Hon Simon Power
Government Bill
109—2
As reported from the Commerce Committee
Commentary
Key
1 Title
2 Commencement
Part 1Amendments to Financial Advisers Act 2008
3 Commencement of provisions of principal Act
4 Principal Act amended
5 Purpose
5A Purpose of Act
5B Overview of Act
6 Interpretation
6A New sections 5A to 5H inserted
5A Who are clients
5B Who are retail clients
5C Who are wholesale clients
5D Who is eligible investor
5E Acceptance of certification
5F How to opt out of being wholesale client
5G Meaning of acting “on behalf of B's business” and “acting through A”
“on behalf of B's business”
“acting through A”
5H Territorial scope
7 Types of financial adviser
8 When advice or transaction by certain persons is not performing financial adviser service
9 Meaning of financial advice clarified
10 New heading and sections 17 to 19 substituted
17 Individual who is QFE employee or nominated representative
Provisions relating to employers or principals of financial advisers
18 Employers or principals of financial advisers must be registered
19 Certain employees and nominated representatives exempted from joining approved dispute resolution scheme
7 New section 7 and subparts 1 and 1A of Part 2 substituted
7 Outline
Subpart 1—Key definitions for financial adviser services
What are financial adviser services
8 Who is financial adviser
9 What is financial adviser service
10 When person gives financial advice
11 When person provides investment planning service
12 When person provides discretionary investment management service
13 Exemption for incidental service
14 Other exemptions
When financial adviser service is personalised service or class service
15 When financial adviser service is personalised service or class service
Subpart 1A—Restrictions on providing financial adviser services
16 Types of financial adviser
Restrictions on providing financial adviser services
17 Who may provide financial adviser service
18 Who is permitted to provide personalised service to retail clients
19 Who is permitted to provide class service to retail clients
20 Who may provide financial adviser service to wholesale clients
Restrictions on holding out
20A Who may hold themselves out as authorised financial adviser
20B Who may hold themselves out as financial planner or investment planner
20C Who may hold themselves out as QFE or having QFE status
Persons acting in course of business of employers and principals
20D Who must be member of dispute resolution scheme
20E Obligation to cease providing if employer or principal not permitted to provide
20F Who is responsible for financial adviser obligations
11 Disclosure by qualifying financial entity
11 New heading and sections 21 to 25 substituted
Disclosure obligations for personalised services for retail clients
21 What is disclosure obligation and when does it apply
22 Financial adviser must make disclosure before providing personalised service to retail client
23 What financial adviser must disclose
24 Disclosure statement
25 Disclosure by QFE
11A New sections 32 and 33 substituted
32 What is conduct obligation and when does it apply
33 Financial adviser must exercise care, diligence, and skill
11B Financial adviser must not engage in misleading or deceptive conduct
12 Restriction on use of term sharebroker
12 New section 36 substituted
36 Regulations may impose specific conduct obligations for class retail services
12A Authorised financial adviser must not recommend or receive money for acquisition of securities if offer for subscription illegal
12B Sections 39 to 44 repealed
12C New section 45A inserted
45A Authorised financial adviser must report breach of Act to Commission
13 QFE must not engage in misleading or deceptive conduct in relation to financial adviser service by employee or agent
13 New heading and sections 46 to 48 substituted
Conduct obligations related to QFEs
46 QFE must comply with terms and conditions of grant of QFE status
47 QFE or member of QFE group must not engage in misleading or deceptive conduct in relation to financial adviser service by employee, agent, or nominated representative
48 Advertisement by QFE or member of QFE group in relation to financial adviser service must not be misleading, deceptive, or confusing
13A Eligibility to be authorised
13B New sections 55 and 55A substituted
55 Commission must approve or decline application for authorisation
55A Variation of terms and conditions and period of authorisation
13C Renewal of authorisation
13D New section 59A inserted
59A Commission's power to ban financial adviser who is registered but not authorised
13E Reasonable opportunity to be heard
14 Application for QFE status
15 New section 68A inserted
68A Nominated representatives of QFEs
14 New sections 63 to 77 substituted
63 What is qualifying financial entity (QFE)
64 Who may apply for QFE status
65 Application for QFE status
66 Eligibility for QFE status
67 Commission must approve or decline application for QFE status
68 Determination of application
69 Name of QFE group
70 Commission must notify Registrar of grant of QFE status
71 Addition of associated entities
72 Termination of status of associated entity
73 Certification of QFE group
74 Nominated representatives of QFEs or partner entities
75 Variation of terms and conditions and period of grant of QFE status
75A Termination of QFE status
75B Commission may designate certain QFE products as beyond scope of QFE advisers
75C Renewal of QFE status
Commission's powers in relation to default by QFE or by members of QFE group
75D Commission’s powers in relation to QFE default
75E Reasonable opportunity to be heard
75F Commission may give QFE direction
75G Other provisions concerning Commission's powers in relation to QFE default
QFE’s obligations
76 Ongoing obligations of QFEs and of partner entities
77 QFE must provide annual report to Commission
16 New section 75 substituted
75 Exemption from liability for employee or nominated representative of QFE
17 QFE's ongoing compliance obligations
18 QFE must provide annual report to Commission
17 New Part 3A inserted
Part 3ABrokers' disclosure and conduct obligations
Who is broker and what is broking service
77A Who is broker
77B What is broking service
77C Exemption for incidental service
77D Other exemptions
Disclosure obligations for services for retail clients
77E What is disclosure obligation and when does it apply
77F Broker must make disclosure before receiving client money or client property from retail client
77G What broker must disclose and form of disclosure
77H Disclosure must not be misleading, deceptive, or confusing
77I Disclosure of additional information
77J No compliance with disclosure obligation if disclosure out of date
Brokers' conduct obligations
77K What is conduct obligation and when does it apply
77L Broker must exercise care, diligence, and skill
77M Broker must not engage in misleading or deceptive conduct
77N Advertisement of broking services must not be misleading, deceptive, or confusing
77O Restriction on use of term sharebroker
77P Broker must not receive client money if offer for subscription illegal
Trust accounting obligations for services for retail clients
77Q Broker must pay client money into separate trust account
77R Broker must account for client money and client property
77S Broker must keep records of client money and client property
77T Restrictions on use of client money and client property
77U Protection of client money and client property held on trust
Persons acting in course of business of employers or principals
77V Who is responsible for broker obligations
Commission's direction in respect of breach of disclosure or conduct obligation
77W Commission may give broker direction in respect of breach of disclosure or conduct obligation
18 Part 4 heading amended
19 Content of code
20 New section 94 substituted
94 Code comes into force by Gazette notice
21 New section 98 substituted
98 Reference of complaint to disciplinary committee
22 Offence of performing financial adviser service without being registered
23 Offence of performing financial adviser service without being authorised
24 New section 116 substituted
116 Offences in relation to employer or principal failing to maintain registration
22 New heading and sections 114 to 116 substituted
Offences: restrictions on providing services and holding out
114 Offence of providing financial adviser service without being permitted to do so
115 Offence of holding out as authorised financial adviser, financial planner, or QFE
116 Offence of continuing to provide if employer or principal not permitted to provide
Disclosure offences: financial advisers, QFEs, and brokers
23 Failure to make disclosure under or in accordance with disclosure obligation
24 Heading above section 118 amended
24D New sections 118 to 120 substituted
118 Offence of misleading or deceptive conduct by financial adviser or broker
119 Offence of misleading, deceptive, or confusing advertisement by financial adviser or broker
120 Offence of contravening restrictions on use of term sharebroker
24E Offence of recommending or receiving money in connection with offer of securities when subscription illegal
24F Sections 122 to 125 repealed
25 Offence of misleading or deceptive conduct in relation to financial adviser service by employee or agent
25 New heading and sections 129 to 134 substituted
Offences: QFEs and QFE groups only
129 Offence of failing to comply with terms and conditions of QFE status
130 Offence of misleading or deceptive conduct in relation to financial adviser service by employee, agent, or nominated representative
131 Offence of misleading, etc, advertisement of financial adviser service by employee, agent, or nominated representative
132 Offence of failing to comply with Commission’s direction
133 Offence of failing to comply with obligations in relation to authorised financial advisers
134 Offence of failing to provide annual report
26 Offence of misleading, etc, advertisement of financial adviser service by employee or agent
26A New heading and sections 134A to 134F inserted
Offences: broking services only
134A Offence of receiving client money if offer for subscription illegal
134B Offence of contravening requirement to pay client money into separate trust account
134C Offence of failing to account for client money and client property
134D Offence in relation to records of client money and client property
134E Offence of breaching restrictions on use of client money and client property
134F Offence of failing to comply with Commission’s direction
27 New heading inserted
27A New headings and sections 137A to 137Q inserted
Subpart 4—Injunctions, banning orders, and other remedies
Injunctions
137A Injunctions against contraventions
137B Undertaking as to damages not required by Commission
137C When Court may make banning order
137D Terms of banning orders
137E Offence of contravening banning order
Orders to preserve assets to satisfy claims
137F When High Court may prohibit payment or transfer of money, securities, or other property
137G What orders may be made
137H Interim orders
137I Relationship with other law
137J Offence of breaching orders
Pecuniary and compensatory orders for contravening wholesale certification requirement
137JA Pecuniary order for contravening wholesale certification requirement
137JB Compensation for contravention of wholesale certification requirement
Temporary banning orders against financial adviser and broker
137K When Commission may make temporary banning orders for financial adviser services or broking services
137L Terms of temporary banning order
Process for Commission's orders
137M Commission must follow steps before making orders
137N Commission may shorten steps for specified orders
137O Commission must give notice after making orders
137P General provisions on temporary banning orders
137Q Offence of failing to comply with Commission's orders
27B Right of appeal
27BA New heading and sections 147A to 147E inserted
Standard conditions for incorporation in authorisation and grants
147A Approval of standard conditions for incorporation in authorisations and grants of QFE status
147B Requirement to consult on proposal to incorporate material by reference
147C Variation or revocation of standard conditions
147D When standard conditions come into force
147E Incorporation of changed standard conditions into existing authorisations or grants
27C New sections 148 to 148B substituted
148 Commission may grant exemptions
148A Commission may vary or revoke exemption
148B Status of exemptions, variations, or revocations
27CA Commission must notify reasons for exemption
27D Section 150 repealed
27E New section 153 substituted
153 Levy
28 General regulations
28 New section 154 substituted
154 General regulations
28B Section 159 repealed
29 New section 168 added
168 Grant of authorisations in transitional period without prior inquiry into convictions
169 Applications for QFE status made in transitional period
30 Enactments amended consequential on principal Act
Part 2Amendments to Financial Service Providers (Registration and Dispute Resolution) Act 2008
31 Commencement of provisions of principal Act
32 Principal Act amended
33 Purpose
33A Commencement
33B Overview
34 Interpretation
34B Meaning of financial service
35 Application of Act
35 New section 7 substituted
7 Application of Act
35A New section 8A inserted
8A Territorial scope
35B No being in business of providing financial service unless registered
35C No holding out that in business of providing financial service unless registered
35D Qualifications for registration as financial service provider
36 Disqualified person
36 Application to be registered as financial service provider
36A Registration of financial service provider
36B New section 16A inserted
16A Registration of unincorporated body as financial service provider
36C New section 16B inserted
16B Amendment to registration
36D Duty to notify changes relating to financial service provider
36E Deregistration of financial service provider
36F Reregistration of financial service provider
36G Purpose of register
36H Contents of register
37 Registrar must amend register in certain circumstances
37A Registrar's inspection powers
37B Regulations under Part 1 and this Part
38 New section 46 substituted
46 Territorial scope
38 Section 46 repealed
38A Financial service provider must be member of dispute resolution scheme
38B New sections 49 to 49E substituted
49 Who are retail clients
49A Who is eligible investor
49B Acceptance of certification
49C How to opt out of being wholesale client
49D Members of dispute resolution scheme must comply with rules and binding resolutions
49E Offence to fail to comply with District Court order
38C Rules about approved dispute resolution scheme
38D Duty to co-operate and communicate information in certain circumstances
38E Appointment of reserve scheme
38F New section 72A inserted
72A Reserve scheme: rules about fees and charges
38G Duty to co-operate and communicate information in certain circumstances
38H Section 77 and the heading above section 77 repealed
38I New heading and new section 78A inserted
Levy
78A Levy
38J Regulations under this Part
38K New sections 79A and 79B and heading inserted
79A Pecuniary order for contravening wholesale certification requirement
79B Compensation for contravention of wholesale certification requirement
39 Schedule 2 amended
Schedule Enactments consequentially amended
Legislative history
The Parliament of New Zealand enacts as follows: