• “(2) To this end, the Act—

  • “(a) requires financial advisers and brokers to take an appropriate degree of care in providing services to investors and consumers and prohibits certain conduct by financial advisers and brokers; and

  • “(b) in addition—

    • “(i) requires disclosure by financial advisers and brokers to retail clients, so ensuring that clients can make informed decisions about whether to use the financial adviser or broker and, in the case of an adviser, whether to follow a financial adviser's advice; and

    • “(ii) imposes competency requirements on financial advisers dealing directly with retail clients, so ensuring that there are available to retail clients 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

    • “(iii) ensures that financial advisers are held accountable for the services that they give to retail clients and that there are incentives for financial advisers to manage conflicts of interest appropriately.”

• “(ca) Part 3A (Brokers' disclosure and conduct obligations):”.

“acting through has the meaning set out in section 5G(2)

“approved rating agency means a rating agency nominated or approved under the Reserve Bank of New Zealand Act 1989 or section 17 of the Insurance Companies (Ratings and Inspections) Act 1994

“associated entity, in relation to a QFE, means an entity that, under an approval given under section 67(4) or 71, is an associated entity of that QFE

“bonus bonds means a unit in an approved unit trust within the meaning of section 2 of the Finance Act (No 2) 1990

“broker has the meaning set out in section 77A

“broking service has the meaning set out in section 77B

“building society has the same meaning as in section 2(1) of the Building Societies Act 1965

“call building society share or call credit union share means a share issued by a building society or credit union under which—

• “(a) the shareholder, in the case of a building society, or member, in the case of a credit union, has a right to demand repayment of the value of the share in full at any time; and

• “(b) the building society or credit union has an obligation to repay the value of the share in full not later than 1 working day after the demand is made; and

• “(c) the rate of dividend or interest payable or any other benefit provided does not alter as a result of the demand being made; and

• “(d) no fee or other amount is payable as a result of the principal sum not having been held by the issuer for a particular period of time

“class of financial products means a group of financial products with similar characteristics

“class service has the meaning set out in section 15(3)

“client money means money received from, or on account of, a client in relation to acquiring, holding, or disposing of a financial product

“client property means property received from, or on account of, a client in relation to acquiring, holding, or disposing of a financial product

“controlling owner has the meaning set out in section 4 of the FSP Act

“conveyancing practitioner has the same meaning as in section 6 of the Lawyers and Conveyancers Act 2006

“credit union has the meaning set out in section 2(1) of the Friendly Societies and Credit Unions Act 1982

“discretionary investment management service has the meaning set out in section 12

“exempt provider means—

• “(a) a financial adviser who is not resident, incorporated, or carrying on business in New Zealand and does not provide financial adviser services to any retail clients in New Zealand; and

• “(b) an entity that is, under the FSP Act, an affiliated entity; and

• “(c) any person who is exempted under this Act from the requirement to register under the FSP Act by virtue of providing financial adviser services

“financial service means a financial service as defined in section 5 of the FSP Act (but excluding financial services provided by a person within section 7(2)(a) to (j) of that Act)

“insurance product does not include a life insurance policy

“investment-linked contract of insurance has the meaning set out in the regulations

“investment planning service has the meaning set out in section 11

“local authority has the same meaning as in section 5(1) of the Local Government Act 2002

“member of a QFE group means a partner entity or an associated entity

“nominated representative means an individual who has been nominated by a QFE or by a partner entity of a QFE group, in accordance with section 68A 75, to perform financial adviser services in respect of the QFE and whose nomination has not been terminated under that section

“non-profit organisation means any organisation, whether incorporated or not, that is carried on other than for the purposes of profit or gain to an owner, member, or shareholder

“on behalf of the business of another person or on behalf of another person's business has the meaning set out in section 5G(1)

“partner entity, in relation to a QFE, means an entity that is part of the QFE

“personalised service has the meaning set out in section 15

“product provider means—

• “(a) the issuer, in the case of a security:

• “(b) the creditor, in the case of a consumer credit contract (as defined in the Credit Contracts and Consumer Finance Act 2003):

• “(c) the insurer, in the case of a contract of insurance (other than an investment-linked contract of insurance):

• “(d) the person specified by regulations, in the case of any other financial product specified by the regulations

“promoter has the same meaning as in section 2(1) of the Securities Act 1978

“QFE adviser means an individual who is not an authorised financial adviser and who is—

• “(a) an employee of a QFE or any member of a QFE group; or

• “(b) a nominated representative of a QFE or a partner entity

“QFE group means a group of entities that consists of—

• “(a) the partner entities that are part of a QFE and the associated entities of that QFE, if any; or

• “(b) in the case of a QFE that does not come within paragraph (a), that QFE and its associated entities

“registered legal executive means a person who is a member of the New Zealand Institute of Legal Executives Incorporation and holds a current annual registration certificate issued by that body

“relevant service has the meaning set out in section 14(3)

“related body corporate has the meaning set out in section 5B(2) of the Securities Markets Act 1988

“retail client has the meaning set out in section 5B

“standard conditions means standard terms and conditions for the time being approved by the Commission under section 147A or 147C and in force under section 147D

“statutory officer means a person—

• “(a) holding or performing the duties of an office established by an enactment; or

• “(b) performing duties expressly conferred on that person by virtue of his or her office by an enactment; or

• “(c) holding office as the chief executive of a Crown organisation

“term life insurance policy means a policy—

• “(a) under which an amount (other than an amount not exceeding the sum of the premiums paid to the insurer) is payable only if during the term of the policy the life insured dies or becomes ill or disabled; and

• “(b) that is for a specified term that is less than the life expectancy of the life insured (measured in accordance with generally accepted actuarial practice) at the time the policy is issued

“trustee corporation means the Public Trust, the Maori Trustee, or any corporation authorised by an Act to administer the estates of deceased persons and other trust estates (and any wholly owned subsidiary of that corporation that is guaranteed by the corporation)

“wholesale client has the meaning set out in section 5C”.

“approved dispute resolution scheme has the same meaning as in section 4 of the FSP Act, but also includes the reserve scheme within the meaning of section 71 of the FSP Act

“call debt security means a debt security under which—

• “(a) the security holder has a right to demand repayment of the principal sum in full at any time; and

• “(b) the issuer has an obligation to repay the principal sum in full not later than 1 working day after the demand is made; and

• “(c) the rate of interest payable or any other benefit provided does not alter as a result of the demand being made; and

• “(d) no fee or other amount is payable as a result of the principal sum not having been held by the issuer for a particular period of time

“category 1 product means any of the following products (other than a product that is a category 2 product):

• “(a) a security; or

• “(b) a land investment product (as defined in the regulations); or

• “(c) a futures contract; or

• “(d) an investment-linked contract of insurance; or

• “(e) any other product specified by the regulations; or

• “(f) a renewal or variation of the terms or conditions of an existing category 1 product

“category 2 product means any of the following products:

• “(a) a bank term deposit; or

• “(b) any bonus bonds; or

• “(c) any call building society shares; or

• “(ca) a call credit union share; or

• “(d) a call debt security; or

• “(da) a share in a co-operative company (as defined in section 2(1) of the Co-operative Companies Act 1996); or

• “(db) a unit in a cash or term portfolio investment entity (as defined in the regulations); or

• “(e) a consumer credit contract (as defined in section 11 of within the meaning of the Credit Contracts and Consumer Finance Act 2003); or

• “(f) an insurance product, including a term life insurance policy; or

• “(f) a contract of insurance (other than an investment-linked contract of insurance); or

• “(g) a life insurance policy (within the meaning of section 2(1) of the Securities Act 1978) issued before 1 January 2009; or

• “(h) any other product specified by the regulations; or

• “(i) a renewal or variation of the terms or conditions of any existing category 2 product

“client has the meaning set out in section 5A

“conduct obligation means,—

• “(a) in relation to a financial adviser, an obligation described in section 32:

• “(b) in relation to a broker, an obligation described in section 77K

“disclosure obligation means,—

• “(a) in relation to a financial adviser, an obligation described in section 21:

• “(b) in relation to a broker, an obligation described in section 77E

“entity—

• “(a) includes a body corporate and an unincorporated body (including partners in a partnership, members of a joint venture, or the trustees of a trust) and the sole trustee of a trust acting in his, her, or its capacity as trustee of that trust; but

• “(b) does not include an individual

“life insurance policy—

• “(a) means a policy other than a term life insurance policy that—

  • “(i) is a policy of life or endowment insurance; or

  • “(ii) secures an annuity; and

• “(b) includes—

  • “(i) a policy of insurance other than a term life insurance policy that is declared by regulations made under the Securities Act 1978 to be a life insurance policy for the purposes of that Act; and

  • “(ii) a renewal or variation of the terms or conditions of any policy described in paragraph (a) or subparagraph (i)

“QFE or qualifying financial entity means an entity described in section 63(1)(a) or a number of partner entities described in section 63(1)(b)

“security—

• “(a) means—

  • “(i) any interest in, or right to participate in, any capital, assets, earnings, royalties, or other property 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); but

• “(b) does not include—

  • “(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; or

  • “(ii) an investment-linked contract of insurance; or

  • “(iii) a life insurance policy (within the meaning of section 2(1) of the Securities Act 1978) issued before 1 January 2009”.

“5A Who are clients

• “(1) For the purposes of this Act, a client—

  • “(a) means a person who receives a service (whether on payment of a charge or not); and

  • “(b) in relation to a broking service, means the person on whose behalf the financial product is acquired or disposed of or the client money or client property is held (but excludes the product provider); but

  • “(c) does not include a person who receives any service from another person if the service is both provided and received in the course of, and for the purposes of,—

    • “(i) the same business; or

    • “(ii) the businesses of related bodies corporate (within the meaning of section 5B(2) of the Securities Markets Act 1988); or

    • “(iii) the businesses of members of a QFE group.

    Example

    If a company employee (A) gives financial advice to the board of directors on investments to be made by the company, the directors are not clients of A. However, if A, in the course of business, gives that same financial advice to another employee (B) in relation to B's own investments, B would be a client of A for the purposes of this Act.

  “(2) Subsection (1) applies whether the person providing or receiving the service is the person carrying on the business, a controlling owner, a director, an agent, or any other person.

“5B Who are retail clients

• A retail client is a client of a financial adviser or broker who is not a wholesale client.

“5C Who are wholesale clients

• “(1) The following clients of a financial adviser or broker are wholesale clients in respect of a financial adviser service or a broking service (unless the person has opted out from being a wholesale client under section 5F):

  • “(a) any other financial adviser or broker who receives the service in the course of business as a financial adviser or broker:

  • “(b) a person who is in the business of providing any other financial service and receives the financial adviser service or broking service in the course of that business:

  • “(c) a person whose principal business is the investment of money or who, in the course of and for the purposes of the person's business, habitually invests money:

  • “(d) an entity to which at least 1 of the following applied at the end of each of the last 2 completed accounting periods:

    • “(i) at the balance date, the net assets of the entity exceeded $1 million:

    • “(ii) the turnover of the entity for the accounting period exceeded $1 million:

  • “(e) a related body corporate of an entity to which paragraph (d) applies:

  • “(f) a local authority, a Crown entity, a State enterprise, the Reserve Bank of New Zealand, and the National Provident Fund (or a company appointed under clause 3(1)(b) of Schedule 4 of the National Provident Fund Restructuring Act 1990):

  • “(g) a person who falls within 1 or more of the categories listed in section 3(2), 5(2CB), or 5(2CBA) of the Securities Act 1978 if the service relates to securities that may be offered to that person, or that have been subscribed for by that person, in a private offer of securities:

  • “(h) an eligible investor under section 5D.

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

  “(3) In this section, a private offer of securities means an offer of securities that—

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

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

“5D Who is eligible investor

• “(1) A client is an eligible investor if—

  • “(a) the client certifies in writing that—

    • “(i) the client has sufficient knowledge, skills, or experience in financial matters to assess the value and risks of financial products and the merits of the service or services to be provided; and

    • “(ii) the client understands the consequences of certifying himself, herself, or itself to be an eligible investor (including that the competency standards and requirements of the code will not be applicable (if relevant) and that the financial adviser or broker may not be a member of an approved dispute resolution scheme); and

  • “(b) the client states the reasons for this certification; and

  • “(c) an authorised financial adviser, QFE, or other type of financial adviser or broker signs a written acceptance of the certification in accordance with section 5E.

  “(2) A certification may be specific to a particular service or class of services or may be general (but is not effective in relation to services provided before all the requirements of subsection (1)(a) to (b) are met).

  “(3) A certification relating only to a discretionary investment management service or a broking service (or both) does not need to certify as to the matters referred to in subsection (1)(a)(i).

“5E Acceptance of certification

• “(1) An authorised financial adviser, QFE, or other type of financial adviser or broker must not accept a certification unless he, she, or it, having considered the client's reasons for the certification,—

  • “(a) is satisfied that the client has been sufficiently advised of the consequences of the certification; and

  • “(b) has no reason to believe that the certification is incorrect; and

  • “(c) is satisfied that nothing indicates, or would indicate to a reasonable person, that further information or investigation is required as to the client's reasons for the certification.

  “(2) The person who accepts the certification of a client may be the financial adviser or broker for the client (but does not need to be).

  “(3) A financial adviser (other than an authorised financial adviser or QFE) or broker who accepts a certification without having complied with subsection (1) contravenes a wholesale certification requirement.

  “(4) Contravention of this section may give rise to a pecuniary penalty order or compensatory order (see sections 137JA and 137JB).

“5F How to opt out of being wholesale client

• “(1) A person may opt out of being a wholesale client, in relation to a financial adviser or broker, by giving the financial adviser or broker a signed notification to that effect.

  “(2) A notification may be specific to a particular service, or class of services, or may be general for all services provided by the financial adviser or broker to whom it is given.

  “(3) A person may vary or revoke a notification in the same way as the notification may be given.

  “(4) A notification (or variation or revocation of a notification) under this section is effective only in relation to services provided after it is given.

“5G Meaning of acting ‘on behalf of B's business’ and ‘acting through A’

• “(1) In this Act, a person (A) provides services acting on behalf of the business of another person (B) or on behalf of B's business if—

  • “(a) A is a director, an employee, or an agent (including a nominated representative or a contractor) of B and is acting within the scope of his or her actual or apparent authority; or

  • “(b) A is acting at the direction or with the consent or agreement (whether express or implied) of—

    • “(i) B; or

    • “(ii) a director, an employee, or an agent (including a nominated representative or a contractor) of B and the direction, consent, or agreement given is within the scope of the actual or apparent authority of the director, employee, or agent.

  “(2) If A is providing services on behalf of B's business, then B is acting through A to provide those services.

“5H Territorial scope

• “(1) This Act applies to a financial adviser service or broking service received by a client in New Zealand, regardless of where the person providing the service is resident, is incorporated, or carries on business.

  “(2) Sections 33, 34, 49, and 118 also extend to any financial adviser service or broking service received by a client outside New Zealand if it is provided by a person who is ordinarily resident in New Zealand (within the meaning of section 4 of the Crimes Act 1961) or incorporated or carrying on business in New Zealand.”

• “(p) an employer, or an employee of the employer, providing assistance to a person who is an employee of the employer with the implementation of a decision to acquire or dispose of a financial product made available through the person's workplace unless the assistance includes or is accompanied by a recommendation or opinion as to the suitability of the financial product; or”.

• “(q) a company or an employee of a company—

  • “(i) giving advice, in the course of the company's business, to no person other than a related company; or

  • “(ii) making an investment transaction, in the course of the company's business, on behalf of no person other than a related company; or”.

• “(ta) a rating agency, or an employee of a rating agency, giving advice as part of, or in connection with, a rating that the agency is to complete or has completed, but only if the agency is approved under section 157J of the Reserve Bank of New Zealand Act 1989 or under section 17 of the Insurance Companies (Ratings and Inspections) Act 1994; or”.

• “(ca) a statement or report made to, or for the purposes of, a general meeting of the members of an issuer, or a report of the proceedings of such a meeting; or

• “(cb) a statement or report relating to the affairs of an issuer made to any registered exchange for the purposes of compliance with the listing requirements relating to that registered exchange, by or on behalf of that issuer, or any report of such a statement or report; or”.

• “(ea) any of the following documents relating to a company:

  • “(i) the company's annual report:

  • “(ii) the company's records required to be kept under section 215 of the Companies Act 1993:

  • “(iii) a notice of a meeting of the shareholders of the company; or”.

“17 Individual who is QFE employee or nominated representative

• An individual (whether registered or not) who is an employee or a nominated representative of a QFE may, in the course of the QFE’s business, give financial advice or make an investment transaction in relation to—

  • “(a) a category 2 product; or

  • “(b) a category 1 product of which the QFE is the issuer or promoter.

“Provisions relating to employers or principals of financial advisers

“18 Employers or principals of financial advisers must be registered

• “(1) If a person employs an employee or engages an agent (other than as a nominated representative) to perform 1 or more financial adviser services in the course of the person's business,—

  • “(a) the person must maintain registration throughout the time that the employee is so employed or the agent is so engaged; and

  • “(b) the employee or the agent must not perform a financial adviser service in the course of the person's business if the employee or the agent knows or ought to know that the person is not currently registered.

  “(2) If an entity with QFE status nominates a nominated representative,—

  • “(a) the entity must maintain its QFE status and its registration throughout the time that the nominated representative is nominated; and

  • “(b) the nominated representative must not perform a financial adviser service in the course of the entity's business if the nominated representative knows or ought to know that the entity no longer has QFE status or is no longer registered.

  “(3) This section does not apply to financial adviser services performed by an employee or agent (other than as a nominated representative) in the course of the employer's or principal's business for—

  • “(a) the employer and, if the employer is a company, any related company of the employer; or

  • “(b) the principal and, if the principal is a company, any related company of the principal.

  “(4) A person who contravenes this section commits an offence (see section 116).

“19 Certain employees and nominated representatives exempted from joining approved dispute resolution scheme

• “(1) A financial adviser who is an employee or a nominated representative is not required to be a member of an approved dispute resolution scheme for the purposes of registration under the FSP Act if—

  • “(a) the employer of the financial adviser, or the QFE that nominated the financial adviser as nominated representative, is a member of an approved dispute resolution scheme; and

  • “(b) the financial services that the financial adviser performs are performed—

    • “(i) in the financial adviser's capacity as an employee of that employer or as a nominated representative of that QFE; and

    • “(ii) in the course of the business of that employer or, as the case requires, of that QFE.

  “(2) This section overrides the FSP Act.”

“7 Outline

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

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

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

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

“Subpart 1—Key definitions for financial adviser services

“What are financial adviser services

“8 Who is financial adviser

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

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

“9 What is financial adviser service

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

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

  “(3) The services are—

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

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

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

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

“10 When person gives financial advice

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

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

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

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

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

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

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

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

“11 When person provides investment planning service

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

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

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

“12 When person provides discretionary investment management service

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

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

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

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

“13 Exemption for incidental service

• “(1) A service is not a financial adviser service for the purposes of this Act if the service is provided only as an incidental part of another business that is not otherwise a financial service.

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

  Example

  A sales assistant in a retail outlet giving advice to a consumer purchasing goods on a hire purchase contract.

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

“14 Other exemptions

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

  • “Other occupations

  • “(a) a teacher, lecturer, journalist, or State services employee giving financial advice in the course of that occupation:

  • “(b) a Minister of the Crown giving financial advice in the course of his or her duties as a Minister of the Crown:

  • “(c) a member of Parliament giving financial advice in the course of his or her duties as a member of Parliament:

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

  • “Crown-related organisations and other statutory officers and organisations

  • “(e) a statutory officer, Crown organisation (other than Public Trust), or the Reserve Bank of New Zealand—

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

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

  • “Non-profit organisations, workplace financial products, and trustee corporations

  • “(f) a non-profit organisation providing a relevant service if the relevant service is provided, without charge, in the course of the organisation's activities:

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

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

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

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

  • “Activities governed by other regulatory frameworks

  • “(i) a principal officer of any entity providing a relevant service in the person's capacity as a principal officer:

  • “(j) the offeror or target company giving financial advice in the course of a takeover offer under the Takeovers Code:

  • “(k) an independent adviser giving financial advice in the course of that person's functions under the Takeovers Code:

  • “(l) an approved rating agency giving financial advice in connection with a rating given or to be given by it:

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

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

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

  • “(n) a person carrying on the business of dealing in futures contracts to the extent authorised to do so under section 38(1)(a) of the Securities Markets Act 1988 or if approved to do so under section 38(1)(b) of that Act:

  • “Documents required by law

  • “(o) providing or making available to a person any of the following documents or information:

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

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

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

  • “Services provided to product provider

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

  • “Other exemptions in regulations

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

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

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

“When financial adviser service is personalised service or class service

“15 When financial adviser service is personalised service or class service

• “(1) A financial adviser service is a personalised service if it is—

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

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

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

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

“Subpart  1A—Restrictions on providing financial adviser services

“16 Types of financial adviser

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

  • “(a) an individual who is authorised and registered (an authorised financial adviser):

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

  • “(c) an individual who is not an authorised financial adviser and who is an employee of a QFE or any member of a QFE group or a nominated representative of a QFE or a partner entity (a QFE adviser):

  • “(d) a QFE or any other entity that is registered:

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

“Restrictions on providing financial adviser services

“17 Who may provide financial adviser service

• “(1) A person must not provide a financial adviser service unless—

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

  • “(b) the person is—

    • “(i) registered or an exempt provider; and

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

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

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

“18 Who is permitted to provide personalised service to retail clients

• The following individuals are permitted to provide a personalised service to a retail client:

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

    • “(i) an authorised financial adviser:

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

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

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

    • “(i) an authorised financial adviser:

    • “(ii) a registered individual:

    • “(iii) a QFE adviser.

“19 Who is permitted to provide class service to retail clients

• The following persons are permitted to provide a class service to a retail client:

  • “(a) an authorised financial adviser:

  • “(b) a QFE adviser:

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

  • “(d) an exempt provider (whether an individual or an entity), other than a person to whom paragraph (a) of the definition of exempt provider applies.

“20 Who may provide financial adviser service to wholesale clients

• The following persons are permitted to provide a financial adviser service to a wholesale client:

  • “(a) an authorised financial adviser:

  • “(b) a QFE adviser:

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

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

“Restrictions on holding out

“20A Who may hold themselves out as authorised financial adviser

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

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

“20B Who may hold themselves out as financial planner or investment planner

• “(1) A person (A) must not hold out (whether directly or indirectly) that A or any other person (B) is—

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

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

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

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

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

“20C Who may hold themselves out as QFE or having QFE status

• “(1) A person (A) must not hold out (whether directly or indirectly) that A or any other person (B) is a QFE or has QFE status unless A or B (as applicable) is a QFE.

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

“Persons acting in course of business of employers and principals

“20D Who must be member of dispute resolution scheme

• A person (A) who provides a financial adviser service on behalf of the business of another person (B) need not be a member of an approved dispute resolution scheme for the purposes of registration if—

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

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

“20E Obligation to cease providing if employer or principal not permitted to provide

• “(1) No QFE adviser (A) may provide a financial adviser service on behalf of the business of another person (B) if A knows that B is—

  • “(a) not currently registered or is not an exempt provider; or

  • “(b) in the case of a QFE, either not currently registered or has lost its QFE status.

  “(2) Contraventions of this section may give rise to an offence (see section 116).

“20F Who is responsible for financial adviser obligations

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

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

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

  • “(c) in any other case, B only.

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

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

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

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

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

• “(1) This section applies if a financial adviser (A) who is an employee or a nominated representative of a QFE, but who is not an authorised financial adviser, performs, in the course of the QFE's business, a financial adviser service (the financial adviser service) in relation to—

  • “(a) a category 2 product; or

  • “(b) a category 1 product of which the QFE is the issuer or promoter.”

“Disclosure obligations for personalised services for retail clients

“21 What is disclosure obligation and when does it apply

• “(1) A disclosure obligation under this Part is an obligation to make disclosure under or in accordance with sections 22 to 31.

  “(2) A disclosure obligation applies only to a personalised service provided for a retail client.

“22 Financial adviser must make disclosure before providing personalised service to retail client

• “(1) A financial adviser who provides a personalised service for a retail client must disclose prescribed information to the client, in accordance with this Act and the regulations,—

  • “(a) before providing the service; or

  • “(b) if not practicable before, as soon as practicable after providing the service.

  “(2) Subsection (1) does not apply to a QFE adviser acting in that capacity.

“23 What financial adviser must disclose

• “(1) Regulations for the purposes of prescribing disclosure for financial advisers under section 22 may require disclosure,—

  • “(a) for authorised financial advisers, in relation to any or all of the matters referred to in subsection (2).

  • “(b) for other financial advisers, in relation to any or all of the matters referred to in subsection (2)(a) to (g).

  “(2) The matters are—

  • “(a) contact details:

  • “(b) the type of financial adviser:

  • “(c) financial adviser services provided (including financial products in relation to which a financial adviser service is provided):

  • “(d) fees:

  • “(e) material interests, relationships, or associations:

  • “(f) remuneration:

  • “(g) dispute resolution arrangements:

  • “(h) professional or business experience relevant to performance of a financial adviser service:

  • “(i) criminal convictions:

  • “(j) disciplinary proceedings:

  • “(k) adverse findings by a court or the Commission:

  • “(l) bankruptcy or other insolvency proceedings:

  • “(m) indemnity insurance:

  • “(n) matters required to be disclosed by the authorised financial adviser's terms and conditions of authorisation.

“24 Disclosure statement

• “(1) Disclosure under section 22(1) must be made by 1 or more disclosure statements in accordance with the regulations.

  “(2) A disclosure statement must—

  • “(a) be in writing; and

  • “(b) state when it was prepared; and

  • “(c) state the name, address, trading name (if any), telephone number, fax number, and email address of the financial adviser; and

  • “(d) be—

    • “(i) provided to the client; or

    • “(ii) 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 that purpose.

  “(3) Regulations may provide for the form that a disclosure statement must take.

“25 Disclosure by QFE

• “(1) A QFE or a member of a QFE group that, acting through a QFE adviser, provides a personalised service for a retail client must ensure that prescribed information is disclosed to the client, in accordance with the Act or the regulations,—

  • “(a) before the service is provided; or

  • “(b) if not practicable before, as soon as practicable after the service is provided.

  “(2) Regulations for the purposes of this section may require disclosure in relation to any or all of the following matters:

  • “(a) contact details:

  • “(b) the type of financial adviser:

  • “(c) the QFE's dispute resolution arrangements:

  • “(d) matters required to be disclosed by the QFE's terms and conditions of a grant of QFE status:

  • “(e) whether the QFE provides any other licensed service.

  “(3) Regulations for the purposes of this section may provide for the form that the disclosure must take.”

“32 What is conduct obligation and when does it apply

• “(1) A conduct obligation under this Part is an obligation under sections 33 to 48.

  “(2) The conduct obligations in—

  • “(a) sections 33 to 35 apply to all financial adviser services:

  • “(b) section 36 applies to a class service provided to a retail client:

  • “(c) sections 37, 38, 45, and 45A apply to an authorised financial adviser, irrespective of the type of service:

  • “(d) sections 46 to 48 apply to a QFE and (in some cases) members of a QFE group, irrespective of the type of service.

“33 Financial adviser must exercise care, diligence, and skill

• A financial adviser, when providing 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,—

  • “(a) the nature and requirements of the financial adviser's client or (if it is a class service) of the clients intended to receive the service; and

  • “(b) the nature of the service provided and the circumstances in which the service is provided; and

  • “(c) the type of financial adviser.”

• “(1) In any advertising or promotional material, the term sharebroker must not be used in connection with a person unless the person, or the person’s employer, is a member of a registered exchange.”

“36 Regulations may impose specific conduct obligations for class retail services

• A financial adviser must, when providing a class service to a retail client,—

  • “(a) (if required by regulations) ensure that the prescribed warning is given in the prescribed manner that the class service is not personalised; and

  • “(b) ensure compliance with the prescribed requirements relating to the competency of, or the use of adequate care, diligence, and skill by, the persons involved in providing the service (for example, a requirement to obtain a certificate from the principal officers of the adviser or a requirement to obtain the approval of an authorised financial adviser or registered financial adviser to financial advice); and

  • “(c) comply with any prescribed record-keeping or procedural requirements relating to those matters.”

“45A Authorised financial adviser must report breach of Act to Commission

• “(1) If an authorised financial adviser (A) reasonably believes that a person has breached this Act or an obligation imposed under this Act (including the code) in a material respect, A must, as soon as practicable, report the breach to the Commission.

  “(2) If A makes a report under subsection (1) in good faith,—

  • “(a) no civil, criminal, or disciplinary proceedings may be brought against A in respect of the report:

  • “(b) no person may terminate the appointment or employment of A by reason of the report:

  • “(c) no tribunal, body, or authority that has jurisdiction in respect of the professional conduct of A may make an order against, or do any act in relation to, A in respect of the report:

  • “(d) the Commission must not disclose information that might identify A unless—

    • “(i) A consents in writing to the disclosure of the information; or

    • “(ii) the Commission believes that disclosure of the information is essential to the effective investigation of the alleged breach or is otherwise essential, having regard to the principles of natural justice.

  “(3) If A makes a report under subsection (1) (whether or not in good faith), the Commission must not disclose information that might identify a client of A unless—

  • “(a) the client consents in writing to the disclosure of the information; or

  • “(b) the Commission believes that disclosure of the information is essential to the effective investigation of the alleged breach or is otherwise essential, having regard to the principles of natural justice.

  “(4) A breach of subsection (1) must be treated as a breach of the code for the purposes of subpart 2 of Part 4.”

“Conduct obligations related to QFEs

“46 QFE must comply with terms and conditions of grant of QFE status

• “(1) Every QFE and every partner entity of a QFE must comply with the terms and conditions of the QFE's grant of QFE status.

  “(2) Contraventions of this section give rise to the offences described in section 129.

“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

• “(1) A QFE or a member of a QFE group must not engage in conduct in relation to a financial adviser service by the QFE's or the member's employee, agent, or nominated representative that is misleading or deceptive or likely to mislead or deceive.

  “(2) Contraventions of this section give rise to the offences described in section 130.

“48 Advertisement by QFE or member of QFE group in relation to financial adviser service must not be misleading, deceptive, or confusing

• “(1) A QFE or a member of a QFE group must not advertise a financial adviser service in a way that is misleading, deceptive, or confusing.

  “(2) Contraventions of this section give rise to the offences described in section 131.”

“55 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) providing any financial adviser service, or specified kinds of financial adviser services, in relation to any category 1 product, specified category 1 products, or specified classes of category 1 product:

  • “(b) providing a discretionary investment management service on behalf of clients, generally or in specified cases, in relation to any category 1 product, specified category 1 products, or specified classes of category 1 product:

  • “(c) providing investment planning services generally or in specified cases.

  “(2) The authorisation may be subject to terms and conditions relating to financial adviser services or broking services or to both.

  “(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) The Commission may incorporate, with any modifications it considers appropriate, the standard conditions.

  “(5) If an applicant for authorisation is not eligible, the Commission must—

  • “(a) decline the application; and

  • “(b) notify the applicant in writing of—

    • “(i) the decision and the reasons for it; and

    • “(ii) the applicant’s right of appeal against the decision.

“55A Variation of terms and conditions and period of authorisation

• “(1) An authorised financial adviser may apply to the Commission for a variation of the terms and conditions of the adviser’s authorisation.

  “(2) The Commission may grant or decline the application.

  “(3) The Commission may, by notice to an authorised financial adviser, propose a variation of the terms and conditions of the adviser’s authorisation or the period of the adviser’s authorisation, or both, on either or both of the following grounds:

  • “(a) the business of the adviser has changed in a way that poses a material risk to consumers:

  • “(b) the adviser has been involved in market practices that are, in material respects, inconsistent with the purpose of this Act.

  “(4) The Commission must specify in the notice a reasonable period for the adviser to respond in writing.

  “(5) After considering any response received within the period specified in the notice, the Commission may, by notice to the adviser, vary the terms and conditions of the adviser’s authorisation or the period of the adviser’s authorisation, or both.

  “(6) The Commission may, in the notice under subsection (5), vary terms and conditions on a provisional basis and, if it does so, must, in the light of any changes in risk posed by the adviser’s business or market practices, review those terms and conditions by a date stated in the notice.

  “(7) On completion of the review, the Commission may do any of the following:

  • “(a) confirm 1 or more of the variations effected by subsection (5):

  • “(b) cancel 1 or more of the variations effected by subsection (5):

  • “(c) propose further terms and conditions by giving the authorised financial adviser a notice under subsection (3).

  “(8) The Commission must give the authorised financial adviser notice of any decision taken under subsection (7)(a) or (b).”

• “(4) In addition to the matters specified in section 54, the Commission must be satisfied that—

  • “(a) the applicant for renewal of authorisation has complied with the minimum professional standards for authorised financial advisers prescribed by the code; or

  • “(b) any failure, on the part of the applicant, to comply with those standards is not sufficiently serious or recent to preclude the renewal of the applicant’s authorisation.”

“59A Commission's power to ban financial adviser who is registered but not authorised

• “(1) This section applies if the Commission is satisfied that an individual (the affected individual)—

  • “(a) is a financial adviser, other than a QFE adviser, who is registered but not authorised; and

  • “(b) has persistently breached his or her conduct obligations.

  “(2) The Commission may, after following the procedure set out in section 60, order that the affected individual not provide any financial adviser services or not provide 1 or more specified classes of financial adviser service for a specified period that does not exceed 5 years.

  “(3) The Commission must give the affected individual a copy of the order.

  “(4) The order takes effect when it is given to the affected individual.

  “(5) The Commission must notify the Registrar in writing of the terms of the order, and may also publicly notify those terms as it sees fit.

  “(6) The Commission may, on application by the affected individual, after following the procedure set out in section 60, vary or revoke the order.

  “(7) Subsections (3) to (5) apply, with any necessary modifications, to an order that varies or revokes the original order.”

• “(2) If the entity proposes to nominate 1 or more individuals as nominated representatives, the application must state, or be accompanied by a list that states, the name of each person proposed to be nominated.”

“68A Nominated representatives of QFEs

• “(1) In order to nominate an individual as one of its nominated representatives, a QFE must—

  • “(a) comply with the method (if any) prescribed for that purpose in the terms and conditions of its grant of QFE status; or

  • “(b) if those terms and conditions do not prescribe a method for that purpose, record the nomination in a written instrument that—

    • “(i) nominates the individual as a nominated representative of the QFE; and

    • “(ii) is dated and, if the nomination is to take effect on a later date, specifies that later date.

  “(2) The QFE may terminate the nomination by giving written notice to the individual concerned and to the Commission.”

“63 What is qualifying financial entity (QFE)

• “(1) A QFE is—

  • “(a) an entity that is registered and has QFE status; or

  • “(b) a number of partner entities that are each registered and jointly have QFE status.

  “(2) For the purposes of any powers or rights conferred, or obligations or liabilities imposed, on QFEs by this Act, a QFE described in subsection (1)(b) is taken to be a separate entity and a person.

  “(3) Subsection (2) does not limit any obligation or liability imposed on a partner entity.

“64 Who may apply for QFE status

• An application may be made to the Commission by—

  • “(a) a single entity for QFE status; or

  • “(b) 2 or more related bodies corporate for joint QFE status.

“65 Application for QFE status

• “(1) An application for QFE status must—

  • “(a) be in the prescribed form (if any); and

  • “(b) be accompanied by the prescribed fee (if any).

  “(2) If the applicant or applicants seek to have 1 or more entities approved as associated entities of the proposed QFE, the application must state the name of each entity sought to be approved as an associated entity and how that entity is related to the applicant or applicants.

  “(3) The application must set out the procedures that the applicant or applicants have for—

  • “(a) training employees and nominated representatives; and

  • “(b) setting standards for employees and nominated representatives; and

  • “(c) monitoring those standards.

“66 Eligibility for QFE status

• “(1) The Commission may confer QFE status on a single entity applying under section 64(a) or on 2 or more entities applying under section 64(b) if it is satisfied that—

  • “(a) each entity is registered or is entitled to be registered; and

  • “(b) no entity is debarred from applying for QFE status; and

  • “(c) on the grant of QFE status and at all times while a QFE, the single entity that will be the QFE has, or the partner entities that will be the QFE together have, the capacity to, and will,—

    • “(i) discharge its or their ongoing compliance obligations under section 76 and all other obligations on it under this Act or the regulations; and

    • “(ii) comply with the terms and conditions (if any) of the grant of QFE status; and

    • “(iii) maintain procedures to ensure that retail clients of the QFE receive adequate consumer protection.

  “(2) In determining under subsection (1)(c) whether clients receive adequate consumer protection, the Commission must, in relation to QFE advisers who provide personalised financial adviser services that relate to category 1 products,—

  • “(a) consider whether the clients will receive protection of a similar standard to that provided by advisers who are subject to the code; and

  • “(b) in doing so, take into account the scope of category 1 products in respect of which those QFE advisers provide financial adviser services.

“67 Commission must approve or decline application for QFE status

• “(1) If an applicant under section 64(a) is eligible, or if applicants under section 64(b) are eligible, for QFE status, the Commission must approve the application and grant the applicant or the applicants QFE status.

  “(2) The grant of QFE status is subject to the terms and conditions specified or incorporated in the grant.

  “(3) The Commission may incorporate, with any modifications it considers appropriate, the standard conditions.

  “(4) If the application also asks for the approval of 1 or more entities as associated entities of the QFE, the Commission may, by written determination, approve an entity as an associated entity of the QFE if that entity—

  • “(a) is registered or is entitled to be registered; or

  • “(b) is, under the FSP Act, an affiliated entity of one of the applicants.

  “(5) Even though an entity is eligible under subsection (4), the Commission may decline to approve the entity for any reason, including, without limitation, the absence of a direct connection between the entity and the QFE or any of its partner entities.

  “(6) If the Commission approves an associated entity, terms and conditions under subsection (2) may, without limitation, relate to—

  • “(a) the kinds of financial adviser services that may be provided by or on behalf of any associated entity:

  • “(b) any conditions and restrictions that are to apply to the provision of those services:

  • “(c) the way in which the QFE is to supervise any associated entity.

  “(7) The Commission is not precluded from approving an entity as an associated entity of a QFE merely because the entity is, or is proposed to be, the associated entity of another QFE.

“68 Determination of application

• “(1) If the Commission approves an application for a grant of QFE status, the Commission must notify the entity or entities in writing of—

  • “(a) the grant of QFE status; and

  • “(b) the terms and conditions; and

  • “(c) the period for which QFE status has been granted.

  “(2) If an applicant under section 64(a) is not, or 1 or more of the applicants under section 64(b) are not, eligible for QFE status, the Commission must—

  • “(a) decline the application; and

  • “(b) notify the entity or entities of—

    • “(i) the decision and the reasons for it; and

    • “(ii) the right of an applicant under section 64(a) to appeal, and the right of applicants under section 64(b) jointly to appeal, against the decision.

“69 Name of QFE group

• “(1) A QFE group has the name that is approved by the Commission and chosen by the applicant or applicants for QFE status that results in the formation of the group.

  “(2) Every application for QFE status that would, if approved, result in the formation of a QFE group must submit a name for the proposed group.

  “(3) The Commission may ask the applicant or applicants to submit another name.

“70 Commission must notify Registrar of grant of QFE status

• “(1) If the Commission grants an entity or entities QFE status, the Commission must notify the Registrar in writing of—

  • “(a) the name of the entity, or the names of the partner entities, granted QFE status:

  • “(b) the period for which QFE status has been granted:

  • “(c) if a QFE group has been formed, the name of the group:

  • “(d) if associated entities of the QFE have been approved, the names of those entities.

  “(2) The Commission may publicly notify the grant of QFE status and the other matters referred to in subsection (1) as it thinks fit.

“71 Addition of associated entities

• “(1) The QFE of a QFE group may apply to the Commission to approve the addition of 1 or more entities as associated entities of the QFE.

  “(2) The application must—

  • “(a) be in the prescribed form (if any); and

  • “(b) be accompanied by the prescribed fee (if any); and

  • “(c) name the entities sought to be added as associated entities.

  “(3) Section 67(3) to (5) apply with any necessary modifications.

  “(4) The Commission may amend the terms and conditions of the QFE's grant of QFE status to include, modify, or replace any terms and conditions of a kind described in section 67(6).

  “(5) The QFE may withdraw the application at any time before it is determined.

  “(6) If the Commission approves an entity as an associated entity under this section, the Commission—

  • “(a) must notify the Registrar in writing of the name of the entity; and

  • “(b) may publicly notify the inclusion of the associated entity in the QFE group as it thinks fit.

“72 Termination of status of associated entity

• The status of an associated entity terminates when—

  • “(a) the entity ceases to be registered; or

  • “(b) the Commission receives a written request from the entity or from the relevant QFE or any partner entity to cancel its status as associated entity; or

  • “(c) the QFE status of the relevant QFE is terminated.

“73 Certification of QFE group

• “(1) The Commission may issue a certificate stating that named entities are, as at the date of the certificate, a QFE group or that named entities were, during a specified period, a QFE group.

  “(2) A certificate issued under subsection (1) is, in the absence of proof to the contrary, evidence of its contents.

“74 Nominated representatives of QFEs or partner entities

• “(1) A QFE or a partner entity may nominate an individual as one of its nominated representatives by—

  • “(a) complying with the method (if any) prescribed for that purpose in the terms and conditions of the relevant grant of QFE status; or

  • “(b) if those terms and conditions do not prescribe a method for that purpose, recording the nomination in a written instrument that—

    • “(i) nominates the individual as a nominated representative of the QFE or of the partner entity; and

    • “(ii) is dated and, if the nomination is to take effect on a later date, specifies that later date.

  “(2) An individual may not be the nominated representative of 2 or more entities unless the entities are related bodies corporate.

  “(3) The QFE or the partner entity may terminate the nomination by giving written notice to the individual concerned and to the Commission.

  “(4) Every QFE must keep an up-to-date record of its nominated representatives.

“75 Variation of terms and conditions and period of grant of QFE status

• “(1) A QFE may apply to the Commission for a variation of the terms and conditions of the grant of QFE status.

  “(2) The Commission may grant or decline the application.

  “(3) The Commission may, by notice to a QFE, propose a variation of the terms and conditions of the QFE’s grant of QFE status or the period of the grant on either or both of the following grounds:

  • “(a) the business of the QFE or of the QFE group has changed in a way that poses a substantial risk to consumers:

  • “(b) the QFE or any member of the QFE group has been involved in market practices that are, in material respects, inconsistent with the purpose of this Act.

  “(4) The Commission must specify in the notice a reasonable period for the QFE to respond in writing.

  “(5) After considering any response received within the period specified in the notice, the Commission may, by notice to the QFE, vary the terms and conditions of the QFE’s grant of QFE status or the period of the grant, or both.

  “(6) The Commission may, in the notice under subsection (5), vary terms and conditions on a provisional basis and, if it does so, the Commission must, in the light of any changes in risk posed by the business or market practices of the QFE or any member of the QFE group, review those terms and conditions by a date stated in the notice.

  “(7) On completing the review, the Commission may do any of the following:

  • “(a) confirm 1 or more of the variations effected by subsection (5):

  • “(b) cancel 1 or more of the variations effected by subsection (5):

  • “(c) propose new terms and conditions or a new period of grant by giving the QFE a further notice under subsection (3).

“75A Termination of QFE status

• “(1) The QFE status of an entity or of partner entities terminates when—

  • “(a) the period of a grant of QFE status expires; or

  • “(b) the Commission receives a written request from the QFE or from any partner entity requesting the Commission to cancel the QFE status; or

  • “(c) the entity that forms, or any of the partner entities that jointly form, the QFE ceases to be registered; or

  • “(d) the Commission cancels its QFE status under section 75D(2).

  “(2) The Commission must notify the Registrar in writing of the termination of QFE status under subsection (1)(a), (b), or (d).

“75B Commission may designate certain QFE products as beyond scope of QFE advisers

• “(1) If, because of the complexity of a particular category 1 product, the Commission has concerns about the provision of personalised services in relation to that product by QFE advisers, the Commission may specify those concerns in a notice to the QFE or the partner entity whose QFE advisers provide those services.

  “(2) A notice under subsection (1) may be given only in exceptional circumstances.

  “(3) The Commission must specify in the notice a reasonable period for the relevant entity to respond in writing and must ask the entity to satisfy the Commission that the QFE advisers are able to, and will, provide financial adviser services in relation to the category 1 product concerned with the appropriate level of professionalism and competence.

  “(4) After considering the entity's response, the Commission may, by notice to the entity, determine that a QFE adviser may not provide a personalised financial adviser service to a retail client directly in relation to the specified category 1 product.

  “(5) A determination under subsection (4) has effect according to its tenor despite anything in section 18.

  “(6) The Commission may at any time, by notice to the entity, revoke a determination under subsection (4).

“75C Renewal of QFE status

• “(1) A QFE may apply for renewal of QFE status.

  “(2) An application for renewal of QFE status must be—

  • “(a) made in the prescribed form (if any); and

  • “(b) accompanied by the prescribed fee (if any).

  “(3) Sections 64 to 70 apply, with any necessary modifications, to an application for renewal of QFE status.

  “(4) If an application for renewal of QFE status has been made but not determined before the date on which the QFE status is due to expire, the QFE status continues until the application is determined.

  “(5) The renewal of QFE status takes effect from the date of expiry of the previous grant 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

• “(1) This section applies if the Commission is satisfied that—

  • “(a) a QFE or any partner entity of a QFE has ceased to be eligible for QFE status; or

  • “(b) the QFE or any member of the QFE group has breached or is in breach of this Act or the regulations; or

  • “(c) the QFE or any member of the QFE group is in breach of a term or condition of the grant of QFE status; or

  • “(d) the QFE or any partner entity of the QFE has failed to comply with a direction given to it by the Commission under section 75F; or

  • “(e) the QFE or any partner entity of the QFE has failed to pay a fee or levy as required by this Act or the regulations.

  “(2) In any case to which this section applies, the Commission may, after following the procedure set out in section 75E and subject to subsections (3) and (4),—

  • “(a) cancel the QFE’s status; or

  • “(b) cancel the QFE’s status and debar, for a specified period, the entity, any partner entity, and any associated entity of the former QFE from re-applying for QFE status; or

  • “(c) suspend the QFE’s status for a specified period or until the suspended QFE or any partner entity, or any associated entity of the suspended QFE, does any thing that the Commission requires; or

  • “(d) amend the terms and conditions of the QFE’s grant of status; or

  • “(e) order that the QFE pay a fine not exceeding $50,000; or

  • “(f) censure the QFE; or

  • “(g) take no further action.

  “(3) The Commission may take only 1 of the actions specified in subsection (2), except that it may order the QFE to pay a fine not exceeding $50,000 in addition to taking an action under subsection (2)(d) or (f).

  “(4) All partner entities of a QFE are jointly and severally liable for the payment of a fine that the QFE is ordered to pay under subsection (2)(e).

  “(5) The Commission must not order the QFE to pay a fine in relation to an act or omission that constitutes an offence for which the QFE or any partner entity of the QFE has been convicted by a court.

  “(6) If the Commission cancels or suspends the QFE status of an entity, the Commission must notify the Registrar in writing of the cancellation or suspension, and, in the case of suspension, the period of suspension.

  “(7) The Commission may publicly notify the action it takes under subsection (2) as it sees fit.

“75E Reasonable opportunity to be heard

• The Commission must not take any of the actions specified in section 75D(2) unless it has first—

  • “(a) informed the QFE and any partner entities of the QFE in writing of the reasons for taking any of those actions; and

  • “(b) given the QFE and any partner entities of the QFE or their representatives a reasonable opportunity to make written submissions and be heard on the question.

“75F Commission may give QFE direction

• “(1) This section applies if the Commission has reason to believe that a QFE is in breach of a disclosure or conduct obligation.

  “(2) The Commission may give the QFE, and every partner entity of the QFE, notice of its alleged breach and, if the Commission does give a notice of breach, the Commission must also give the QFE a reasonable opportunity to respond.

  “(3) If the Commission concludes, after considering the QFE’s response, that the QFE is in breach, the Commission may give the QFE a direction in writing.

  “(4) The direction may—

  • “(a) direct the QFE, any partner entity, or any associated entity of the QFE to comply with the disclosure or conduct obligation:

  • “(b) stipulate any steps that the QFE, any partner entity, or any associated entity of the QFE must take in order to comply with the disclosure or conduct obligation:

  • “(c) require the QFE to report to the Commission within 28 days of the date of the direction stating how and by when the Commission’s direction will be implemented.

  “(5) If the QFE, any partner entity, or any associated entity of the QFE fails to comply with a direction by the Commission, the QFE and every partner entity commits an offence (see section 132).

  “(6) Nothing in this section precludes the Commission from exercising any of its other powers under this Act against a QFE.

“75G Other provisions concerning Commission's powers in relation to QFE default

• “(1) A fine imposed by the Commission under section 75D(2)(e) is recoverable in any court as a debt due to the Commission.

  “(2) At the end of a period of suspension of QFE status, a QFE's status is immediately revived, unless its QFE status has been further suspended or has been cancelled.

  “(3) Suspension or cancellation is effective when a written notice of the suspension or cancellation is sent to the QFE by the Commission.

“QFE’s obligations

“76 Ongoing obligations of QFEs and of partner entities

• “(1) A QFE, and every partner entity of a QFE, must—

  • “(a) ensure compliance by the QFE and, where the QFE is part of a QFE group, by every member of that group, and by each employee and nominated representative of the QFE and of every member of that group, with the terms and conditions of the grant of QFE status; and

  • “(b) where an associated entity is the associated entity not only of the QFE but also of another QFE, ensure compliance by the associated entity and by each employee of the associated entity with the terms and conditions of the grant of QFE status of that other QFE; and

  • “(c) in relation to QFE advisers who are employees of the QFE or of a member of the QFE group, ensure compliance by each of those persons with his or her financial adviser obligations; and

  • “(d) in relation to QFE advisers who are nominated representatives of the QFE or of a partner entity, ensure compliance by each of those persons with his or her financial adviser obligations, whether or not the nominated representative acts for the QFE or for the partner entity or for any related company of the QFE or the partner entity; and

  • “(e) in relation to advisers of the QFE or of a member of the QFE group who perform a financial adviser service that, by virtue of sections 17 and 18 only an authorised financial adviser is permitted to perform, ensure that each of those persons is authorised:

  • “(f) provide the Commission, whenever reasonably required by the Commission and in any case in accordance with any requirements specified in the terms and conditions of its grant of QFE status, with an up-to-date list of the names of—

    • “(i) the authorised financial advisers of the QFE and of any members of the QFE group; and

    • “(ii) the nominated representatives of the QFE and of any partner entity; and

  • “(g) provide an annual report to the Commission in accordance with section 77; and

  • “(h) comply with a direction by the Commission given under section 72; and

  • “(i) comply with its other obligations under this Act and the regulations.

  “(2) A contravention of subsection (1)(e) gives rise to the offences described in section 133.

“77 QFE must provide annual report to Commission

• “(1) Within 5 months after the end of its financial year, a QFE must send to the Commission a written report in respect of that year (the reporting year)—

  • “(a) certifying that the QFE and every member of the QFE group has complied with its obligations under this Act and the regulations, and with the terms and conditions of the grant of QFE status; and

  • “(b) if the QFE or any member of the QFE group has not complied with its obligations under this Act and the regulations, and with the terms and conditions of the grant of QFE status, stating those respects in which it has failed to comply; and

  • “(c) if the QFE is aware of any breach of a financial adviser obligation by an employee, agent, or nominated representative of the QFE or of a member of the QFE group, stating—

    • “(i) the name of that person; and

    • “(ii) the nature of that person’s breach or breaches; and

  • “(d) containing any other information required by the regulations; and

  • “(e) containing the information (if any) that is required to be contained in the report by the terms and conditions of the grant of QFE status.

  “(2) The report may be submitted by any partner entity of the QFE.

  “(3) The report must be signed by either—

  • “(a) a principal officer of the QFE; or

  • “(b) a principal officer of a partner entity of the QFE.

  “(4) Contraventions of subsection (1) give rise to the offences described in section 134.”