AFA Authorisation Guide
August 2015
How to apply to become an
Authorised Financial Adviser (AFA)
Document history
This version was issued in August 2015 and is based on legislation and regulations as at the date of
issue.
www.fma.govt.nz
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Contents
Contents
3
Section 1: About this guide
5
Section 2: Steps to becoming an AFA
6
Section 3: Important first steps
8
Join a Dispute Resolution Scheme
8
Register with the Financial Service Providers Register
8
Select the scope of Financial Adviser Services (FAS scope) you will provide
8
If you want to change your FAS scope before authorisation
8
Section 4: Proof of good character
9
Providing evidence of good character
9
Adverse impact statement
9
Declaring criminal convictions punishable by imprisonment
10
Disclosing criminal or other convictions
10
Testimonials
11
Section 5: Proof of competence
12
Alternative qualifications and designations
13
TSO registration identification number
14
Australian financial advisers
14
Section 6: Personalised DIMS eligibility
14
Section 7: Adviser Business Statement
15
Section 8: Qualifying Financial Entity (QFE) FSP Registration Number
15
Section 9: FSP Registration Number
15
AFA Authorisation Guide | Page 3
Section 10: Submitting your application for authorisation
16
Registration
16
Becoming authorised
16
Uploading documents
16
Confirming your application
16
Submitting your application and paying fees
17
Applicant declaration
17
Section 11: Authorisation approvals
17
Authorisation approval
17
Period of authorisation
18
Submissions
18
Application declined
18
Section 12: Making changes to your authorisation
18
Section 13: Termination of authorisation
19
Cancellation of your authorisation
19
Section 14: Renewal of your authorisation
19
Where to go for help
20
Appendix 1:
21
FA Act (personalised DIMS)
21
Glossary
48
AFA Authorisation Guide | Page 4
Section 1: About this guide
This guide explains how to apply to become an Authorised Financial Adviser (AFA). It also explains
how to apply to make changes to your authorisation status and lists the reasons we may have to
terminate authorisation.
You should read this guide thoroughly before you apply for authorisation. You can use it as a
reference during the online application process, in conjunction with the on-screen help text.
Before beginning your application you should make sure you have read and understood the
Financial Advisers Act 2008, the Code of Professional Conduct (the Code) and the Standard
Conditions for Authorised Financial Advisers.
AFA Authorisation Guide | Page 5
Section 2: Steps to becoming an AFA
This is a check list of the steps to becoming an AFA. We recommend that you tick off each step
before you go online to apply for authorisation. The steps are fully explained in this guide under
Authorisation Requirements.
□ Register with The Skills Organisation (TSO) for your TSO registration identification number and
to book your competence assessments and examinations.
□ Sit and complete all of the required competence assessments and examinations.
□ If applicable, get evidence from your educational institution or industry body of accepted
alternative qualifications and designations (see Schedule G of the Code). Have copies of these
original documents certified as correct by a solicitor of the High Court of New Zealand, a justice
of the peace or an officer of the court.
□ Join and register with a Dispute Resolution Scheme (DRS) or obtain details of your employer’s
DRS.
□ Determine the scope of Financial Adviser Services (FAS scope) you wish to be authorised for.
You will only be able to give advice on those services you are qualified and authorised to
provide.
□ Determine which testimonials you will need to submit and download and print the relevant
testimonial templates. Complete the testimonial forms with your name and TSO number, then
send them to your referees to complete, date, sign and return to you.
□ If applicable, prepare a statement declaring any matters that could have a negative impact on
the FMA’s view of your good character, taking into account your rights under the Criminal
Records (Clean Slate) Act 2004.
□ If applicable, get details of any criminal convictions you have, either in NZ or overseas, which
carried a potential penalty of six months imprisonment or more. Drink–drive convictions and
serious driving convictions are criminal convictions and must be included. You will also need
details of any other criminal convictions which could have a negative impact on our assessment
of your character. Prepare a statement of your convictions, including the offence, the penalty
and when and where you were convicted. Provide any additional information that is relevant to
the circumstances of the offence, and the financial adviser services you are seeking
authorisation for.
□ Prepare an Adviser Business Statement (ABS) so it is available when you are granted AFA
authorisation status.
□ Prepare your CV outlining your employment history for the previous 15 years, including any
period of time when you were living overseas, and the relevant month(s) and year(s).
□ If you work for, or plan to work for a Qualifying Financial Entity (QFE), you will need to know the
FSP registration number of your QFE. This applies if you are an employee or a nominated
representative of a QFE or an associated entity of a QFE.
□ When you have successfully completed all of the required competence assessments and
examinations and have all the required documents saved electronically and on hand to upload,
you can apply for both registration and authorisation online at the FSP Register.
AFA Authorisation Guide | Page 6
□ Set up your own logon (username and password) in RealMe (formerly known as i-govt) and
Financial Service Providers Register (FSPR) user account at the FSP Register (www.fspr.govt.nz).
You can use your existing RealMe logon if you have one.
□ Enter your RealMe logon details on the FSPR website and follow the registration instructions.
You will be asked if you wish to apply to be authorised by the FMA. Answer ‘Yes’ and then
complete the authorisation application. The system will allow you up to 30 days to complete the
authorisation application process, provided you start it at the same time as you register.
AFA Authorisation Guide | Page 7
Section 3: Important first steps
This section explains the important first steps you must take before you start your AFA
authorisation application.
Join a Dispute Resolution Scheme
Before providing financial services to retail clients you must be a member of an approved Dispute
Resolution Scheme (DRS). You will need to record which scheme you (or your employer or QFE)
belong to during the online registration application process.
For more information about dispute resolution schemes click here.
Register with the Financial Service Providers Register
The Financial Service Providers (Registration and Dispute Resolution) Act requires all financial
service providers operating in New Zealand, including financial advisers, to be registered.
Registration is a prerequisite to authorisation. The FSP Register is public so anyone can search it to
check if you are registered and authorised.
You will need to register before applying to be authorised. As part of the registration application
process the registrar will carry out a criminal history check on you and determine whether or not
you are fit to become a registered financial service provider. Detailed information on registration is
provided on the FSP Register.
Select the scope of Financial Adviser Services (FAS scope) you will provide
Before you apply for authorisation you need to decide which service(s) you wish to be authorised to
provide. During the online application process you will be asked to select from a list of financial
adviser services or combination of financial adviser services – see below. Select the option in the
drop-down box appearing in the online application that matches the services you wish to provide.
Definitions of these financial adviser services can be found in schedule H of the Code.
Financial advice
Financial advice and investment planning services
Personalised discretionary investment management services
Financial advice and personalised discretionary investment management services
Financial advice, personalised discretionary investment management services and investment
planning services
Financial adviser services in relation to category 2 products only
Financial adviser services to wholesale clients and provision of class services
If you want to change your FAS scope before authorisation
If you wish to amend the FAS scope you have applied for before your authorisation has been
granted, email us at AFAapplications@fma.govt.nz to request a change of scope. You will have to
AFA Authorisation Guide | Page 8
satisfy us that you have met the competence requirements (or alternatives) for your new FAS
scope.
You cannot apply to amend your FAS scope through the FSP website.
Section 4: Proof of good character
Providing evidence of good character
The FMA must be satisfied that you are of good character before we grant your authorisation. Our
assessment of good character is an important tool for preserving public confidence in the
professionalism and integrity of financial advisers. To enable us to assess your character, you will
need to declare anything that may have a negative impact on our view of your character, including
details of any criminal convictions. This includes any drink–drive or other serious driving
convictions.
You will also need to provide written testimonials and complete a good character declaration form
provided by the FMA.
Adverse impact statement
During the online application process you will be asked:
“Are you aware of any matters that may have an adverse impact on the FMA's view of your
character?”
You should respond to this question by providing any information we might wish to know before
granting authorisation. Any information supplied should be set out in a separate MS Word
document, then scanned as a PDF and uploaded as part of the online application process.
When responding you should consider the following examples of the types of conduct we would
expect you to disclose:

having been dismissed from employment or asked to resign from a position of trust,
fiduciary responsibility, or similar

having been investigated, charged, disciplined, censured, suspended or criticised by a
regulatory or professional body, court or tribunal

having been (or currently) the subject of a complaint to a professional body

any current or pending disciplinary or criminal charges, dispute resolution matters or civil
proceedings against you in New Zealand or overseas

holding certain positions in a business which has gone into liquidation or receivership while
you were connected with that business, or within one year of that connection

involvement in civil proceedings against you

information on conduct suggesting:

a lack of willingness to comply with legal obligations, regulatory requirements or
professional standards
AFA Authorisation Guide | Page 9

obstructive, misleading or untruthful dealings with others

a breach of fiduciary obligation or other obligation involving trust

a failure to deal appropriately with conflicts of interest

involvement in negligent, deceitful or otherwise discreditable business or professional
practices. For example being involved in the management or being a major
shareholder of a company employing discreditable practices

failure to manage business or personal debts or financial affairs satisfactorily.
Please provide us with all relevant details of any conduct of this nature (or similar). If you are
unsure about whether a matter needs to be disclosed, you should either disclose it or seek legal
advice on whether or not it requires disclosure.
We will not be satisfied that full disclosure has been made unless you disclose all relevant
information yourself, even if you know we might obtain the information from another source. If you
do not disclose matters which we subsequently become aware of, your non-disclosure will be
viewed unfavourably by us when assessing your good character.
Declaring criminal convictions punishable by imprisonment
During the online application process you will be asked:
“Have you been convicted by a court in New Zealand or overseas of an offence punishable by
imprisonment for a term of six months or more? “
You must disclose if you have any criminal convictions in New Zealand or overseas for which you
could have been sentenced to six or more months in prison. This is a specific eligibility criteria
required by statute. It makes no difference whether or not you were actually sentenced to a term
of imprisonment or not, or that you didn’t serve an entire six month term of imprisonment if you
were sentenced.
Any conviction in New Zealand or overseas carrying a potential penalty of six or more month’s
imprisonment must be disclosed.
You must disclose to us the details of any convictions including the offence, the penalty and when
and where you were convicted. This information should be set out in a separate MS Word
document, then scanned as a PDF and uploaded as part of the application process.
Disclosing criminal or other convictions
In addition to the criminal convictions you must disclose in the ‘Declaring criminal convictions
punishable by imprisonment’ section above, you also need to disclose any other convictions that
could affect our assessment of your character. For example, criminal convictions:

involving dishonesty, deceit, theft or fraud

suggesting a lack of competence, diligence, judgement, honesty or integrity

that relate to the types of information listed above.
Drink–drive convictions and serious driving convictions are criminal convictions and must be
disclosed.
As part of our assessment of your application, we will ask you questions about each of these
circumstances in the declaration we will send you after you have submitted your online application.
We will check records held by the Ministry of Business, Innovation and Employment for any history
of bankruptcy or company insolvency you may have been involved with.
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As a guide, we would not expect you to disclose offences such as parking infringements, unless the
overall history or pattern of offending suggests a lack of willingness to comply with, or disregard for
the law.
How we assess good character
If you have conduct or conviction matters to disclose, we will not automatically take an adverse
view of your character or disqualify you from being eligible to be authorised as an AFA. We have
the discretion to take into account the circumstances of the matters you disclose and decide
whether they reflect negatively on your fitness to act as an AFA.
If you would like to talk to us directly, to explain the circumstances disclosed in your application,
please contact us via email at AFAapplications@fma.govt.nz after lodging your application.
Nothing in this section affects your rights under the Criminal Records (Clean Slate) Act 2004.
Failure to disclose criminal or other convictions
It is in your interest to disclose any convictions you have, and anything else we might need to
consider before reaching our decision. You can also provide relevant information about your
financial adviser services or your role relevant to the circumstances of the offence as part of your
submission.
We will check records held by the Ministry of Justice and may check with overseas government
agencies to verify the information you provide. However you will still need to disclose all of this
information yourself for the FMA to be satisfied that you have made full disclosure.
For further information on the process and policies for the assessment of good character see our
Guidance Note: Good character and criminal convictions, Financial Advisers Act 2008
Testimonials
As part of our assessment of your good character, you must provide testimonials in support of your
application. Signed testimonials need to be scanned and uploaded as part of your online
application. Each testimonial must be signed by the referee, include their contact telephone, email
and address, and be dated no more than two months before the application date. We may contact
your referees in person to discuss the content of their testimonial.
Testimonials must provide substantive information about you from your referee. Testimonials
submitted with Yes/No responses to the questions in the template will not be accepted. We can
reject a testimonial and require you to submit a replacement testimonial. Please ensure your
referees understand the purpose and importance of the testimonials, and are in a position to
provide full and correct information.
Standard testimonials
You are required to provide two standard testimonials in the template (available on the FMA’s
website) from the following sources:
1. Your current manager
2. Your immediate past manager.
Non–standard testimonials
Where your employment circumstances preclude you from providing the two standard testimonials
from your current manager and immediate past manager, you may seek our prior consent to
provide three non-standard testimonials instead. We recommend you email us at
AFAapplications@fma.govt.nz to tell us why you cannot provide the two standard testimonials. An
AFA Authorisation Guide | Page 11
FMA adviser will contact you to discuss your circumstances and the alternative information you
should submit.
The FMA has sole discretion to grant or withhold written consent to your request.
In general we expect non–standard testimonials to be provided by referees who have:

known you for a minimum period of 24 months but preferably longer, and

have had the opportunity to observe your conduct first hand during that period.
Testimonials must provide substantive information about you from your referee.
We have the discretion to reject a testimonial and require you to submit a replacement.
Testimonial templates and guidelines
We have produced testimonial guidelines and templates for applicants and their referees to explain
what you and your referees need to do. These are available on the authorisation resources and
templates page of our website. Please ensure you use the correct template for each testimonial.
Curriculum Vitae
You will be required to provide a curriculum vitae (CV) in support of your application. You will need
to upload your CV together with the testimonials under the testimonials section of the online
application form on the FSPR.
Your CV should describe your employment history for the previous 15 years with details of your
employers, the specific month and year of employment, the country where you were employed and
the nature of your position at each place of employment.
Section 5: Proof of competence
To be authorised you must meet the minimum standards of competence, knowledge and skills
specified in the Code. The Code establishes the National Certificate in Financial Services (Financial
Advice) Level 5 (‘National Certificate’) as the minimum standard of competence for AFAs, and sets
out the educational requirements and alternative paths available to advisers to meet this minimum
standard.
To understand the competence requirements, please read Code Standards 14 – 16 and Schedule G
of the Code.
The FAS scope you wish to be authorised to provide will dictate which Unit Standard Sets you need
to complete. The table below sets out the competence requirements for authorisation in each FAS
scope.
AFA Authorisation Guide | Page 12
Financial adviser service or services
Competence
requirements
(Unit Standard Sets)
Financial advice
A, B, C, D
Financial advice and investment planning services
A, B, C, D
Personalised discretionary investment management services
A, B, D
Financial advice and personalised discretionary investment
management services
A, B, C, D
Financial advice, personalised discretionary investment management
services and investment planning services
A, B, C, D
Financial adviser services in relation to Category 2 products only
A, B, C, E
Financial adviser services to wholesale clients and provision of class
services
A, B
Review the National Certificate unit standards on The Skills Organisation website. Reviewing these
will help you to check whether you have any gaps in your knowledge or skills, and decide whether
you need to undertake further training in order to meet the Code’s competence requirements.
Arrange any training you need to address gaps in your knowledge and skills through an accredited
training provider.
The Skills Organisation (TSO) will advise us of your Unit Standard Set results once you have
completed them. All of the competence requirements have to be met before your application can
be approved.
Alternative qualifications and designations
The Code lists the qualifications and designations which are acceptable alternatives to certain Unit
Standard sets that make up the National Certificate. These are listed in Schedule G of the Code and
defined in Schedule H. If you wish to rely on any of these alternative qualifications or designations,
you will need to scan and upload evidence of them during the authorisation application process.
Alternative qualifications
You will need to provide a certified copy of your qualification, or a certified copy of your official
academic record which states you have met the requirements to attain the qualification.
Qualifications can be certified as correct when compared to the original by a solicitor of the High
Court, a justice of the peace or an officer of the court.
Alternatively you can provide a letter on letterhead paper from the relevant educational body or
institution confirming that you hold the qualification, and the date on which the qualification was
conferred. If you upload a copy of the letter with your application, you will also need to post the
original hard copy of the letter to our office (marked for the attention of the licensing team, FMA,
PO Box 1179, Wellington 6140). The original will be returned to you once it has been sighted.
Alternative designations
You will need to provide a copy of your designation certificate or a letter from the professional body
or institution verifying your membership, the date the designation was awarded, and that the
designation is up-to-date. Please note that if you provide a copy of your designation, we will also
require confirmation from the professional body that your designation is current.
AFA Authorisation Guide | Page 13
TSO registration identification number
When you apply for authorisation you will be asked for your TSO registration identification number.
This number is also required when you book competence assessments and exams through TSO. The
number may sometimes be referred to as the ETITO registration identification number in the online
application form.
To obtain this number register with TSO’s centrally administered assessment system. You will then
receive access to The Skills Organisation’s Candidate Handbook which explains the competence
assessment process.
Australian financial advisers
There are three avenues for recognition of licences or qualifications of Australian financial advisers
who wish to provide financial adviser services to New Zealand retail clients. To understand your
eligibility under any of these avenues, contact the FMA in writing or by email to
AFAapplcations@fma.govt.nz to discuss your circumstances and eligibility.
More information can be found on our website under Australian Financial Advisers.
Australian financial advisers operating from Australia
The Financial Advisers (Australian Licensees) Exemption Notice is applicable to Australian Financial
Services Licence holders who provide certain financial adviser services from a place of business in
Australia to New Zealand clients. This can also be found on our website under the Financial Advisers
(Australian Licensees) exemption notice.
How to apply under this exemption
If you are eligible to apply under this exemption, refer to the check list on page six of this guide.
Log on to the FSPR website www.fspr.govt.nz to apply for registration as a financial services
provider and apply for authorisation as an AFA. We will send you an Australian Qualified Advisers
Supplementary Information Form that all Australian applicants using the exemption must complete.
The usual fees for AFA applications will apply.
Australian qualifications recognition
The Financial Advisers (Australian Qualified Advisers) Exemption Notice provides an exemption from
the qualifications requirements in Code Standard 16 for Australian-qualified advisers applying to be
authorised financial advisers. Certain conditions must be met. This procedure is part of a mutual
recognition arrangement with ASIC.
Trans-Tasman mutual recognition
Recognition under the Trans-Tasman Mutual Recognition Act 1997 (TTMRA) can be given to current
individual holders of Australian Financial Services Licences and/or Australian Credit Licences who
provide certain services and who apply to become authorised financial advisers and registered
financial advisers. TTMRA recognition has limited application as it does not apply to entities or
representatives.
Section 6: Personalised DIMS eligibility
To be authorised to provide personalised DIMS you must satisfy us that you are capable of
effectively performing the personalised DIMS service. The FMA has set minimum standards which
an applicant must satisfy to show capability. These can be found in Appendix 1.
AFA Authorisation Guide | Page 14
Your Adviser Business Statement (ABS) is used by us as evidence that you satisfy the minimum
standards and are therefore eligible to be authorised to provide personalised DIMS.
Please see Appendix 1 for guidance on including the evidentiary information in your ABS.
On receipt of your application selecting the FAS scope of personalised DIMS to be authorised, the
FMA will contact you to provide your ABS with the information referred to above.
Section 7: Adviser Business Statement
Every AFA is required to have an Adviser Business Statement (ABS). Your ABS describes your
business and explains the systems and procedures you have to ensure that you conduct your
business in a professional way. It will also help us determine the level of regulatory monitoring
appropriate to you.
We have produced an AFA Adviser Business Statement Guide that explains how to write your ABS.
During the online application process you will be asked to confirm whether you have an ABS. If you
have not prepared an ABS at the time you submit your application, you can answer ‘No’ to that
question. An up-to-date ABS is a Standard Condition of an AFA’s authorisation so you will require
an ABS once you are authorised.
Section 8: Qualifying Financial Entity (QFE) FSP
Registration Number
If you are either an employee or a nominated representative of a QFE or a member of a QFE Group
you will need to provide your QFE’s FSP registration number when you apply for authorisation.
Your QFE will be able to give this to you.
Section 9: FSP Registration Number
You must apply for registration as a financial services provider and apply for authorisation as an AFA
on the Financial Service Providers Register. Registration and authorisation are different but can be
applied for at the same time.
Before logging on to the FSPR website, we recommend you refer to the check list in Section 2 on
page six of this guide to ensure that you have prepared everything you will need during the
application process.
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The online application process has been designed to allow you to apply for registration and then
apply for authorisation at the same time. Help text is provided in the online application screen to
make the process easy to follow and also provides additional information.
Section 10: Submitting your application for
authorisation
Registration
When registering you will be asked to provide some basic personal and business information, as
well as to select the financial adviser services you will provide and the Dispute Resolution Scheme
that you or your employer have joined.
Becoming authorised
Once you have applied for registration online, you will be asked if you wish to apply to be
authorised as an AFA. If you do and continue with your application for authorisation, you will be
asked to provide additional information to satisfy the FMA that you meet the requirements for
authorisation.
If you start your authorisation application and find that you don’t have all of the relevant
information available or need to interrupt the process, you can save and exit the application. You
can then return to complete it, but you must do so within 30 days. In this case, it will appear as ‘My
Unfinished Business’ when you log on again.
You can choose to submit your registration application and then apply for authorisation at a later
date. To do this simply return to the FSPR website and enter your RealMe logon. This will allow you
to make changes to complete your application and you can fill out the unfinished authorisation
application section.
In this case, you will need to supply all of the authorisation information during the online session.
You cannot save and exit this part of the process as you can at the time of registration.
Uploading documents
At various steps in the application process you will need to upload the documents you have
prepared, such as testimonials and evidence of alternative qualifications. These documents should
be in MS Word or PDF format. Word documents will be converted to PDF files automatically when
they are scanned and uploaded.
Confirming your application
AFA applications must be completed by the person applying to become an AFA
Another person or colleague in your business such as your compliance manager or a personal
assistant cannot apply or submit an application on your behalf.
When you have completed your application you will be asked:
AFA Authorisation Guide | Page 16

to confirm that you are the person named in the application and that, if authorised
as an AFA, you will act with professionalism and integrity. In some circumstances we
may require you to provide a certified copy of your passport or drivers licence to
prove your identity

to authorise the registrar to disclose personal information to the FMA and to
authorise the FMA and other parties to collect, use or disclose personal information
for the purpose of authorisation

to confirm that you understand that it is a criminal offence under Section 136 of the
Financial Advisers Act to knowingly make a false or misleading representation or
omission in seeking authorisation status or to use a document, knowing it to be
false.
Submitting your application and paying fees
Once you have completed and submitted your application and paid the required fees, the FSP
registrar will advise you within five working days by email if you are registered. If registration is
confirmed then your application for authorisation will be forwarded automatically to the FMA to
process.
Applicant declaration
After you have submitted your online application via the FSPR, we will contact you to collect further
information on eligibility criteria to help us assess your application. We will send you a declaration
in a template format with the additional information we need, to complete, sign and return to us.
You will be asked to declare that you have:

no record of adverse professional conduct by reference to the list of specified conduct
matters (the list repeats the matters outlined in Section 4 of this guide)
 no criminal conviction by a court in NZ of an offence punishable by imprisonment for a term
of six months or more
 no criminal conviction by a court overseas of an offence punishable by imprisonment for a
term of six months or more.
You will also be asked to disclose:


details of any current and prior membership (if any) of a DRS
details of any complaints made against you to your current and prior DRS.
Section 11: Authorisation approvals
Authorisation approval
We will only grant authorisation when we are satisfied you have met all of the eligibility
requirements. We will process your application as speedily as possible. The time it takes to process
your application will depend on a number of factors, including whether there are any gaps or
omissions in the information you provide. If we have any questions regarding your application we
will contact you directly.
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We will formally notify you when you have been granted authorisation. We will also notify you of
the Standard Conditions and any individual conditions that will apply to your authorisation.
You will receive a letter from us by email confirming your AFA status. The letter will include a copy
of the Standard Conditions for AFAs, any individual conditions attached to your authorisation and a
Certificate of Authorisation which includes the term and expiry date of your authorisation.
We will advise the FSP Registrar of your authorisation, and your status as an Authorised Financial
Adviser will be published on the Financial Service Providers Register. Your status as an AFA will also
be published on the FMA website.
Period of authorisation
In most cases we authorise financial advisers for an initial term of five years from the date of
authorisation, unless there are reasons for an alternative term. We will let you know if we think you
should be authorised for a term other than five years.
Submissions
If, based on the information available to us, we are considering declining your application, you will
be notified and given the opportunity to make submissions in support of your application. You may
also be given the opportunity to meet with us to discuss your submissions, and may have your
solicitor or another support person attend that meeting.
Application declined
If your authorisation application is declined, we will formally notify you of our decision and the
reasons for it. You may appeal against our decision to the District Court within 20 days of being
notified of the decision. Your appeal rights are set out in section 138 of the Financial Advisers Act.
Section 12: Making changes to your authorisation
After you have been authorised, you may apply to change the period of your authorisation, the
terms and conditions of your authorisation, or the FAS scopes you have been authorised for.
i.
If you wish to add to your FAS scope you will need to submit a scope variation application
form. The application form (AFAVAR 1.1) is available on the FMA website or by emailing
AFAapplications@fma.govt.nz.
Complete form AFAVAR 1.1 and submit it to the FMA with the required supporting
documentation and the relevant application fee.
ii. If you wish to wish to change the period or the terms and conditions of your authorisation
you will need to submit a variation application form. The application form (AFAVAR 1.2) is
available on the FMA website or by emailing AFAapplications@fma.govt.nz.
iii. Complete form AFAVAR 1.1 and submit it to the FMA with the required supporting
documentation and the relevant application fee.
AFA Authorisation Guide | Page 18
iv. If you wish to add personalised DIMS to your FAS scope you will need to submit a DIMS
variation application form. The application form (AFADIMS 1.1) is available by emailing
AFAapplications@fma.govt.nz
Complete form AFADIMS1.1 and submit it to the FMA with the required supporting
documentation and the relevant application fee.
v. If you wish to reduce your FAS scope then you can request this by emailing us at
AFAapplications@fma.govt.nz.
We will change your FAS scope, update our records and notify the registrar of financial service
providers to remove the relevant services from your FAS scope on the register. We will also issue
you with a replacement Certificate of Authorisation with the updated FAS scope(s).
Section 13: Termination of authorisation
Your authorisation can be terminated for the following reasons:
i.
the period of your authorisation expires
ii.
you ask the FMA to cancel your authorisation
iii.
you cease to be registered as an FSP
iv.
the FMA cancels or suspends your authorisation if you are no longer eligible to be
authorised, or you have breached your obligations under the FAA, regulations, the Code
or your terms or conditions.
If we decide to cancel, suspend or amend the terms and conditions of your authorisation, you will
be notified first and given the opportunity to make submissions. We will notify your change of
status to the registrar. If your authorisation is cancelled or suspended because you are no longer
eligible or you have breached your obligations under the Act, we may also make this information
public.
Cancellation of your authorisation
If you decide to cancel your authorisation please email the FMA at AFAapplcations@fma.govt.nz.
Section 14: Renewal of your authorisation
We will send you a renewal reminder before your authorisation expires. You must apply for
renewal before the expiry of your authorisation. Your renewal application must be completed using
the FMA’s AFA licence renewal application form and accompanied by the application fee.
You will remain authorised while we process your application for renewal, even if your expiry date
passes.
AFA Authorisation Guide | Page 19
Your application for renewal will be subject to the FMA’s eligibility criteria at the time of your
application. We will also take into account your compliance history including whether you have
complied with the Act, the terms and conditions of authorisation, any special conditions of
authorisation and the Code.
Where to go for help
www.fma.govt.nz
For more information about AFA licencing, obligations, Code of Professional Conduct, Trans-Tasman
Mutual Recognition, and Standard Conditions. You can also call our financial adviser helpline on
0800 434 567.
www.skills.org.nz
The Skills Organisation for information on competence standards and assessment and the list of
training providers.
www.fspr.govt.nz
Financial Service Providers Register for information on registration.
www.consumeraffairs.govt.nz
For more information about Dispute Resolution Schemes.
AFA Authorisation Guide | Page 20
Appendix 1:
FA Act (personalised DIMS)
To be eligible to provide personalised DIMS under the Financial Advisers Act 2008 (FA Act), you must be
capable of effectively performing personalised DIMS. The FMA will assess your capability against the
minimum standards for personalised DIMS and relevant Code Standards from the Code of Professional
Conduct for Authorised Financial Advisers (“the Code”).
The way to demonstrate your capability to provide personalised DIMS will be through your Adviser Business
Statement (ABS). For some assessment categories, meeting a minimum standard may be simply showing
how you adhere to the relevant Code Standard. In other areas, to show you are fully capable, it will be
necessary to tell us not only how you meet the conduct requirement of a Code Standard but also explain the
business processes, systems and procedures you rely on to perform personalised DIMS effectively.
The following tables set out the minimum standards, related Code Standards and explanatory comments to
help you update your Adviser Business Statement for personalised DIMS.
Minimum standards for
personalised DIMS
Comments
ABS Section
Capability
You and anyone you are relying on to provide personalised DIMS must have the capability to manage the
service properly and effectively.
1. You have an appropriate
breadth and depth of
relevant financial
services know-how,
whether gained here or
overseas, to effectively
provide personalised
DIMS.
2. You have the capability
relating to any aspect of
the provision of
personalised DIMS that
you will personally
perform.
3. You have access to any
necessary expert
professional advice (for
example, legal or tax
Your capability to provide personalised DIMS
a. We need to assess whether you have the right skills
and experience to provide personalised DIMS. As it is
you who is authorised to perform the service, we will
consider your personal capability. If you are using
other people in your business to assist with certain
aspects of the performance of your personalised
DIMS service, we must also be satisfied as to their
skills and competence.
b. We need to assess that you personally have the
capability required to provide personalised DIMS. In
order to have entered the AFA profession you will be
meeting the competency Code Standards 14-18. We
also need to assess whether you have the right level
of experience, additional skills, specialist knowledge
and know-how to successfully deliver the
personalised DIMS you are proposing to offer.
c. In our view, there is a high threshold to meet in order
Competence
Minimum standards for
personalised DIMS
advice).
Comments
ABS Section
to be able to provide personalised DIMS, as
developing a bespoke investment strategy requires a
high degree of specialist investment knowledge and
experience. It would be unusual for a person
providing such services not to have a specialist
qualification and significant experience in investment.
d. In order for the FMA to assess your capability to
provide personalised DIMS, we ask that you provide
the following information:
- Qualifications – details of any qualifications you
hold relevant to providing personalised DIMS
- Experience – relevant experience, particularly in
managing investments and developing investment
strategies
- Professional development – other information
regarding your professional development, such as
professional training courses or study that highlight
your expertise or competency relevant to providing
personalised DIMS
- Other knowledge and experience necessary to
successfully run a personalised DIMS business (if
relevant).
Professional advice
Please comment on whether and how you ensure you
have ready access to key expert advice when you need it
(such as legal, accounting, tax, financial, business or IT
advice). We do not require that you keep advisors on a
retainer, just that you can access advice as and when
required.
If you outsource part of your work and have a formal
agreement, you don’t need to discuss that arrangement
here. Please note you cannot outsource the portfolio
composition. It is you who is authorised to perform this
service so you must demonstrate your capability to do
this.
Related Code Standard/s
Code Standard 14: Before providing a financial adviser service, an AFA must have the competence,
knowledge and skills to provide that service.
Minimum standards for
personalised DIMS
Comments
ABS Section
New clients
Your procedures for bringing new clients on board must ensure they get sufficient information to make
informed decisions about the financial services offered – and you must ensure these services are not
inappropriately marketed.
1. You maintain adequate
and effective systems to
bring clients on board,
with processes and
controls to ensure the
requirements of the FA
Act (including conduct
requirements) are met.
2. You have effective
procedures to identify
whether a client is a
retail or wholesale client
(sections 5B and 5C of
the FA Act) and they are
informed about their
status.
3. Any staff involved in
bringing clients on
board are aware of their
obligations under the FA
Act, and are adequately
trained in the systems
and processes for
bringing clients on
board.
a. Please describe how your procedures for bringing
clients on board will work, including how you intend
to attract clients to your service, such as using
advertising or referrals – and how you’ll ensure you
meet your legal obligations.
b. The FA Act (section 41) requires you to ensure there
is a client agreement governing the personalised
DIMS provided to the client. This client agreement
must be entered into at the same time as, or before,
the investment authority is granted by the client. You
must provide personalised DIMS to the client in
accordance with the client agreement and an
investment authority from the client.
c. Please describe what procedures you have in place to
identify whether a client is a retail client or a
wholesale client.
d. There are restrictions on providing financial adviser
services under the FA Act. Even if you have staff who
help you bring personalised DIMS clients on board,
you must comply with the restrictions on providing
financial adviser services under the FA Act. Please
describe how you ensure that you comply with these
restrictions if other staff are involved in bringing
clients on board. If no other staff are involved, please
state this. Please advise how you ensure that only
you as the authorised party will exercise the
discretion granted under the investment authority.
Clients
Related Code Standard/s
Code Standard 7: An AFA must ensure each retail client has sufficient information to enable the client to
make an informed decision about whether to use the AFA’s financial adviser services.
Minimum standards for
personalised DIMS
Comments
ABS Section
Client objectives and investment authority
A client should be given sufficient information to enable them to fully understand the scope of any
investment authority they grant.
1. You have effective
procedures to record
the client’s objectives
and investment
authority.
2. You keep a written copy
of your client’s
investment authority,
and that authority
meets the requirements
of Section 43 of the FA
Act.
3. You ensure the
proposed investment
authority is appropriate
for the client’s
investment objectives.
Explain how you record your client’s investment
objectives for personalised DIMS. For example, do you
have a standard form; where did your form originate;
and how often do you review the form?
Appropriate investment authority
a. You must ensure the client’s investment authority is
appropriate for the investment objectives (see
section 43 of the FA Act).
b. You will only be required to show you have satisfied
this standard based on information provided by the
client and information otherwise known to you. You
must have a process to make reasonable enquiries to
ensure that you have an up-to-date understanding of
the client's financial situation, financial needs,
financial goals, and risk profile, having regard to the
personalised DIMS being provided.
Clients
Related Code Standard/s
Code Standard 1: An Authorised Financial Adviser must place the interests of the client first, and must act
with integrity. These obligations are paramount.
Code Standard 12: An Authorised Financial Adviser must record in writing adequate information about any
personalised services provided to a retail client.
Minimum standards for
personalised DIMS
Comments
ABS Section
Selecting investments
You must exercise a professional standard of skill and care when selecting investments.
1. You have effective
2.
3.
4.
5.
procedures to collect
relevant investment
information about forms
of proposed
investments. This
includes information
about any proposed
investments that are
exempt from the
disclosure obligations in
Part 3 of the FMC Act, to
fulfil your obligations
under Code Standard 6.
You have adequate and
effective processes to
select
assets/instruments to
comply with the
investment authority –
including an investment
strategy, supported by
up-to-date research and
analysis.
You ‘stress test’ your
investment strategies as
appropriate to the
particular strategy.
You maintain efficient
procedures to identify
transactions involving
related party benefits
and deal with them
appropriately.
You maintain efficient
procedures to identify
conflicts (or potential
conflicts) of interest and
deal with them
appropriately.
Please explain how you’ll meet the minimum standards
for selecting investments, including how you research
and analyse information to evaluate and form your
decisions when providing personalised DIMS.
- Provide services that you have the competence,
skills and knowledge to provide
- Provide services and perform your obligations in a
timely way
- Make recommendations in relation to financial
products that have been assessed or reviewed by
you to a level that provides you with a reasonable
basis for any such recommendation, or by another
person if it is reasonable in the circumstances for
you to rely on that other person's assessment or
review.
Stress testing
a. The purpose of stress-testing your investment
strategies is to understand what would happen in
specific, uncommon but possible circumstances, and
to learn from those results.
a. We don’t expect to see fully documented stresstesting, but we would expect to see that you’ve
thought about the issues that might arise in adverse
market conditions, and whether any further action
might be appropriate.
b. For example, if your investment authority only allows
a maximum percentage of your clients’ portfolios to
be invested in a particular asset class, a sudden
market movement might unexpectedly cause you to
breach this condition in your investment authority. To
minimise this risk you might:
- regularly check that your investment authorities
match the scope of your investment strategy (so
there’s less likely to be a breach of the investment
authorities), and
- make sure the risks of market movements have been
adequately explained to your clients.
Related party benefits and conflicts of interest
a. You are required to place the interests of your clients
first. Under Code Standard 5, you must identify, and
Advice or
service and
Business
Relationships
Minimum standards for
personalised DIMS
Comments
ABS Section
clearly and effectively communicate to the client, all
interests you or a related person to you may have
that might influence the services you provide to the
client. Where a conflict of interest arises when
providing your services, and you are unable to
manage the conflict of interest so as to place the
interests of your client ahead of your interests, you
must decline to act.
c. Please describe how you identify, and communicate
to your clients, all interests that you have where
those interests might influence the provision of
personalised DIMS. For example, do you regularly
update a list of material interests and check proposed
trades against it?
Related Code Standard/s
Code Standard 14: Before providing a financial adviser service, an AFA must have the competence,
knowledge and skills to provide that service.
Code Standard 5: An AFA must effectively manage any conflicts of interest that may arise when providing a
financial adviser service.
Code Standard 6: An Authorised Financial Adviser must behave professionally in all dealings with a client, and
communicate clearly, concisely and effectively.
Minimum standards for
personalised DIMS
Comments
ABS Section
Investment monitoring and client reports
Your systems and processes must enable you to monitor investment portfolios and take appropriate action
when necessary.
1. Your portfolio
monitoring systems and
processes enable you to
measure and report
performance against the
client’s investment
objectives – and the
client agreement sets
out the frequency and
methodology for
reporting to them.
2. You regularly require
your clients to get
updated financial advice
or reconsider their
investment objectives
(as appropriate). You
review your client’s
circumstances and the
portfolio allocations at
least every six months.
3. Your systems, controls
and procedures ensure:
a. your investment
strategy is developed
and amended when
appropriate
b. corporate actions
relating to
investments (such as
rights entitlements,
dividend payments or
stock splits) are
appropriately dealt
with by placing the
interest of your
clients first
c. no one can conduct
unauthorised trading
in relation to your
a. Please describe how you manage investments,
monitor performance against personalised DIMS
client objectives, and report to clients.
b. You must comply with Code Standard 8, which
outlines (among other obligations) that you have an
up-to-date understanding of your client's financial
situation, financial needs, financial goals and risk
profile, having regard to the personalised DIMS that
you are providing to them.
c. The level of monitoring performance against client
objectives needs to be appropriate for the nature of
your business. Given that personalised DIMS involve
the creation of a bespoke investment strategy based
on your client’s needs, we would expect that regular
monitoring is performed to ensure it remains
appropriate.
d. Include details of how often you conduct portfolio
performance reviews and what factors would lead
you to update a client’s investment strategy.
Breaches of investment authorities
Please describe what steps you will take if an investment
authority is breached, and your procedure for reviewing
and amending processes to minimise the risk of
reoccurrence.
Advice or
service
Minimum standards for
personalised DIMS
client’s property.
Comments
ABS Section
4. You have adequate and
effective systems and
procedures to:
a. identify and report to
your client (and the
FMA if required)
breaches of the
investment authority
b. analyse and follow up
any breaches
c. identify any trends in
breaches, and
introduce measures
to prevent
reoccurrence.
Related Code Standard/s
Code Standard 1: An Authorised Financial Adviser must place the interests of the client first, and must act
with integrity. These obligations are paramount.
Code Standard 8: When providing a personalised service to a retail client, an Authorised Financial Adviser
must take reasonable steps to ensure that the personalised service is suitable for the client.
Minimum standards for
personalised DIMS
Comments
ABS Section
Material issues and complaints
You have effective processes and procedures to identify and deal with material issues in your business.
1. You maintain effective
methods for identifying
and reporting to the
FMA changes to your
financial service which
may impact your
authorisation or any
serious breach of the FA
Act, regulations, Code or
authorisation.
2. You monitor complaints
to ensure they are dealt
with fairly and, in doing
so, you place the
interests of your clients
first.
3. You have systems and
procedures to identify
trends in complaints,
and you investigate and
address any issues
identified.
Material issues
You need to be able to monitor for material breaches of
authorisation conditions. If you have a staff member who
will assist with this you should focus on who has
responsibility for this monitoring and how they will keep
their knowledge of the requirements up-to-date. You
should also indicate who will be responsible for reporting
matters to the FMA when necessary.
Complaints
a. Code Standard 11 requires that:
- the client, as soon as reasonably practical after
making the complaint, is provided with an
acknowledgement of the complaint, information
about your internal complaints-handling process, and
how to complain to the FMA and to any applicable
external dispute resolution scheme
- a register is kept recording all complaints and action
taken towards resolving those complaints.
b. Please describe how you comply with the
requirements of Code Standard 11, as outlined
above.
c. We expect you to have a complaints process which
covers how you handle complaints and identify and
monitor any trends.
d. Dealing with complaints which place the interests of
the client first does not mean that all complaints
must be resolved in the client’s favour – but it does
mean the solution must be fair and reasonable for
them.
Complaints
Related Code Standard/s
Code Standard 11: An Authorised Financial Adviser must ensure there is an appropriate internal process in
place for resolving client complaints in relation to the Authorised Financial Adviser’s financial adviser
services.
Minimum standards for
personalised DIMS
Comments
ABS Section
Custody
Client money and property must be held by an appropriate independent party.
1. You do not hold any
client money or client
property yourself.
2. Any custodian you use is
independent.
3. Any custodian used is an
appropriate entity to
hold and safeguard
money and property.
4. You keep your due
diligence on any
custodian up-to-date.
Client money must be held either by the client
themselves, or by an independent custodian. Please
confirm that all client money is held either by the client,
or by an independent custodian (specifying who the
custodian is).
Section 44 of the FA Act requires that a custodian of the
client money and/or client property must be a separate
body corporate that you believe, on reasonable grounds,
to be appropriate to hold, and safeguard, the money
and/or property.
Your due diligence process
a. Please explain your due diligence process for
selecting a custodian.
b. The following are suggestions for considerations you
should factor into selecting your custodian:
- the custodian’s previous experience
- the amount of assets under the custodian's control
- public reports and information about their service
- reported complaints about them, and their
complaint-handling procedures
- operating jurisdiction, and any protections/controls
imposed in that jurisdiction
- appropriate registration on the Financial Service
Providers Register (or equivalent overseas
registration)
- whether they have a programme that complies with
the Anti-Money Laundering and Countering Financing
of Terrorism Act 2009 (or equivalent overseas
legislation)
- the good character of directors and controllers
(particularly in the case of small or new custodians
- the nature and extent of any sub-custodian
relationships.
c. We’re also interested in knowing how you actually go
about doing the due diligence and making your
decision, and how you keep the information updated
once you’ve selected a custodian. How often you
update your due diligence should be appropriate to
the level of risk involved.
d. If the independent custodian is a well-established
Client money,
property and
information
Minimum standards for
personalised DIMS
Comments
ABS Section
company, you will need to provide less detail to
justify why you’ve chosen them and why you think
they are an appropriate entity to hold and safeguard
money and/or property.
e. Please include details about your custodial
agreement. For example, how you monitor the
custodian and handle any breaches, and will the FMA
have access to records as required?
Related Code Standard/s
Code Standard 1: An Authorised Financial Adviser must place the interests of the client first, and must act
with integrity. These obligations are paramount.
Code standard 5: An Authorised Financial Adviser must effectively manage any conflicts of interest that may
arise when providing a financial adviser service.
Minimum standards for
personalised DIMS
Comments
ABS Section
Outsourcing (excluding custody)
You must ensure outsourced functions are adequate, effective and comply with your authorisation
obligations.
1. You have appropriate
2.
3.
4.
5.
processes to ensure,
before you outsource a
function, that the
provider is an
appropriate entity and
capable of effectively
performing the
outsourced function to
an acceptable service
level.
You have a proper legal
arrangement with the
provider, including
provisions that enable
you to effectively
monitor their
performance and take
appropriate action for
non-performance.
Records and information
the provider holds will
be available for
inspection by the FMA
on request.
You regularly review the
outsource arrangement
(at a frequency
appropriate to the risk
involved).
Your performance
monitoring programme
includes:
b. checks that the
provider’s
performance meets
required standards
f. triggers for
identifying non-
Who are the standards for?
Business
a. These standards apply to any functions outsourced by relationships
you. You cannot outsource the portfolio construction.
This must be something you perform and the FMA
must be satisfied that the person who performs this
has the skills and competence to do so.
b. Please describe and explain any core outsource
arrangements. These relate to where you rely on the
outsource provider to help you meet the minimum
standards or authorisation obligations for
personalised DIMS.
c. Where you use third parties to provide core parts of
personalised DIMS (for example, if you use a third
party to execute transactions for you) then we want
to know who these third parties are, how you have
confidence they can perform the service they’re
proposing to perform, and what you’ll do if they fail
to perform to the required standards.
d. The level of detail we need on outsource providers
will depend on whether they are already providing
the service and how well-established they are. We
need enough information to get comfort that the
service will be properly performed.
e. The level and nature of records the outsourced
provider must keep should be at least equivalent to
what you would keep if you performed the function
yourself (refer also to ‘Records’).
f. We also expect to be able to view these records
within a few days of our request, depending on the
nature and volume of the records. You don’t need to
arrange for direct access, providing we can obtain the
records through you.
g. Please describe the level of oversight that you
maintain over the outsourced provider.
h. You will need to maintain some level of oversight
over the outsourced provider so you will be aware if
they fail to perform their part of the service properly.
The level of oversight needed depends on whatever
is reasonable for the nature of the service
Minimum standards for
personalised DIMS
performance
g. a plan for steps you
will take in the event
of non-performance.
Comments
ABS Section
outsourced. For example, you might monitor the
performance of someone that executes your trades
for you by reconciling the portfolios your clients
should be holding with those they actually hold.
Related Code Standard/s
Code Standard 6: An AFA must behave professionally in all dealings with a client, and communicate clearly,
concisely and effectively.
Code Standard 12: An Authorised Financial Adviser must record in writing adequate information about any
personalised services provided to a retail client.
Minimum standards for
personalised DIMS
Comments
ABS Section
Staffing and supervision
You must have adequate and effective arrangements to manage and supervise any staff you are relying on to
help you provide personalised DIMS. Staff need to be suitable for their roles and act professionally.
1. Any staff have the right
2.
3.
4.
5.
skills and experience for
their roles, and a clear
job description that sets
out their responsibilities
(including authorisation/
delegation levels).
Roles are designed to
support key controls (for
example, by segregating
duties between roles).
Enough time is allowed
for key processes,
including compliance
activities.
Staff are appropriately
trained, managed and
supervised – you
address poor
performance and
recognise professional
conduct.
You have appropriate
supervisory
arrangements,
including:
a. Sufficient resources
are allocated to
supervision
b. Supervisory staff
have the right
knowledge and
experience (including
understanding the
functions of the roles
they supervise)
c. Supervisory staff
have the support and
authority they need
What do we need to know?
a. Please describe any arrangements you have for the
management and supervision of staff you may be
relying on to help you provide personalised DIMS.
Only an authorised person can exercise discretion
under personalised DIMS.
b. If your personalised DIMS business doesn’t have any
staff other than you as the AFA managing it, and you
don’t intend to recruit any other staff, then you can
answer this question by confirming you’ll ensure that
you will be the only AFA. If your only non-AFA staff
are administrative assistants, you don’t need to
provide any details about how you ensure they have
the right skills and experience.
c. For any staff who are involved in aspects of the
provision of personalised DIMS, you need to
demonstrate that you have appropriate staffing and
an adequate staff supervision structure to ensure you
can maintain minimum standards for the course of
your authorisation.
d. How you structure your business and decide what
skills and people you need to meet the minimum
standards is up to you. We don’t need to know about
the character or capability of individual staff or
particular teams.
Business
relationships
Minimum standards for
personalised DIMS
to do the role
effectively.
6. Any issues identified by
supervisory staff are
acted on appropriately.
Comments
ABS Section
Related Code Standard/s
Code Standard 14: Before providing a financial adviser service, an AFA must have the competence,
knowledge and skills to provide that service.
Minimum standards for
personalised DIMS
Comments
ABS Section
IT systems and business continuity
Your IT systems used to deliver personalised DIMS must be secure and reliable. Your arrangements ensure
they perform efficiently and the associated risks are managed.
1. Your IT systems include
necessary functionality
to provide the service,
and perform the
intended processes
effectively.
2. You have effective
safeguards and controls
over the IT systems (and
the underlying
processes) whether they
are built into, or
external to, the system.
These include
processes:
a. to ensure data and
system security, and
prevent errors or
system failure
b. that take into
account risk from
human error,
technical failure and
malicious conduct.
3. You maintain an
appropriate (and tested)
business continuity plan,
including procedures for
data back-up and
disaster recovery.
4. You have proper legal
arrangements with any
third-party software
providers, including
licences for software
and contracts for any
required maintenance
and support.
Your IT systems
Advice or
service
a. Please describe the IT systems that you use to
provide personalised DIMS.
b. You are free to choose how you implement IT
solutions in your business. Where you integrate
processes into IT systems, the processes performed
by that system must be effective.
c. For example, your IT systems may have built-in
parameters consistent with the terms of your service,
and controls to ensure the integrity of external data
feeds and their accurate use in calculations.
d. You only need to provide detail about IT systems to
the extent that they are essential to delivery of your
service. We only need sufficient information to give
us confidence that they are fit-for-purpose.
e. You don’t need to provide details on every aspect of
your systems, but please tell us about:
- the functionality of your systems – what function/s
they perform for the licensed business (an overall
architecture design map might be useful)
- key risks and the controls/safeguards in place
(internal and external)
- any third-party verification you obtain for your IT
systems
- how you manage the risks associated with the use
of your IT systems, including:
 data security and integrity (such as a security
audit)
 disruptions from IT system failures and
outages.
Business Continuity Plan
a. Your business continuity plan should include the
documented procedures that guide you to respond,
recover, resume and restore to a pre-defined level of
operation following disruption. This plan should
provide for the continuity of your business operations
generally, not just the recovery of your IT systems.
b. It should cover all aspects of your business (not just IT
Minimum standards for
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Comments
systems) that are necessary to meet the minimum
standards or your authorisation obligations.
c. Please provide details of when you completed a
business impact analysis and what support, and
resources, you have or will implement and maintain
according to that business continuity plan. Provide
information relating to when you last did an impact
analysis and last tested your business continuity plan.
Legal agreements
Please explain your legal rights to use the software you
use to provide any aspect of personalised DIMS and
whether it is currently under support.
ABS Section
Minimum standards for
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Comments
ABS Section
Records
You must maintain adequate records and provide information to the FMA in a timely manner.
1. You have systems and
procedures to maintain
proper records.
2. You retain these records
for at least seven years
– and they are available
for inspection by the
FMA on request.
Your record keeping
a. Please describe how you comply with the
requirements under Code Standard 13 (outlined
below) and the requirement more generally (also
outlined below) to maintain proper records for seven
years.
b. You will also need to be able to produce appropriate
records, including:
- records of key decisions and activities, so we can
confirm your compliance; and
- files for each client (and past clients) with all relevant
documents, such as client agreements and disclosure
documents.
c. You must ensure your client agreements or other
arrangements include client consent for us to view
their records.
d. You may keep paper files of client records.
Alternatively you may use a simple computerised
filing system. You don’t need to go into extensive
detail on your filing procedures – just enough so that
we can be confident you’ll be able to promptly give
us your business and client records if we ask for
them.
Your arrangements
a. Under Code Standard 13, you may satisfy the
requirement to keep records by arranging for records
or information required to be held by a third party
(for example, a platform provider, or a purchaser of
your business) by taking reasonable steps to ensure
that the third party keeps the records for at least as
long as you would be required to keep them.
b. Under Code Standard 13, this seven-year
requirement commences on the last date that you
provide a financial adviser service to the client.
Record
keeping
Related Code Standard/s
Code Standard 13: An AFA must ensure that records of all information and documents required under this
Code are kept for a minimum of seven years.
Code Standard 12: An Authorised Financial Adviser must record in writing adequate information about any
personalised services provided to a retail client.
Minimum standards for
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Comments
ABS Section
Termination of service
You must act in the best interests of your client when their client agreement ends.
1. Your client agreement
allows the client to
terminate the service
without penalty – and
take control of the
assets, or realise their
value, within a
reasonable period.
2. Your client agreement
explains clearly:
a. how assets will be
dealt with when the
service is terminated;
b. any risks associated
with the assets that
could arise when the
service is terminated.
3. You have effective
procedures to deal with
any assets that can’t be
transferred directly to
the client or transferred
to another service when
the service is
terminated.
4. You have effective
procedures to ensure
the orderly termination
or transfer of client
services if your business
ceases.
Termination without penalty
Clients
Your personalised DIMS clients must be able to terminate
their personalised DIMS client agreement with you
without penalty. However, you may still pass on the
reasonable costs you actually incur to terminate the
service – providing you disclosed to the client in the
client agreement at the start of personalised DIMS the
type of costs and approximate amount they would incur.
Termination procedures
a. Please tell us about your termination procedures, and
how you deal with the client’s assets – especially if
the assets are non-liquid and/or can’t be held directly
by the client, for example wholesale assets.
b. How you cover termination (and dealing with assets)
in your personalised DIMS client agreement.
c. If you’ve invested in wholesale products, or products
that can’t be easily liquidated, tell us how you deal
with these investments and how you communicate
the risks to your clients.
Related Code Standard/s
Code Standard 6: An AFA must behave professionally in all dealings with a client, and communicate clearly,
concisely and effectively.
Minimum standards for
personalised DIMS
Comments
ABS Section
Financial resources
You must, at all times, have adequate financial resources to effectively perform the service.
1. You have a sufficiently
strong balance sheet.
2. You are able to pay your
debts as they become
due in the normal
course of business.
3. You maintain an
appropriate level of
liquid assets at all times
to cover reasonably
expected contingencies
in your business.
4. You have adequate and
effective systems,
policies, procedures and
controls to:
a. monitor your
financial resource
levels
b. consistently calculate
an appropriate level
of liquid assets to
hold for your
business
c. assess the risk of
your financial
resources not being
adequate to continue
to provide the
service, or a serious
financial problem
occurring.
Your balance sheet
Financial
Resources
We note that it is likely to be easier to demonstrate that
you are NTA positive if you are using a corporate
structure.
Are your net tangible assets positive?
a. Generally, we require licensees to have positive net
tangible assets (NTA).
b. This is because we expect you to have sufficient
capital to be financially stable and to be able to run
your business operations.
c. If your NTA is negative we may still consider you to be
eligible to provide DIMS. You will need to explain the
reasons behind your negative NTA and why you think
it shouldn’t prevent you from providing effective
DIMS. For example you may have a high level of
intangible assets that provide a significant income
stream, or related party transactions that cause an
issue.
d. We will assess your reasons and take into account
your cashflow forecasts and steps you’re taking to
return to a positive NTA. We won’t allow you to
provide DIMS if your balance sheet indicates your
business is at risk of failure, or your NTA is negative
because you haven’t committed the investment
needed for the business.
What are your net tangible assets?
These are your total tangible assets, less your total
liabilities, as they appear on your balance sheet at the
time of calculation. The calculation must not include any:
- receivables from a related party or associate unless
‘permitted’
- for the avoidance of doubt, intangible assets, any
client funds you hold, or any investments you have
in the portfolios you manage.
This is only a summary of the test you must apply – the
full test is set out in the standard licence conditions for
AFAs providing personalised DIMS.
What is a ‘permitted’ related-party receivable?
Permitted related-party receivables are those resulting
Minimum standards for
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Comments
from a transaction done in the ordinary course of
business, on standard commercial terms, and at arm’s
length. Your total permitted related-party receivables
can’t exceed 20% of your net assets (total assets less
total liabilities).
Shareholder loans can be excluded from your total
liabilities for the NTA calculation, if you have a written
agreement with the relevant shareholder to subordinate
the debt. This agreement must:
- Provide that repayment of the debt will be
subordinate to all the claims, demands, rights and
causes of action of all unsubordinated creditors
- Provide that the debt is not repayable within one
year
- Be available to your auditor and the FMA on
request
- You must calculate your NTA at least monthly, and
report to us if your NTA becomes negative.
Cashflow forecasting
a. You must be able to pay your debts as they fall due,
plus have a buffer for reasonably foreseeable
contingencies. There are no set levels for liquid
assets.
b. To satisfy yourself that you meet the minimum
standards, we expect you to use a suitable
forecasting mechanism. Your forecasts should show
that you have access to sufficient financial resources
over the projected term to meet your liabilities as
they fall due in the normal course of business.
Your policies, systems and controls
a. Please tell us how you will manage your financial
resources more generally.
b. If you have an existing business that has a history of
financial stability, this will give us significant comfort.
You will still need to provide the following
information:
- The balance date for your financial statements
- If you have an auditor, who they are and whether
there were any issues raised on your last audit
opinion
- Your NTA calculation, and if your NTA is negative
please explain why this doesn’t affect your financial
stability
ABS Section
Minimum standards for
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Comments
-
-
Your cashflow forecast for the next 12 months,
showing your forecasted monthly cash balance
together with the calculations and assumptions used
in the forecast, and an explanation of why they are
appropriate
A brief description of how you manage your cashflow
to ensure you’ll have liquid assets to pay any
outgoings as they become due.
ABS Section
Minimum standards for
personalised DIMS
Professional indemnity insurance
Comments
ABS Section
You must maintain an appropriate level of professional indemnity insurance cover for your business.
1. You maintain an
appropriate level of
professional indemnity
insurance to cover risks
related to your service
(if cover is available).
2. Your level of
professional indemnity
insurance cover is
adequate and
appropriate for the
nature, scale and
complexity of your
business.
3. You have sufficient
resources to meet any
policy excess.
You only need a level of professional indemnity cover
Professional
that is appropriate for the nature of your business. You
Indemnity
need to consider what level of professional indemnity
insurance is appropriate for your business and provide us
with enough information to justify your decision. There
is no set minimum cover – it depends on your business.
Please tell us the level and scope of cover you think is
necessary for your personalised DIMS, and explain how
you assessed this and why you think that level and scope
is adequate.
We expect you to have cover at or above that level and
scope.
a. If you don’t think you need cover please explain why.
b. If you can’t get suitable cover please explain the steps
you took to try and get cover.
Exclusions
Please describe any material exclusions or conditions in
your policy/s, including the policy excess. We only
require information on exclusions or conditions that
could affect cover for your personalised DIMS. For
example, there could be other parts of your business, not
within the scope of your DIMS, that are covered by the
same policy. We don’t need to know about exclusions
that would have no impact on the cover for the
personalised DIMS. Please also tell us whether there are
any claims currently notified under your policy.
Related Code Standard/s
Code Standard 1: An Authorised Financial Adviser must place the interests of the client first, and must act
with integrity. These obligations are paramount.
Minimum standards for
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ABS Section
Governance
You must have a framework for ensuring compliance with your personalised DIMS obligations – and ensuring
you have in place appropriate risk management processes.
1. You have a clear
governance framework
covering all key aspects
of your personalised
DIMS compliance
obligations and key risks
of providing
personalised DIMS.
Your governance framework
Governance
a. We ask that you describe your framework for
ensuring compliance with relevant obligations and
managing the key risks. This may consist of
documenting the things you do in governing the
provision of DIMS.
b. We need you to tell us how often you will consider
governance issues and what matters you will consider
in doing so. To satisfy this, we only require that you
provide us with enough information to give us
comfort that you have proper oversight of the
provision of DIMS.
Minimum standards for
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ABS Section
Culture
You have governance and compliance arrangements that promote a culture of compliance, and ensure
appropriate risk management and fair treatment of investors.
1. You have a good
compliance culture,
supported by systems,
policies, procedures and
controls.
2. We expect a good
compliance culture to
include the following:
a. you clearly
communicate your
conduct expectations
to any staff involved
in providing your
personalised DIMS,
for example through
the Code
b. you allocate
adequate time and
resources for
training, supervision
and compliance
activities
c. you willingly engage
with relevant
regulators in an open
and honest manner,
and are responsive to
any regulatory
concerns they may
raise.
Your compliance culture
a. Where you don’t have staff other than AFAs
(including yourself) involved in the delivery of
personalised DIMS then you can answer this question
by confirming you’ll ensure the business continues to
be managed only by AFAs (as they already adhere to
standards of professional conduct).
b. Where you have staff other than AFAs, you need to
give us enough information to tell us about the
specific steps you have taken (or will take) to
promote the right attitudes and behaviour in relation
to compliance for the provision of personalised DIMS.
Culture
Related Code Standard/s
Code Standard 1: An Authorised Financial Adviser must place the interests of the client first, and must act
with integrity. These obligations are paramount.
Minimum standards for
personalised DIMS
Comments
ABS Section
Compliance assurance
You must have adequate and effective arrangements for challenging and testing your own compliance, the
compliance framework and the outcomes.
1. Compliance assurance –
you have adequate and
effective arrangements
to challenge and test
the design and
operation of your
processes and controls,
and the adequacy of
your governance and
management
information. This is your
compliance assurance
programme.
2. Your compliance
assurance programme
goes beyond day-to-day
controls for key
processes, by including
more in-depth testing of
processes and controls
including:
a. the testing (and the
design) is done
independently of
those involved in
day-to-day processes
and oversight – for
example, testing is
done by a separate
compliance or
internal audit
function, or by an
external organisation
b. you allocate
sufficient,
appropriate
resources to planning
and carrying out the
programme, and
ensure those
Testing your compliance
Compliance
Assurance
a. Please describe how you test and ensure that your
compliance processes and controls are adequate for
the provision of personalised DIMS.
b. You do not need to include information about the
compliance controls themselves.
c. You need to have processes to test your compliance –
over and above the checks built into your operational
systems and oversight of staff. The extent and type of
testing you do depends on things such as:
- The nature and size of your business
- How your systems and processes are designed
- The types and levels of risk in your business
- How involved your directors/oversight body are in
overseeing day-to-day functions (if there are
directors/an oversight body)
Is your testing independent?
a. Where practical, your compliance testing should be
done independently of those responsible for
undertaking, or directly managing, those functions.
b. For an AFA, it may not always be practical for this
testing to be done by someone who is completely
independent of the function.
c. However, there will need to be some level of testing
of your compliance controls. The level of testing
depends on what is reasonable for the nature of the
business and for your key risks. You may outsource
this task if you don't have the scale or structure to
employ someone independent for the role.
Compliance testing could also be achieved by AFAs
peer-reviewing each other’s work.
Minimum standards for
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involved have the
skill and experience
to carry out the work.
Comments
ABS Section
Glossary
ABS
Adviser Business Statement
AFA
Authorised Financial Adviser
ASIC
Australian Securities and Investments Commission
Code
Code of Professional Conduct for Authorised Financial Advisers
CPD
Continuing Professional Development
DAO Delegated Assessment Organisation - being an entity registered by The Skills Organisation
accredited for the provision of training for and assessment of Unit Standard Set C
DRS
Dispute Resolution Scheme
ETITO Electro-Technology Industry Training Organisation - the national standards setting body for the
financial services industry, now called The Skills Organisation
FAS
Financial Adviser Services
FSP Register
Financial Service Providers Register
FSP Registrar
Registrar of financial service providers
FMA
Financial Markets Authority
FSPA
Financial Service Providers (Registration and Dispute Resolution) Act 2008
National Certificate
National Certificate in Financial Services (Financial Advice) Level 5
QFE
Qualifying Financial Entity
TSO The Skills Organisation - being the national standards setting body for the financial services industry,
formerly known as ETITO
TTMRA
Trans-Tasman Mutual Recognition Act 1997
AUCKLAND OFFICE
Level 5, Ernst & Young Building
2 Takutai Square, Britomart
PO Box 106 672
Auckland 1143
WELLINGTON OFFICE
Level 2
1 Grey Street
PO Box 1179
Wellington 6140
www.fma.govt.nz
January 2015