The Financial Advisers (Broker Trust Accounts) Exemption Notice 2010 allows brokers to continue to pay and hold client money in trust accounts held with overseas banks until such time as relevant regulations are put in place under the Financial Advisers Act 2008 (FAA).
Currently there are a large number of brokers who are to be subject to the FAA who hold client money in trust accounts with overseas banks. However, under section 77P(1)(b) of the FAA, brokers must pay client funds into a trust account with a bank in New Zealand unless other entities have been prescribed by regulation. Since no regulations have yet been made to provide for that, when section 77P comes into force brokers with trust accounts with overseas banks would have been in contravention of the FAA.
The notice expires on 31 May 2011.