Dated at Auckland this 27th day of August 2020.
Nick Kynoch,
General Counsel.
Statement of reasons
Section 77P(1A) of the Financial Advisers Act 2008 (the FA Act) requires brokers to keep client money and client property separate from their own money and property. The 2017 Notice exempts non-NZX brokers from that requirement subject to the conditions set out in the notice. The 2017 Notice is due to be revoked on 30 November 2020.
One of the conditions imposed by the 2017 Notice is that exempt brokers must obtain an auditor’s report about their compliance with the 2017 Notice within 4 months after their relevant date (usually their annual balance date). The effects of COVID-19 have made it difficult for some brokers to obtain their audit report by that deadline. The 2017 Notice was amended in April 2020 to give affected brokers an additional 2 months to comply. Currently, this covers brokers with a relevant date between 31 December 2019 and 1 July 2020. However, because of the continuing effects of COVID-19, this longer time frame now extends to also cover brokers whose relevant date is in July 2020.
The FMA, after satisfying itself as to the matters set out in section 148(2)(a) of the FA Act, considers it appropriate to amend the 2017 Notice because—
the 2017 Notice has been in place for 3 years and the original policy reasons for it remain valid and relevant. The FMA is aware of likely continued reliance on the 2017 Notice until it is revoked by the 2019 Act:
the costs of full and immediate compliance by brokers with section 77P(1A) of the FA Act if the term of the 2017 Notice were not extended, for the short period until it is revoked, would not be justified by the benefit of a significant reduction in risks for clients.
Issued under the authority of the Legislation Act 2012.
Date of notification in Gazette: 31 August 2020.
This notice is administered by the Financial Markets Authority.