Following on from the Ministry of Business, Innovation and Employment consultation in May this year on whether regulations were required to exempt the issue or sale of financial products from the uninvited direct sales provisions in subpart 2 of Part 4A of the Fair Trading Act 1986 (FTA), the Fair Trading (Uninvited Direct Sales—Financial Products) Regulations 2014 have been enacted. The regulations came into force on 17 June 2014.
The regulations address concerns by stakeholders over issues arising from the overlap of the new uninvited direct sales provisions in the FTA and the provisions in the Financial Markets Conduct Act 2013 (FMCA) relating to offers of financial products to persons who are not acting in trade in the course of unsolicited meetings.
Like the FTA, the FMCA provisions are aimed at protection against pressure selling of financial products. The FMCA unsolicited meeting provisions do not however apply in certain circumstances and stakeholders identified that there would be practical difficulties (including material compliance costs) if the FTA’s uninvited direct sales provisions applied to those circumstances exempted under the FMCA.
The Fair Trading (Uninvited Direct Sales—Financial Products) Regulations 2014, which are based on some (but not all) of the exemptions in section 34 of the FMCA, exempt the following classes of agreements for the issue or sale of financial products from the uninvited direct sales provisions in the FTA:
- offers to wholesale investors (for example, investment businesses or large entities);
- offers to investors who are close business associates of the offeror or are relatives of the offeror;
- offers through a licensee for a discretionary investment management service;
- offers under employee share purchase schemes or dividend reinvestment plans;
- offers to persons who are under the control of wholesale investors or certain other persons who do not require disclosure under the FMCA;
- offers through an authorised financial adviser or a QFE adviser who is acting in the ordinary course of business as a financial adviser;
- offers of quoted financial products through financial advisers (who are required to comply with obligations under the Financial Advisers Act 2008); and
- offers of standard banking products by a registered bank or a subsidiary of a registered bank (such as simple “on-call” accounts and term deposits).
The regulatory impact statement released on the exemption notice notes that there may be grounds for further exemptions from the FTA’s uninvited direct sales provisions (for example, for spot foreign exchange products and insurance products), but these would need to be introduced through primary legislation as they would be broader than allowed under the FTA’s regulation-making provisions. Click here for further details.