Revised Code of Conduct submitted to FMA

The Code Committee for Financial Advisers has submitted its proposed revised Code of Professional Conduct for Authorised Financial Advisers (AFAs) to the Financial Markets Authority (FMA).

Code Chair, David Ireland said, “It became clear during the consultation process that the Code’s principles-based approach is supported by the adviser industry. The proposed changes therefore align with this approach but clarify certain principles, particularly where uncertainty as to their application was expressed.”

Key changes proposed from the current code include:

  • clarifying that code standard 1 is paramount, to place the interests of the client first and act with integrity
  • a provision enabling AFAs to advise on KiwiSaver first home withdrawals without sitting investment qualifications
  • increasing the number of structured professional development hours AFA’s are required to undertake spread over two years from 20 to 30 hours, whilst broadening the definition of structured professional development so there is greater flexibility for AFAs in determining what will count as ‘structured’
  • a new Code Standard for transparently managing conflicts of interest
  • restructuring the key Code Standards relating to minimum standards of client care

Mr Ireland said the Committee was grateful for the engagement shown by AFAs and interest groups throughout the review.

The final version of the Code must be approved by FMA before it can be sent to the Minister of Commerce for final acceptance. Following acceptance, FMA will give notice in the Gazette of the date when the new Code comes into force, which is anticipated to be early to mid-2014.

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Contact

David Ireland on 021 343 615 or email chair@financialadvisercode.govt.nz

About the Code of Professional Conduct for Authorised Financial Advisers:

The Code establishes minimum standards of competence, knowledge and skills, ethical behaviour and client care, along with minimum requirements for continuing education, and training for AFAs. It is required under the Financial Markets Authority Act 2008.

The Code is developed and maintained by a Code Committee for Financial Advisers, appointed by the Financial Markets Authority. Current Code Committee members are: David Ireland (Chair), Ross Butler, Shane Edmond, David Russell, Professor Dimity Kingsford-Smith, Gary Young and Michael Staal.

Further information about the Code and the work of the Code Committee can be found at the Committee website:www.financialadvisercode.govt.nz

Code of Conduct exposure draft released

3 October 2013

The Code Committee for Financial Advisers has today released its exposure draft version of the revised Code of Professional Conduct for Authorised Financial Advisers (AFAs).

Code Chair, David Ireland, said a key change from the consultation version was replacing a proposed KiwiSaver certificate qualification with a provision for AFAs to advise on KiwiSaver first home withdrawals without sitting investment qualifications.

The proposed increase in the number of structured professional development hours spread over two years remains, but the definition of structured professional development offers significantly greater flexibility.

The Committee has also restructured the key Code Standards relating to minimum standards of client care.

“It was very clear from both our consultation, and from the Financial Markets Authority consultation on its draft guidance in this area, that these Code Standards cause confusion,” said Mr Ireland.

“We’ve recast four of them. One is now purely about the information AFAs have to provide to ensure retail clients are making informed decisions about engaging them, one is about how and when to determine suitability, the third is about the explanations an adviser has to give when providing an investment planning service or financial advice on a category 1 product, and finally a principles-based adjustment to record keeping obligations to complement the other changes made. We think this will provide a much clearer formulation for what is required.

“We’ve also introduced an express relief from obligations in relation to suitability, for situations where clients are simply instructing an AFA to carry out a transaction for them – for example in the situation where they might want to purchase a particular share and don’t want a full analysis of whether that share is suitable for them.”

Mr Ireland said the Committee was grateful for the engagement shown by AFAs and interest groups.

“Some excellent points were made and taken on board by the Committee. The exposure draft remains principles-based which was important to submitters, but now clarifies some of the principles that may not have been so clear.”

The Committee is seeking final comments on the exposure draft. Comments can be made to consultation@financialadvisercode.govt.nz and must be received by Thursday 24 October 2013.

The final version of the Code must be approved by the Financial Markets Authority before it can be sent to the Minister of Commerce for final acceptance and gazetting. It is anticipated the new Code will be published in early- to mid-2014.

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Contact

David Ireland on 021 343 615 or email chair@financialadvisercode.govt.nz

About the Code of Professional Conduct for Authorised Financial Advisers:

The Code establishes minimum standards of competence, knowledge and skills, ethical behaviour and client care, along with minimum requirements for continuing education, and training for AFAs. It is required under the Financial Markets Authority Act 2008.

The Code is developed and maintained by a Code Committee for Financial Advisers, appointed by the Financial Markets Authority. Current Code Committee members are: David Ireland (Chair), Ross Butler, Shane Edmond, David Russell, Professor Dimity Kingsford-Smith, Gary Young and Michael Staal.

Further information about the Code and the work of the Code Committee can be found at the Committee website: www.financialadvisercode.govt.nz

Code of Conduct consultation begins

9 August 2013

The Code Committee for Financial Advisers has begun consulting on proposed changes to the Code of Professional Conduct for Authorised Financial Advisers.

Code Chair, David Ireland, says with the Code in force since December 2010, it was timely to initiate a review. In particular the Committee was keen to review the effectiveness of the Code in light of its objectives and experiences to date.

“Overall, the Committee is comfortable that the Code provides a sound, principled set of professional standards for authorised financial advisers (AFAs) to adhere to. But there is always room for improvement ,” said Mr Ireland.

Key changes recommended by the Committee include:

  • Amendments to code standard 1 (client first) to reinforce it is the overarching code standard
  • A replacement conflict of interest code standard
  • Changes to support a new qualifications framework (likely to be introduced next year) that will increase minimum standards of competence, knowledge, and skill for AFAs
  • Introducing more flexibility in continuing professional training and clarifying requirements for structured training

Mr Ireland said the Committee is particularly interested in feedback on how well the current suitability and basis for advice code standards are working.

“There has been a lot of industry feedback about how these may be limiting access to professional financial advice. This is not a desired outcome, so it’s very important we get some detailed feedback on these points,” said Mr Ireland.

Industry participants and consumer representatives are encouraged to attend public meetings about the Code being held in Auckland, Wellington and Christchurch. Submissions on the proposed changes close on 6 September 2013.

Ends

Contact 
David Ireland on 021 343 615 or email chair@financialadvisercode.govt.nz

The Code Committee for Financial Advisers is appointed by the Financial Markets Authority under the Financial Advisers Act 2008. It developed and now maintains a Code of Professional Conduct for Authorised Financial Advisers (AFAs). The Code establishes minimum standards of competence, knowledge and skills, ethical behaviour and client care, along with minimum requirements for continuing education, and training, for AFAs.

The current members are: David Ireland (Chair), Ross Butler, Shane Edmond, David Russell, Professor Dimity Kingsford-Smith, Gary Young and Michael Staal.

Consultation information can be found at the Committee website: www.financialadvisercode.govt.nz