Amendments made to the Financial Advisers Act 2008 (FAA) in June this year have removed the requirement for persons who solely provide financial advice on category 2 products (which include a range of simple securities such as call debt securities, general insurance products and consumer credit contracts) to be authorised under the regime.
The amendments were made so that the focus of the legislation was on services that are provided in relation to investments, as opposed to services that are provided solely in relation to risk or credit products. However, the amendments raised a further policy question about whether the regulatory framework should allow a person to voluntarily seek authorisation to provide financial adviser services in relation to category 2 products.
Commerce Minister Simon Power has now announced that Cabinet has agreed for regulations to be developed to allow those who only provide services in relation to category 2 products to be voluntarily authorised under the FAA. This development will be particularly welcomed by a number of insurance advisers and mortgage brokers who, under the previous wording of the FAA, had already begun to take steps towards authorisation.
Under the new regulations, an Authorised Financial Adviser (AFA) who is authorised to provide financial adviser services in relation to category 2 products would be subject to the same regulatory obligations as any other AFA. The primary distinction will be that, under the Code of Professional Conduct for Authorised Financial Advisers, an AFA authorised to provide financial adviser services in relation to category 2 products would be able to do unit standard set E (insurance specialist standards or residential property lending specialist standards) in place of unit standard set D (investment specialist standards). He or she would also be restricted from providing advisory services in respect of category 1 products.
For further background information on this development, click here to read the Cabinet paper released on the Ministry of Economic Development's website.
The regulations allowing voluntarily authorisation are expected to be passed in November.