if the advice or transaction is a necessary incident of professional accounting practice; or

    • (f) a tax agent giving advice or making an investment transaction in the course of his or her professional practice as a tax agent if the advice or transaction is a necessary incident of professional tax agency; or

    • (g) a real estate agent giving advice or making an investment transaction in the course of his or her occupation as a real estate agent if the advice or transaction is a necessary incident of working as a real estate agent; or

    • (h) a member of the board of a Crown entity under the Crown Entities Act 2004 giving advice in the course of his or her duties as a member of the board and in accordance with the Crown Entities Act 2004 and the Crown entity’s own Act; or

    • (i) a Crown organisation giving advice or making an investment transaction or providing a financial planning service in the course of its functions; or

    • (j) the Reserve Bank of New Zealand (the Reserve Bank), a member of the board of the Reserve Bank, or an employee of the Reserve Bank, giving advice or making an investment transaction in the course of the functions of the Reserve Bank; or

    • (k) a person providing free budgetary advice as part of a budgetary advice service offered by a non-profit organisation; or

    • (l) an employee giving advice to, or making an investment transaction on behalf of, his or her employer in the course of his or her employment; or

    • (m) an employer giving information to an employee that is required by the KiwiSaver Act 2006 to be provided to that employee; or

    • (n) a company giving advice to, or making an investment transaction on behalf of, a related company; or

    • (o) the offeror or target company giving advice in the course of a takeover offer made under the Takeovers Code; or

    • (p) an independent adviser giving advice in the exercise of that person’s functions under the Takeovers Code; or

    • (q) a person giving general commentary relating to a financial market if that commentary is not directed to a specific person or persons; or

    • (r) a person giving advice or making an investment transaction or providing a financial planning service if that person is not a financial service provider to whom the FSP Act applies; or

    • (s) any other person or class of persons specified in the regulations giving advice or making an investment transaction or providing a financial planning service in circumstances specified in the regulations.

13 Meaning of financial advice clarified

  • (1) Financial advice does not include anything contained in—

    • (a) a prospectus; or

    • (b) an investment statement; or

    • (c) an authorised advertisement; or

    • (d) a bank disclosure statement; or

    • (e) a document or documents issued in lieu of a prospectus or investment statement in accordance with an exemption under the Securities Act 1978; or

    • (f) a disclosure statement that is required under the Credit Contracts and Consumer Finance Act 2003.

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

    (3) For the avoidance of doubt, the provision of information, whether orally or in writing, is not financial advice unless accompanied by a recommendation, an opinion, or guidance.

Restriction on performing financial adviser service

14 Who may perform financial adviser service

  • Only the persons described in sections 15 to 17 may perform a financial adviser service.

15 Individual who is authorised financial adviser

  • An individual who is an authorised financial adviser may—

    • (a) give financial advice in relation to a category 1 product; or

    • (b) make an investment transaction in relation to a category 1 product; or

    • (c) provide a financial planning service.

16 Individual who is registered

  • An individual who is registered may—

    • (a) give financial advice in relation to a category 2 product; or

    • (b) make an investment transaction in relation to a category 2 product.

17 Individual who is QFE employee or agent

  • An individual (whether registered or not) who is an employee or agent of a qualified financial entity (the QFE) may, in the course of the QFE’s business,—

    • (a) give financial advice in relation to a category 2 product; or

    • (b) make an investment transaction in relation to a category 2 product.

18 Employer or principal of financial adviser must be registered

  • (1) This section applies where one person (A) employs another person (B) as employee or agent to perform a financial adviser service in the course of A’s business for A’s client or clients (the financial adviser service).

    (2) In any case to which this section applies,—

    • (a) A must maintain registration for the duration of B’s employment or agency; and

    • (b) B must not perform the financial adviser service if B knows or ought to know that A is not currently registered.

    (3) A person who contravenes subsection (2) commits an offence (see section 111).

19 Client’s rights preserved against employer or principal of financial adviser

  • Nothing in this Act affects the rights of a person for whom a financial adviser performs a financial adviser service against the employer or principal of the financial adviser.

Subpart 2—Financial advisers’ disclosure and conduct obligations

Disclosure obligations

20 What is disclosure obligation

  • A disclosure obligation is an obligation to make disclosure under or in accordance with sections 21 to 30.

21 Financial adviser must make disclosure before performing financial adviser service

  • Subject to section 25, a financial adviser who performs a financial adviser service must make disclosure, in accordance with this Act and the regulations, to the person for whom the financial adviser service is performed before (or, if not practicable before, as soon as practicable after) performing the financial adviser service.

22 Disclosure by authorised financial adviser

  • (1) An authorised financial adviser must disclose the information prescribed by regulations.

    (2) For the purposes of this section, regulations may prescribe disclosure in relation to any or all of the following matters:

    • (a) professional or business experience relevant to performance of a financial adviser service:

    • (b) criminal convictions:

    • (c) disciplinary proceedings:

    • (d) adverse findings by a court or the Commission:

    • (e) bankruptcy or other insolvency proceedings:

    • (f) fees:

    • (g) material interests, relationships, or associations:

    • (h) remuneration:

    • (i) financial products in relation to which a financial adviser service is performed:

    • (j) procedures for handling a client’s money or other property:

    • (k) indemnity insurance:

    • (l) dispute resolution arrangements:

    • (m) location of business premises:

    • (n) matters required to be disclosed by the financial adviser’s terms and conditions of authorisation.

23 How disclosure must be made by authorised financial adviser

  • (1) Disclosure by an authorised financial adviser must be made in a disclosure statement.

    (2) The disclosure statement must—

    • (a) be in writing; and

    • (b) state when it was prepared; and

    • (c) state the name, address, and business telephone number of the financial adviser; and

    • (d) be either received by the client, or delivered or sent to the client, at the client’s last known address or an address (including an electronic address) specified by the client for this purpose; and

    • (e) comply with regulations prescribing the form of the statement.

    (3) Subject to subsection (2), regulations may prescribe the form of the statement.

24 Disclosure by financial adviser performing financial adviser service in relation to category 2 product

  • (1) Subject to section 25, a financial adviser who performs a financial adviser service in relation to a category 2 product must disclose the information prescribed by regulations.

    (2) For the purposes of this section, regulations may prescribe disclosure in relation to all or any of the following matters:

    • (a) the status of the financial adviser, for example, whether the financial adviser is authorised or not:

    • (b) dispute resolution arrangements:

    • (c) location of business premises:

    • (d) telephone, email, and fax details.

    (3) Regulations may prescribe the form of disclosure.

25 Disclosure by qualifying financial entity

  • (1) This section applies if a financial adviser (A)—

    • (a) is an employee or agent of a QFE; and

    • (b) performs a financial adviser service in relation to a category 2 product in the course of the QFE’s business (the financial adviser service).

    (2) In any case to which this section applies,—

    • (a) before (or, if not practicable before, as soon as practicable after) A performs the financial adviser service, the QFE must disclose the information prescribed by regulations to the person for whom the financial adviser service is performed; and

    • (b) A has no obligation of disclosure.

    (3) For the purposes of this section, regulations may prescribe disclosure in relation to any or all of the following matters:

    • (a) the QFE’s dispute resolution arrangements:

    • (b) matters required to be disclosed by the QFE’s terms and conditions of grant of QFE status:

    • (c) whether the QFE provides any other licensed service.

    (4) Regulations may prescribe the form of disclosure.

26 Disclosure must not be misleading, deceptive, or confusing

  • Disclosure under a disclosure obligation must not be misleading, deceptive, or confusing at the time that the disclosure is made.

27 Disclosure of additional information

  • (1) Disclosure of the matters that must be disclosed under a disclosure obligation may be accompanied by disclosure of additional information.

    (2) Additional disclosure that accompanies disclosure under a disclosure obligation must not be deceptive, misleading, or confusing at the time that it is made.

28 No compliance with disclosure obligations if disclosure out of date

  • (1) Previous disclosure does not discharge a person’s disclosure obligation if the previous disclosure is out of date when the financial adviser service is performed.

    (2) The previous disclosure is out of date if—

    • (a) since the date of the disclosure there has been a material change in any matter that must be disclosed; and

    • (b) a reasonable person in the position of the person for whom the financial adviser service is performed (A) would consider that the change would materially affect any of the following decisions by A:

      • (i) to proceed with a financial adviser service by the financial adviser in question (B):

      • (ii) to proceed with financial advice already given by B:

      • (iii) about the weight that A gives to financial advice by B:

      • (iv) to postpone or countermand the performance of a financial adviser service.

    (3) Subsection (1) does not apply if—

    • (a) the previous disclosure was by way of a disclosure statement; and

    • (b) before the financial adviser service is performed, B gives A—

      • (i) a new disclosure statement that is up to date; or

      • (ii) additional written information that, when read with the original disclosure statement, updates the disclosure statement.

29 Advertisement advertising financial adviser services by authorised financial adviser must refer to disclosure statement

  • Any advertisement advertising financial adviser services by an authorised financial adviser must state that a disclosure statement is available, on request and free of charge.

30 Disclosure by 2 or more financial advisers in joint disclosure statement

  • (1) Subject to regulations being made under subsection (3), disclosure may be made by 2 or more financial advisers in a joint disclosure statement.

    (2) A joint disclosure statement must—

    • (a) comply with section 23(2)(a) to (c); and

    • (b) comply with regulations prescribing the form of the joint disclosure statement; and

    • (c) be either received by the client, or delivered or sent to the client, at the client's last known address or an address (including an electronic address) specified by the client for this purpose.

    (3) Regulations may prescribe—

    • (a) when, and subject to what terms and conditions, disclosure may be made in a joint disclosure statement; and

    • (b) the form of a joint disclosure statement.

Conduct obligations

31 What is conduct obligation

  • A conduct obligation is an obligation under sections 32 to 46.

Conduct obligations that apply to all financial advisers

32 Financial adviser must exercise care, diligence, and skill

  • A financial adviser, when performing a financial adviser service, must exercise the care, diligence, and skill that a reasonable financial adviser would exercise in the same circumstances, taking into account, but without limitation, the nature and requirements of the financial adviser’s client and the nature of the service performed for the client.

33 Financial adviser must not engage in misleading or deceptive conduct

  • (1) A financial adviser must not engage in conduct in relation to the performance of a financial adviser service that is misleading or deceptive or likely to mislead or deceive.

    (2) A person who knowingly or recklessly contravenes subsection (1) commits an offence (see section 113).

    Compare: 1988 No 234 s 13(1)

34 Advertisement by financial adviser must not be misleading, deceptive, or confusing

  • (1) A financial adviser must not advertise a financial adviser service in a way that is misleading, deceptive, or confusing.

    (2) A person who knowingly or recklessly contravenes subsection (1) commits an offence (see section 114).

Conduct obligations that apply to authorised financial advisers only

35 Authorised financial adviser must comply with code

  • An authorised financial adviser must comply with the code.

36 Authorised financial adviser must not recommend or receive money for acquisition of securities if offer for subscription illegal

  • (1) An authorised financial adviser (A) must not recommend to a person that that person acquire securities, and must not receive money from a person in respect of the acquisition of securities, if—

    • (a) when the securities were or are offered for subscription, the offer was or is illegal; and

    • (b) the illegality has not been remedied; and

    • (c) A knows or ought to know that, when the securities were or are offered for subscription, the offer was or is illegal.

    (2) A person who contravenes subsection (1) commits an offence (see section 115).

    Compare: 1988 No 234 s 41S

37 Authorised financial adviser must pay client’s money into separate trust account

  • (1) An authorised financial adviser who receives money on behalf of a client receives the money on trust and must ensure that the money is paid promptly into a separate trust account held with a bank in New Zealand.

    (2) A person who contravenes subsection (1) commits an offence (see section 116).

    Compare: 2006 No 1 s 110(1)

38 Authorised financial adviser must account for client’s money or property

  • (1) An authorised financial adviser who receives or holds the money or other property of a client on trust must account properly, or ensure that account is properly made, to the client for that money or property.

    (2) A person who contravenes subsection (1) commits an offence (see section 117).

39 Authorised financial adviser must keep records of client’s money and other property

  • (1) An authorised financial adviser who receives or holds on trust the money of a client must keep, or ensure that there are kept, trust account records that disclose clearly the position of the money in the trust account.

    (2) An authorised financial adviser who receives or holds on trust the property of a client other than money must keep, or ensure that there are kept, records that—

    • (a) identify the property; and

    • (b) show the date when the property was received; and

    • (c) if the property has been disposed of, show when the property was disposed of and to whom.

    (3) An authorised financial adviser must keep the records required by this section, or ensure that they are kept, in a manner that enables those records to be conveniently and properly audited or inspected.

    (4) A person who contravenes any of subsections (1) to (3) commits an offence (see section 118).

    Compare: 2006 No 1 s 112(1)

40 Restrictions on use of client’s money or property

  • (1) A person must not use or apply money or other property received or held on trust for a client by an authorised financial adviser in any way except—

    • (a) as expressly directed by the client in writing; or

    • (b) in accordance with section 37.

    (2) A person who contravenes subsection (1) commits an offence (see section 119).

41 Protection of client’s money or property held on trust

  • The money or other property of a client that is received or held by an authorised financial adviser on trust—

    • (a) must not be used to pay the debts of any other creditor of the authorised financial adviser or of the authorised financial adviser's employer or principal; and

    • (b) must not be attached or taken in execution under the order or process of any court at the instance of another creditor of the authorised financial adviser or of the authorised financial adviser's employer or principal.

    Compare: 2006 No 1 s 113(1)

42 Meaning of received or held

  • For the purposes of this Part, money or property is deemed to be received or held by an authorised financial adviser (A) if it is held or received by A's employer or principal (B) in relation to a financial adviser service performed by A in the course of B's business.

43 Authorised financial adviser must comply with terms and conditions of his or her authorisation

  • (1) An authorised financial adviser must comply with the terms and conditions of his or her authorisation.

    (2) A person who contravenes subsection (1) commits an offence (see section 120).

Conduct obligations that apply to QFEs only

44 QFE must comply with terms and conditions of grant of QFE status

  • (1) Every QFE must comply with the terms and conditions of the grant of its QFE status.

    (2) A person who contravenes subsection (1) commits an offence (see section 123).

45 QFE must not engage in misleading or deceptive conduct in relation to financial adviser service by employee or agent

  • (1) A QFE must not engage in conduct in relation to a financial adviser service by its employee or agent that is misleading or deceptive or likely to mislead or deceive.

    (2) A person who knowingly or recklessly contravenes subsection (1) commits an offence (see section 124).

46 Advertisement by QFE of financial adviser service must not be misleading, deceptive, or confusing

  • (1) A QFE must not advertise a financial adviser service in a way that is misleading, deceptive, or confusing.

    (2) A person who knowingly or recklessly contravenes subsection (1) commits an offence (see section 125).

Part 3
Authorised financial advisers and qualifying financial entities

47 Outline of this Part

  • (1) This Part is divided into 2 subparts.

    (2) Subpart 1 describes who is an authorised financial adviser, how a person is authorised, and the powers of the Commission in relation to an authorised financial adviser.

    (3) Subpart 2 describes what is a qualifying financial entity (a QFE), how an entity achieves QFE status, and the powers of the Commission in relation to a QFE.

Subpart 1—Authorised financial advisers

48 Who is authorised financial adviser

  • An authorised financial adviser is an individual who is—

    • (a) registered; and

    • (b) authorised.

49 Who may apply to be authorised

  • Any individual may apply to the Commission to be authorised.

50 Application to be authorised

  • An application to be authorised must be—

    • (a) in the prescribed form (if any); and

    • (b) accompanied by the prescribed fee (if any).

51 Eligibility to be authorised

  • A person (A) is eligible to be authorised if—

    • (a) the Commission is satisfied that—

      • (i) A is registered or entitled to be registered; and

      • (ii) A is a person of good character; and

      • (iii) A meets the levels of competency, knowledge, and skills specified in the code for an authorised financial adviser; and

      • (iv) A is not debarred from applying for authorisation; and

    • (b) the Commission—

      • (i) is not aware, after due inquiry, that A has been convicted by a court in New Zealand or elsewhere of an offence punishable by imprisonment for a term of 6 months or more; or

      • (ii) if the Commission is so aware, is satisfied that the commission of the offence does not reflect adversely on A’s fitness to act as an authorised financial adviser.

52 Commission must approve or decline application for authorisation

  • (1) If an applicant for authorisation is eligible, the Commission must authorise that person in respect of 1 or more of the following for a specified period:

    • (a) performing a financial adviser service in relation to a category 1 product:

    • (b) making an investment transaction in relation to a category 1 product:

    • (c) providing a financial planning service.

    (2) The authorisation may be subject to terms and conditions.

    (3) If the Commission approves the application, the Commission must notify the applicant in writing of—

    • (a) the authorisation; and

    • (b) the terms and conditions (if any); and

    • (c) the period of authorisation.

    (4) If an applicant for authorisation is not eligible, the Commission must—

    • (a) decline the application; and

    • (b) notify the applicant in writing—

      • (i) of the decision and the reasons for it; and

      • (ii) of the applicant’s right of appeal against the decision.

53 Commission must notify Registrar of authorisation

  • (1) If the Commission authorises the applicant, the Commission must notify the Registrar in writing of—

    • (a) the name and business address of the applicant; and

    • (b) the terms and conditions (if any) of the authorisation; and

    • (c) the period of authorisation.

    (2) The Commission may publicly notify the authorisation and the other matters referred to in subsection (1) as it thinks fit.

54 Termination of authorisation

  • (1) A person’s authorisation as an authorised financial adviser terminates when—

    • (a) the period of authorisation (including any extension under section 55(5)) expires; or

    • (b) the Commission receives a written request from the person requesting the Commission to cancel his or her authorisation; or

    • (c) the person ceases to be registered; or

    • (d) the Commission cancels his or her authorisation under section 56(2).

    (2) The Commission must notify the Registrar in writing of termination of authorisation under subsection (1)(a), (b), or (d).

55 Renewal of authorisation

  • (1) An authorised financial adviser may apply for renewal of authorisation.

    (2) An application for renewal of authorisation must be—

    • (a) made in the prescribed form (if any); and

    • (b) accompanied by the prescribed fee (if any).

    (3) Subject to subsection (4), sections 49 to 53 apply, with any necessary modifications, to an application for renewal of authorisation.

    (4) In addition to the matters specified in section 51, the Commission must be satisfied that the applicant for renewal has complied with the minimum professional standards for authorised financial advisers prescribed by the code.

    (5) If an application for renewal of authorisation has been made but not determined before the date on which the authorisation is due to expire, the authorisation continues in force until the application is determined.

    (6) The renewal of authorisation takes effect from the date of expiry of the previous authorisation.

Commission’s powers in relation to default by authorised financial adviser

56 Commission’s powers in relation to default by authorised financial adviser

  • (1) This section applies if the Commission is satisfied that an authorised financial adviser (A)—

    • (a) has ceased to be eligible for authorisation; or

    • (b) has breached or is in breach of this Act (excluding section 35) or the regulations; or

    • (c) has breached or is in breach of a term or condition of his or her authorisation; or

    • (d) is the subject of a recommendation by the disciplinary committee under section 97(3)(a), (b), or (c); or

    • (e) has failed to pay a fee or levy as required by this Act or the regulations.

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