Australian-regulated financial advisers will be exempt from the new financial services regulatory regime until 30 June 2013 so that they can continue to service their New Zealand-based clients while long-term arrangements for mutual “trans-Tasman” recognition are developed.
The Financial Advisers (Australian Licensees) Exemption Notice 2011 came into force on 1 July 2011. It exempts Australian licensees and their “specified representatives” from certain key provisions of the Financial Advisers Act 2008 (FAA) and the Financial Service Providers (Registration and Dispute Resolution) Act 2008 (FSPA).
The Exemption should be available for many Australian licensees. But there is some devil in the detail, including the provision that licensees relying on the Exemption should not solicit retail clients in New Zealand (presumably to prevent the Exemption being used as “backdoor” route to business expansion in New Zealand, without full compliance with the FAA and FSPA).
What relief does the Exemption provide?
Australian licensees who have no place of business in New Zealand, and their “specified representatives”, can upon notification to the Financial Markets Authority (FMA) be exempt from:
- the requirement to act only through registered or authorised individual advisers or having to be registered or authorised
- the restrictions on holding themselves out as financial or investment planners
- disclosure obligations for personalised services to retail clients, and
- in respect of specified representatives, the requirement to be individually registered and the prohibition on holding out as being in the business of providing financial service unless registered.
A “specified representative” is essentially an individual who is a “representative” of the Australian licensee under the Australian Corporations Act 2001 and who is notified to the FMA.
What clients and services does the Exemption relate to?
The Exemption applies in relation to all Australian personalised retail services to:
- existing clients of the Australian licensee (at the time it notifies the FMA that it wishes to rely on the Exemption) that have a residential address in New Zealand, or
- clients who become clients of the Australian licensee when physically located in Australia, or
- clients who become clients of the Australian licensee while physically located in New Zealand, other than as a result of solicitation by the Australian licensee or its specified representatives.
In addition, the services must be provided from outside New Zealand through a “specified representative” and must be the same as (or no more than) the services that the Australian licensee is permitted to provide to Australian clients.
The “grandfathering” of existing clients at the time of reliance on the Exemption recognises that those clients are, as a matter of history, current clients of the Australian licensee (and do not represent the forming of any future relationships with clients physically located in New Zealand).
Similarly, allowing the client relationship to commence when the client is physically in New Zealand, as long as the Australian licensee (or a specified representative) does not solicit the client, recognises the possibility that there may well be cases where the Australian licensee is approached by the client on an unsolicited basis.
Conditions of Exemption
To rely on the Exemption an Australian licensee must:
- notify the FMA of its intention to rely on the Exemption
- include in that notification the names and contact information of its “specified representatives” as well as a copy if its current New Zealand retail client list
- register as a financial service provider under the FSPA
- become a member of an approved New Zealand based dispute resolution scheme
- submit to the non-exclusive jurisdiction of the New Zealand courts and appoint an agent for receiving notices in New Zealand
- ensure that its specified representatives are adequately trained and competent under Australian law
- provide disclosure to New Zealand retail clients in accordance with the Corporations Act, as well as written “health warnings” indicating the licensee’s reliance on the Exemption
- comply with certain ongoing notification requirements to the FMA (including providing an updated client list, where requested)
- maintain procedures to record client details, and to show when those clients advise the licensees that they have moved to New Zealand, and
- not engage in solicitation of retail clients in New Zealand.