The table in this paper summarises a number of the major issues considered by the Committee in response to submissions made on the second draft of the Code of Professional Conduct for Authorised Financial Advisers (Code) released on 2 July 2010. The issues summarised reflect those where the Committee felt that some explanation may assist those considering the final version of the Code submitted to the Commissioner for Financial Advisers on 20 August 2010, and provide context to the changes made (and changes not made) since the second draft . A number of additional issues that arose in the course of reviewing the submissions were also considered, along with other feedback received in the course of the Code Committee’s extensive consultation process.
The responses in this paper also address matters raised by the Commissioner for Financial Advisers (Commissioner) in his Direction dated 17 August 2010.
All issues raised with the Committee have been taken into account in finalising the Code. However, a specific explanation of the Committee’s approach in relation to certain issues not mentioned in the table was not considered to be warranted. Public submissions received in response to the second draft of the Code, along with the Committee’s summary of issues raised in the course of its final consultation process conducted in July 2010 and related feedback received separately, are available on the Code Committee’s website http://www.financialadviser.govt.nz
The second draft of the Code proposed 17 Code Standards. Code Standard 8 of the second draft was separated into two separate Code Standards in response to submissions received. (Please see our coverage of Code Standard 8 for more detail.) For clarity of reference, this paper recognises the structure of the final form of the Code as submitted to the Commissioner on 20 August 2010 in the heading for each Code Standard.
This issues paper is intended to explain the reasons underlying the Code Committee’s work in relation to the Code and does not reflect the views of any other party as to the interpretation of the Code.
Background, Introduction and General
|A more prescriptive approach was suggested for the overall style of the Code, along with a further break down of paragraphs with more extensive numbering for ease of reference.||The overwhelming feedback received was supportive of the principles-based approach adopted. However, a number of the Code Standards have been expanded with further guidance provided where it was felt this may assist in applying the relevant principle, or where further clarity was required. Whilst the Committee acknowledges that more extensive use of numbering would assist legal advisers and others when referring to specific provisions of the Code, it was felt that a minimal use of paragraph numbering in the body of each Code Standard rendered the Code more approachable for the benefit of both financial advisers and consumers.|
|Should insurance advisers and mortgage brokers be required to be authorised under the Code in order to ‘raise the bar’ across the entire industry?||Insisting on insurance advisers and mortgage brokers becoming authorised, and crafting the Code accordingly, is beyond the powers of the Code Committee. A policy decision has been made at the legislative level to allow those solely involved with category 2 products to operate without being authorised, outside of the Code. However, the Committee has approached its task on the assumption that those solely involved with advising on category 2 products will be able to apply for an appropriate level of authorisation.|
|Should a distinction be made in terms of client care requirements between different categories of products? In particular, should AFAs be given the discretion to determine for themselves what is appropriate in terms of client care requirements for category 2 products?||Code Standard 9 (explaining the basis of personalised advice for retail clients) has been limited to investment planning services and services involving category 1 products, to ensure an appropriate balance is struck and that the obligations placed on AFAs when advising on category 2 products are not unduly onerous when compared with the obligations on RFAs. For all other Code Standards it seemed inconsistent with the objectives of the Act to prescribe different standards of client care based on product categorisation.|
|It was suggested that the first paragraph of the introduction should be amended to read: ‘The Code sets out Code Standards. Each Code Standard is followed by additional provisions. These comprise part of the Code and relate to the application of the Code Standards’.||The Committee disagreed. This suggestion misconstrues the structure of the Code. The ‘additional provisions’ were also intended to form part of the relevant Code Standard, and this has been expressly stated in the Introduction. The use of an ‘overarching principle’ approach allows each Code Standard to be succinctly summarised, with the additional provisions of the Code Standard providing further detail as to how the overarching principle is to be applied in practice.|
|It was also suggested that reference to compliance with legal obligations be deleted from Background section A, and reference to additional provisions not limiting the application of the relevant overarching principle be deleted from Introduction section B.||The Committee considered that the references identified were helpful in terms of reminding financial advisers that the Code should not be their sole source of reference for identifying their legal obligations. The guidance note in the Introduction ensures that the additional provisions within each Code Standard are placed in their proper context.|
|Support was expressed for specific provisions to be included in the Code in respect of trainee advisers. In particular, it was suggested that a separate designation should be included in the Code for trainee advisers such as a ‘provisional AFA’ or ‘restricted AFA’, with specific relief from various Unit Standard Sets where the trainee operated under the supervision of an AFA who took responsibility for their work and specific standards were imposed on AFA’s acting in a supervisory role. The concern raised was that otherwise it will be very difficult to bring through new advisers, as Unit Standard Set C will be unattainable. Full AFAs may struggle to justify operating a true apprenticeship model in the face of regulatory restrictions on what the apprentice can say.||The Committee considered this issue at length, both within the Committee itself and with various external stakeholders who raised the issue as being of concern to them. The Committee considered the limitations placed on the scope of activities that will constitute ‘financial advice’ when the Act was finalised at the end of June. On balance, it was felt that these limitations provided a sufficient opportunity for apprentice advisers to operate without needing a separate classification. Regardless, if a ‘provisional’ class of AFA were created, the Committee considered that extensive disclosures would need to be imposed in order to ensure the objectives of the Act were not undermined through such a classification. It seemed likely that the extent of those disclosures would render the classification unattractive. The Committee decided that on balance a ‘provisional’ classification should not be incorporated in the first version of the Code.
The Committee understands that ETITO will shortly be issuing guidelines as to how new advisers entering the industry after June 2011 may satisfy the requirement to provide valid evidence to meet the standards in Standard Set C. The Committee notes that from 1 July 2011, individuals who have yet to attain authorisation will be unable to make a recommendation or give an opinion to a retail client in relation to acquiring or disposing of a category 1 product, although they will be able to provide guidance and pass on information and financial advice from an AFA.
|Concern was expressed that including ‘reasonableness’ tests may open the Code up to differing interpretations as to what is ‘reasonable’ in any particular situation.||The concept of ‘reasonable’ is the subject of an extensive case law, and is one with which most New Zealanders are familiar. The overwhelming feedback received was that the Code would be enhanced by introducing more references to conduct that is ‘reasonable’ in the particular circumstances, and the Committee has taken that feedback on board. With the Code Standards as finalised, the Committee is confident that a measured approach will be able to be taken in relation to their application. The version recommended to the Commissioner strikes a good balance between the risk of placing advisers in impossible situations where they are constantly at risk of being judged with the benefit of hindsight, and the risk of allowing advisers to ‘get away’ with acting inappropriately.|
|Should the Code include specific obligations in relation to money handling/broking service?||Conduct obligations in relation to broking services are clearly spelled out in the Act. With ‘investment transactions’ no longer falling within the definition of ‘financial adviser services’ the Committee determined that it would be inappropriate for the Code to devise specific standards governing money handling and other broking services. The Committee saw no reason to change from the approach taken in the second draft of the Code.|
|Should the Code require AFAs to point out the opportunity for wholesale clients to opt out of that classification? Concern was also expressed that advisers may pressure clients to opt into a wholesale client classification.||The Committee agreed that ensuring clients were aware of how they were classified under the Act is an important element of client care, and an appropriate provision has been included at the end of Code Standard 6. Given that any adviser can encourage a client to opt in to becoming a ‘wholesale client’, it was not considered appropriate to impose a specific code standard provision in that regard. However, Code Standard 1 will apply to ensure AFAs do not act inappropriately in this regard.|
|The Commissioner for Financial Advisers directed the Committee to amend the description of financial adviser services requiring authorisation to accord with changes to the Act that came into force on 1 July 2010.||The Committee has updated the Code to more closely reflect the final form of the Act.
Ethical Behaviour Standards
Client Care Standards
Table summarising major submission points raised on the second draft of the Code and the Committee’s responses to those issues.
|Code Standard 6 – Behaving professionally|
|Guidelines of what is required in order for a communication to be considered ‘effective’ were requested. Concern was expressed that the effectiveness requirement was too subjective.||The Committee acknowledged the risk inherent in failing to qualify the ‘effective’ requirement. An additional provision has been included in Code Standard 6 to confirm that communicating ‘effectively’ requires an AFA to take reasonable steps to ensure the client understands the communication.|
|Can the obligation imposed by the words ‘analysed properly’ in CS 6(d) be clarified or the word ‘properly’ removed?||Paragraph (d) has been reworded to address this concern by replacing the reference to ‘properly’ analysed. The reworded obligation restricts AFAs to making recommendations only in relation to financial products that have been analysed by the AFA to a level that provides a reasonable basis for any such recommendation, or analysed by another person upon whose analysis it is reasonable, in all the circumstances, for the AFA to rely.|
|Can it be clarified whether an AFA can rely on information contained in prospectuses and investment statements in this regard?||The Code Committee did not consider that any further clarification was warranted in relation to the appropriateness of an AFA relying on information contained in a prospectus or investment statement. A consideration of the content of public disclosure documentation would form a part of the analysis contemplated under this Code Standard in relation to securities offered to the public, but whether such an analysis would provide an AFA with a reasonable basis for a recommendation in relation to the securities in question can only be determined by reference to the particular circumstances.|
|Should the requirement under CS 6 to ‘analyse properly’ provide an exception for where there is no analysis available in relation to the financial product in question?||Paragraph (d) of Code Standard 6 is limited to a situation where an AFA makes recommendations. The Code Committee considered that if an AFA goes so far as to make a recommendation (as opposed to merely expressing an opinion or providing information about a financial product) then it is entirely appropriate to insist on an appropriate level of analysis to have been carried out, without exception. In situations where no analysis is available, and the AFA is unable to properly analyse the product themselves, Code Standard 6 would not prevent the AFA from expressing an opinion about the product, and clarifying that the lack of proper analysis available means that the AFA is unable to provide a recommendation.|
|It was suggested that the term ‘third party’ in relation to reliance being placed on analysis of a financial product be defined and/or amended to read ‘another person or entity’?||Paragraph (d) has been reworded so as to refer to reliance being placed upon the analysis of ‘another person’.|
|Code Standard 7 – Ensuring retail clients are able to make informed decisions|
|How is the cross over between disclosure requirements under the Act and the Code to be resolved?||Code Standard 7 has been substantially revised. The focus of this Code Standard is on the outcome of informed decision-making. The disclosure obligations under the Act are concerned with the process of providing information. Consistent with the purposes of the Act, the Committee considered it important to provide for a specific obligation to be placed on AFAs to ensure clients have sufficient information to be able to make an informed decision.|
|It was suggested that the Code Committee liaise with the Ministry of Economic Development in relation to CS 7||The Code Committee has extensively engaged with the MED and other government agencies throughout the course of its deliberations. The Committee is comfortable that the approach complements the approach taken by the MED in this regard.|
|Should disclosure be limited to services that only an AFA can provide?||Ensuring clients are able to make informed decisions is an appropriate obligation to impose universally, without having regard to the classification of the financial product in question.|
|Should CS 7 impose an objective standard, by referring to information which would inform a reasonable client, and be limited to allow the AFA to determine what is reasonable in the circumstances?||The Code Committee did not consider that it would be appropriate to relax the standard required, noting the importance of ensuring that clients should be considered based on their own particular characteristics, and not by reference to some reasonable ideal. This means that the extent of information that one client requires in order to make an informed decision may well differ from the extent of information that another might require. The Committee considered that this outcome was appropriate.|
|It was suggested that the explanatory detail should clarify that the information required in a disclosure statement pursuant to the Act need not be repeated if that information is adequate for a client to make a fully informed decision. The fact that additional disclosure is not required if disclosure required by regulation is sufficient, and that disclosure in relation to the AFA generally need not be repeated for every piece of advice should be expressly stated.||Clarification has been included to confirm that compliance with disclosure obligations under the Act may satisfy the requirements of the Code Standard. However, it has also been clarified that in some circumstances disclosure under the Act may not be sufficient of itself.|
|Should CS 7 also refer to the client’s right of complaint to the Commission as per section 96(1) of the Act?||The Code Committee did not consider that reference to a right of complaint was strictly necessary in order for clients to make informed decisions. References to complaints processes have therefore been removed from the scope of the principle.|
|Code Standard 8 (now CS 8 and 9) – Suitability of personalised services for retail clients and explaining the basis of personalised services for retail clients|
|CS 8 should be divided back out into two separate code standards: the first dealing with suitability analysis and the other setting out the requirements for a written explanation.||The Committee agreed that combining the Code Standard on suitability analysis with the Code Standard relating to the provision of written explanations was problematic. The previous Code Standard 8 as it appeared under the second draft of the Code, has been separated out into two separate standards in the final form of the Code recommended to the Commissioner.|
|Should AFAs be able to quote a fee for providing an explanation and/or suitability analysis on the basis that the fee is waived if the client opts out?||The Committee considered that the wording of the Code Standard was sufficient to cover reasonable fee estimating practices of AFAs.|
|Should the explanation required under CS 8 be required to be given in writing?||The Committee considered that the presumption should be for a written explanation to be provided. However, the additional provisions of Code Standard 9 provide an appropriate opt out option that is able to be utilised without unduly compromising the consumer protection provided by this Code Standard.|
|Should both parts of CS 8 state that they relate to retail clients only?||Both Code Standard 8 and 9 are limited to personalised services provided to retail clients.|
|Should the requirement for an explanation for the basis of the advice provided be removed? Can the purpose of this required written explanation be clarified?||The Committee considered that the consumer protection objectives of the Act were best achieved by requiring such an explanation to be provided. Otherwise, clients may not be aware of key factors impacting on personalised services provided for them, which may undermine the quality of the services provided and undermine confidence in financial advisers. The opt out mechanism in Code Standard 9 provides an appropriate work around, provided the client is fully aware of what they are opting out of.|
|Should the written explanation required under CS 8 be confined in its application to advice provided in relation to category 1 products?||The written explanation required under Code Standard 9 is now limited to personalised services given to a retail client that either constitute an investment planning service, or relate to a category 1 product. This ensures that obligations placed on AFAs are not unduly burdensome when providing personalised services in relation to products that do not require the adviser to be authorised. The Committee considered this distinction was important in relation to this Code Standard in order to ensure consistency with distinctions made in the Act.|
|Should the suitability analysis required under CS 8 be confined in its application to advice provided in relation to category 1 products and investment planning services?||The Code Committee considered that ensuring suitability of a personalised service was an essential obligation in every situation, regardless of the categorisation of the financial product to which the service relates. This approach complements s33 of the Act.|
|Where an AFA is engaged by a QFE, the obligations under CS 8 should not extend to cover services that a QFE adviser could perform without being an AFA.||The Committee did not consider that it was appropriate for the Code to specify differing standards for AFAs engaged by QFEs. Code Standard 9 has been limited in its application, as discussed above.|
|Where an AFA is relieved of the obligation to provide a suitability analysis due to an instruction from the client, should that instruction have to be recorded in a separate document? It was suggested that it would be more workable if the client instead were able to acknowledge a waiver in a client service agreement, provided it is clearly brought to the attention of the client.||The wording around the opt out option under Code Standard 8 has been reworked so as to refer to a document that includes a clear acknowledgment from the client as to the advantages of a suitability analysis. No restriction has been placed on the form of document that might be used for this purpose.|
|Should the obligation to provide written explanations be confined to only requiring such an explanation when requested by a client?||The Committee considered that it would be unreasonable to expect a retail client to be sufficiently aware of their rights to expect them to request a written explanation as to the basis of any financial advice provided. The onus has been left with the AFA in this regard.|
|Should the obligation to take reasonable steps to ensure suitability for the client under CS 8 be limited to enquiry of the client, with the suitability obligation based on information provided by the client?||The Committee did not consider any wording change was warranted in response to this query.|
|Should the ability for a client to opt out under CS 8 be able to be relied on by every employee employed by an employer that receives the opt out notice?||Code Standard 8 and Code Standard 9 now both provide relief for opt outs that have been received by the AFA, the AFA’s employer or the AFA’s principal.|
|The Commissioner for Financial Advisers directed that this Code Standard be revised so as to clarify that where a client has sought personalised advice from an AFA, but has opted out of receiving a suitability assessment such that the service becomes a class service, then the AFA must comply with Code Standard 10.||The Committee has amended the Code by adding an additional explanatory note. In addition, references to ‘personalised service’ in relation to the opt out mechanism have been replaced with the wider concept of ‘financial adviser services’ to address the Commissioner’s point.|
|Code Standard 9 (now CS 10) – Providing class services for retail clients|
|A number of submitters suggested that the ‘appropriate statement’ should be able to be provided orally as an alternative to being in writing||The redrafted Code Standard 10 is now simply stated as an overarching principle, requiring the AFA to take reasonable steps to ensure clients are aware of the limitations of any class service provided. The Code Standard itself does not require those steps to include written notification of those limitations, although regulations prescribed under the Act may well do so.|
|The requirement to provide the ‘appropriate statement’ should only be made to apply once to each client, and the AFA should be able to be rely upon any ‘appropriate statement’ previously given.||The new Code Standard 10 only requires an AFA to have taken reasonable steps to ensure clients are aware of the limitations of class services provided. It will be up to the AFA to determine whether or not steps taken in the past are sufficient to cover a new class service provided.|
|Should CS 9 be amended to reflect the fact that class services provided by an AFA may take into account customers’ financial situations, in particular where the class service involves generic risk calculators used by financial service providers in relation to category 1 products?||This query has been addressed in the reworded Code Standard 10.|
|Code Standard 10 (now CS 11) – Complaints processes|
|Should the definition of ‘complaint,’ in particular the reference to ‘dissatisfaction,’ in relation to CS 10 be limited to ensure it only captures statements intended to be complaints?||The definition of ‘complaint’ has been reworked to address this concern, with an option provided for AFAs to seek clarification as to whether or not an expression of dissatisfaction is intended to constitute a complaint for the purposes of the Code. Having regard to consumer interests, the Committee considered that this was the most appropriate balance to strike.|
|A number of submitters suggested that complaints should be required to be made in writing to avoid uncertainty as to what is a ‘complaint’.||Requiring complaints to be expressed in writing can serve to discourage consumers from pursuing complaints. The Committee considered that the appropriate approach to take was to place the onus on the AFA to follow up expressions of dissatisfaction to ensure they are dealt with appropriately, and establish whether they were intended to constitute actual complaints.|
|Should the definition of ‘complaint’ be removed as it has an existing sufficiently understood meaning? It was suggested this would help to maintain consistency with the Act in which the term is not defined.||Given the extent of feedback around what or what may not constitute a complaint, the Committee was not prepared to delete the definition altogether.|
|Does the definition of ‘complaint’ include expressions of dissatisfaction made in relation to a fee rendered by an AFA? If it is intended to do so, the definition should be amended to reflect this fact.||Where a client expresses dissatisfaction regarding a fee charged, that expression would not normally be categorised as an expression of dissatisfaction ‘about the AFA’s financial adviser services’. If in doubt, the AFA should seek clarification from the client as to whether or not the dissatisfaction is so significant that the client wishes it to be treated as a complaint under the Code.|
|Should CS 10 be limited to complaints by retail clients only?||The Code Committee considered that it was appropriate for obligations relating to client complaints to extend to both wholesale and retail clients.|
|Code Standard 10 (now CS 11) – Complaints processes|
|Should the provision of class advice which is provided verbally be excluded from the scope of CS11?||Code Standard 12 is now limited to personalised services provided to retail clients.|
|Should CS 11 be confined in its application to retail clients?||Code Standard 12 is now limited to personalised services provided to retail clients.|
|Should relief under CS 11 be extended beyond AFAs who are employees, to encompass AFAs who look to another group company rather than their immediate employer to take appropriate measures?||Providing relief beyond employee AFAs was not considered warranted.|
|Code Standard 12 (now CS 13) – Record retention|
|What is an AFA required to do in respect of employer records? In particular, should the AFA who is leaving employment be able to rely on the assurances of the employer as to the record keeping?||The additional provisions of this Code Standard now refer to appropriate measures being taken by an AFA’s previous employer, where applicable.|
|Can it be clarified whether CS 12 is intended to apply retrospectively to records created before the Code comes into force?||Code Standard 13 is quite explicit that it only applies to information and documents ‘required under this Code’. As a consequence, it is clear that the Code Standard does not apply to any information previously gathered prior to an AFA becoming authorised, although there is nothing to prevent an AFA observing the standards under Code Standard 13 in respect of information gathered in the past.|
|The blanket obligation to retain records for 7 years beyond the end of the client relationship was seen by some as being inappropriate for information that is confined to a particular transaction.||Additional wording has been included to clarify the commencement of the 7 year minimum period in response to this issue raised.
Competence, Knowledge, and Skills Standards
Table summarising major submission points raised on the second draft of the Code and the Committee’s responses to those issues.
|Code Standard 13 (now CS 14) – Overarching competence requirement|
|No substantive issues were raised, other than queries as to how compliance with the obligation will be assessed.||The Code Committee was satisfied that no additional guidance was required in relation to this Code Standard.|
|Code Standard 14 (now CS 15) – Requirement to have an adequate knowledge of Code, Act, and laws|
|Is CS 14 necessary? If retained, shouldn’t it just state a requirement to comply with Standard Set B?||Code Standard 15 was considered by the Committee to provide an important standalone knowledge standard. Whilst Standard Set B is the mechanism by which Code Standard 15 is satisfied, the overarching principle is what is primarily of concern. Expressed in this manner, the Code Standard provides a convenient option for the Securities Commission to grant exemptions from Code Standard 16 in appropriate circumstances, knowing that the AFA will still need to comply with the requirement to know the Code and relevant consumer protection laws.|
|Is CS 14 appropriate, given that no other profession requires its members to prove knowledge of the laws that govern their practice and they will need to comply with the law regardless?||Given the requirement under the Act to specify minimum standards of competence, knowledge and skills, the Committee was satisfied that insisting on a knowledge of the Code and relevant legal obligations was appropriate.|
|Should CS 14 and CS 15 be combined?||The Committee considered that it was desirable for knowledge of the Code and relevant legal obligations to be expressed as a standalone standard.|
|Code Standard 15 (now CS 16) – National Certificate in Financial Services (Financial Advice) (Level 5) requirement and alternative qualifications|
|Should an AFA also be required to prove that they have achieved a minimum CPD requirement over the 12 month professional body membership period set out in CS 15?||The requirement for CPD has been revised so as to remove reference to belonging to a professional body. The Committee understands that when individuals are applying for authorisation to the Securities Commission and the applicant is relying on a designation previously attained that has not been retained at the time, evidence of completion of CPD in the previous 12 months will be sought.|
|Should the requirement for an AFA to have been a member of a professional body for a continuous period of 12 months to fall within the exception set out in CS 15 be removed, or reduced to say 6 months? It was suggested that it was unfair to impose such a requirement less than 12 months prior to it needing to be observed.||See previous response – reference to membership of a professional body has been removed. The focus is on applicants having retained an ongoing involvement in the industry, and having kept their knowledge up to date. The Committee considered this would be adequately demonstrated through a requirement to have completed at least 20 hours of CPD in the 12 months preceding their application.|
|By failing to recognise experience, is CS 15 inconsistent with the purpose of the Act of encouraging public confidence in professionalism? It was suggested that common sense and fairness dictate that full relief should be given to all CFP’s, irrespective of diploma qualifications.||The fundamental difficulty in recognising experience is that it cannot be assumed that all experience is good experience, or that a blemish-free record necessarily implies that the person is competent to an appropriate minimum level. Recognition of the quality of the professional programmes undertaken by those holding a CFP, CLU, CFA, CA or ACA designation has been provided by granting holders of those designations full relief against Standard Set C, as well as recognition against Standard Set A. The Committee did not consider that recognition of experience alone could be justified.|
|Should the Code specify a non-exhaustive list of existing bodies that are deemed to fall within the definition of ‘professional body’ in order to provide greater certainty? If so, one submitter noted they would like SIFA to be included on that list.||Consistent with the approach taken elsewhere in the Code, no list has been provided. Any organisation that satisfies the definition stated in the definitions scheme will qualify by virtue of that definition, i.e. it is a membership organisation, where ongoing membership requires compliance with continuing professional development or training requirements specified by that organisation. In particular, note that whilst it would not be regarded as a ‘professional body’ in ordinary parlance, NZX will fall within the concept of a professional body for the purposes of the Code.|
|Should CS 15 be reworked so that category 1 advisers who have completed any of the Diplomas set out in Standard Set D are not permitted to act in relation to category 2 without an additional formal relevant qualification?||Code Standard 14 provides an appropriate level of assurance that an AFA who is not competent in matters covered by any of the units in Standard Set E is prevented from advising on such matters, as doing so would result in a breach of Code Standard 14. Whilst attaining Standard Set D will be sufficient to enable a person to apply for authorisation (provided Standard Sets A, B and C have been satisfied or the person has other qualifications or designations that are able to be recognised in their place), all AFAs must still restrict their financial adviser services to matters in respect of which they are able to demonstrate that they have a reasonable basis for believing they have the level of competence, knowledge, and skills required. Attaining relevant units in Standard Set E will provide AFAs with something of a safe harbour if challenged on their competence to advise on matters covered by those units.|
|Should NZX advisors be granted relief from CS 15?||The NZX Advisor designation is recognised as an alternative to Standard Set A and Standard Set C. In addition, those with an NZSE or NZX diploma get recognition against Standard Set D. In the absence of the diploma, the Committee did not consider that relief against Standard Set D was warranted by virtue of NZX advisor designation alone. No relief is provided against Standard Set B.|
|Should CS 15 be extended to include express reference to relief for those granted exemptions by the Securities Commission?||The Committee did not consider it would be appropriate to include express reference to exemptions granted by the Securities Commission in the Code itself. Exemptions are operative as a matter of law, irrespective of what may be included in the Code.|
|Should ETITO or any other such body authorised by the Commissioner be able to specify an alternative qualification or designation as being equivalent to the National Certificate in Financial Services on a case-by-case basis?||The Committee received advice to the effect that it would be outside of their powers to effectively delegate their functions to a third party to recognise alternative qualifications. The Committee’s only statutory power is to prescribe minimum standards. Where such recognition leads to an award of a qualification or unit standard, the Committee understand the education system possesses mechanisms for recognition on a case-by-case basis where there is sufficient evidence that the individual meets all of the requirements of the relevant unit standards.
These mechanisms place an onus on the individual to demonstrate how such qualifications or designations meet the required standards. The Code itself cannot describe how such an assessment will occur.
|The eligibility sunset mechanism is still causing confusion, despite attempts to clarify the meaning in the latest draft.||The eligibility sunset mechanism has again been clarified. The meaning of the term has now been spelled out as a final bullet point to Code Standard 16 and cross referenced in the heading to the Competence Alternatives Schedule. The overall impact of the eligibility sunset mechanism has not changed over the course of the various drafts of the Code. On each occasion, the mechanism has required the qualification, paper or designation in question to have been fully attained at the time the person seeks authorisation, although the Committee notes that a number of submitters still misinterpret the mechanism as contemplated in the first draft of the Code. To provide further clarity, in the final draft of the Code, the sunset date has been specified as 1 January 2014 in the body of the Code itself, as opposed to referring to an unspecified date three years in the future.
Continuing Professional Training Standards
Table summarising major submission points raised on the second draft of the Code and the Committee’s responses to those issues.