Response to submissions on consultation paper - standard conditions for AFAs [2010] NZSecCom 19 (5 November 2010)

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RESPONSE TO SUBMISSIONS ON CONSULTATION PAPER: STANDARD CONDITIONS FOR AUTHORISED FINANCIAL ADVISERS

The Commission released its consultation paper on Standard Conditions for Authorised Financial Advisers on 9 September 2010. The Consultation period ran until 1 October. A total of 11 public submissions were received. Some of the common themes raised by submitters were as follows:

c) clarity or guidance requested regarding the prohibition on endorsement by the Securities Commission and promoting the

d) queries raised in relation to the practicality of displaying the certificate of authorisation

e) comments that some conditions should not apply or should be modified for AFAs in a QFE

f) comments about the ABS- submitters suggested more flexibility and further guidance

g) comments regarding the period of authorisation – submitters suggested some groups were lower risk and should have the longest period available

In general, submitters supported most of the conditions but provided some constructive and practical suggestions regarding the application of the conditions and highlighted areas where further information would be useful.

The Securities Commission has considered all issues raised by submitters and has provided a summary below of the main issues

together with the Commission’s response to each of these issues. Not all issues raised have been recorded in this table.

After consideration of the submissions, the Commission made the following amendments to the conditions:

Standard Condition 1: Requirement to have and maintain and ABS – the words “at all times” have been removed to address any practical difficulties with timing and to recognise that an ABS will be a living document that will change and develop over time.

Standard Condition 3: Notifications - no substantive changes – some re ordering of items in bullet point 3 (additional guidance will be developed over time)

Standard Condition 5: Client Money – no change (additional guidance will be provided)

Standard Condition 6: Supervising Trainee advisers: no change (additional guidance will be provided) Standard Condition 7: No endorsement – no change (additional guidance to be provided)

Standard Condition 8: Display of Certificate – this Condition has been removed.

Please note: In order to capture the key elements of each issue, some paraphrasing of text, general editing and summarising of information has been necessary.

Issue raised (Standard Condition ref.)	From	Submission	Securities Commission response
1.Authorisation period	a) Confidential submission	Authorisation periods should deal with expiry of sunset arrangements (in the Competency alternatives schedule in the Code) “...the Commission to adopt a flexible renewal arrangement which provides, at the Commission's discretion, a temporary 1 or 2-year renewal of authorisation for advisers to complete the required Unit Standards in the National Certification of Financial Services in the absence of being provided proper exemptions when initially authorised”.	The Commission considers that five years should be sufficient time for advisers to plan for and complete any further training requirements for renewal.
	b) Securities Industry Association	For those subject to NZX Participant rules the maximum period should apply.	While it is accepted that those subject to NZX rules may already be subject to high standards of compliance and oversight, practices across firms will differ and there is no guarantee the individual will remain subject to these standards for the entire period of authorisation.
	c) Institute of Financial Advisers	Recommend longer authorisation periods where the adviser can demonstrate higher standards than the norm and/or less risk: advisers who are CFP, CLU designates (default of 7 years) and IFA members (default of at least 6 years).	Please see comments at 1b) above. In addition to this, membership of IFA may not endure for the entire period of authorisation. CFPs and CLUs may also need to undertake further training before renewal (where designations have been relied on for relief against unit standards for the first period authorisation). The Code does not allow for these designations to be relied on (for Set C) for authorisations granted past 2014 and therefore a longer period is not appropriate.

Issue raised (Standard Condition ref.)	From	Submission	Securities Commission response
	d)Westpac	The Commission is unreasonably vague about what factors will define the authorisation period-no criteria provided about the risk assessment. No indication why product and service risk should lead to different periods. Occupational regulation regimes generally provide for annual renewal of practising certificates. The Commission should provide transparent guidance about the circumstances that may lead to different authorisation periods.	The Commission is sympathetic to the concern that there is a lack of information around risk factors. In the first or initial period it is inevitable that risk information about the AFA population will be limited. Over time risk information will be developed and the Commission intends to be transparent in outlining its criteria for setting renewal periods. Given the absence of reliable risk information for the first period, we consider a default period of 5 years for all is fair across all groups. Annual licensing has been considered and discounted on the basis of immense cost and resource required to re- licence all AFAs within 12 months – both for industry and the Commission. Note however there is an annual confirmation requirement for registration (on the FSPR).
	e)Kiwibank	An applicant should have the opportunity to respond to a proposed reduction in period from 5 years.	Partially agree – where appropriate the Commission will engage with an individual where there is a departure from the default period (stated in the consultation as being 5 years). However this may not be practical in all cases. The Commission will publish further information (initially this will be good character and criminal conviction assessment criteria) and other risk information as this is developed.

Issue raised (Standard Condition ref.)	From	Submission	Securities Commission response
	f) Kiwibank	Being in a QFE should be a factor to support being in the upper range.	The AFA licence is about professionalism of the individual and the QFE relationship may change during the period of licence.
	g) NZ Mortgage Brokers Association	Mortgage brokers are low risk and should get 7 years.	Noted. The Commission wishes to take a standardised approach to all advisers for the initial period however a longer period may be considered for lower risk groups at renewal.
	h)Confidential submission	AFAs who are QFE employees should be granted a longer term as they pose less risk.	As per response to 1 b), c) and f)
	i) PAA	We support a minimum 5 year period.	Noted
*Total*	9
2. FAS Scope	a) Westpac	The FAS scopes should be drawn from s55 of the Act.	The Commission considers that the FAS scopes are directly drawn from section 55 and the Code. The FAS scopes are designed to address the possible combinations of permissible activities and competence requirements in the Code. The Commission has developed some further help text and guidance to assist applicants with their choices.
	b)Westpac	The Commission should develop transparent criteria for allocating the FAS scope based on the eligibility of the applicant under the Code.	The applicant will select their own FAS scope, the Commission will not allocate this. The Securities Commission will authorise the applicant provided the applicant meets the eligibility criteria including the competence requirements (set out in the Code) for the FAS scope they have selected.

Issue raised (Standard Condition ref.)	From	Submission	Securities Commission response
	c)Westpac	The Commission should develop transparent criteria for allocating the FAS scope based on the competence of the adviser rather than the scope ‘that best fits their activities’. For example, an adviser who has unit standard sets A, B, C and D should be eligible for the full range of FAS. Terms and Conditions could then relate to the activities of the AFA. Not supportive of FAS Scopes being tied to specific business activities. (comparison with the medical council)	As per response 2 a) above. The example given is correct, however it is up to the adviser to ensure he or she is fully competent (Code Std 14) therefore he or she may have attained all the unit sets but may not wish to be authorised for “All”.
	d) Westpac	FAS scope should reflect the fact that applicants can be allocated more than one. At present ‘ALL’ does not include WS and C. Table needs to be revised so applicants can be authorised for the full range of activities they are eligible for.	Partially agree – further help text has been developed to make this clear on the application system however the codes have been developed so that only one needs to be selected.
	e)Kiwibank	The Commission should clarify when it would decline to allocate the FAS Scope provided the competency requirements are met.	Agree – we will be producing our criteria for consideration of good character and criminal convictions in the near future. In the meantime the AFA Authorisation guide includes some guidelines.
	f)Kiwibank	There should be separate scopes of practice for wholesale and class-may be relevant in controlling what an AFA is authorised to do (although code standard 14 is noted).	We have considered this issue and on balance have decided to leave WS + C as one code because the competency requirements are the same. We have however updated our help text to ensure applicants understand the implications of CS 14 and that any class services to retail clients requires DRS membership.
*Total*	6

Issue raised (Standard Condition ref.)	From	Submission	Securities Commission response
3. Requirement to have and maintain an ABS (Standard Condition 1)	a)Confidential submission	In specific instances there are significant benefits to all stake-holders (the public, the regulators, and the financial advisers) for a degree of prescription in a non-public compliance document. In this case, a template document for the ABS which would significantly reduce compliance costs (in both time and cost to the adviser and auditing costs of the Commission, in particular, costs which eventually have to be passed onto clients) should be considered.	The Commission does not intend to produce a template ABS but has encouraged employers (and industry peers) to do this to assist their employed AFAs provided the AFA remains ultimately responsible for and takes ownership of the content of the document.
	b)Securities Industry Association	Supported, albeit the annual confirmation that the ABS is current should be aligned with other reporting requirements.	Agree - AFAs can align their ABS confirmation date with other reporting dates (such as annual confirmation for FSPR register).
	c) confidential submission	Guidance would be helpful on how to update an ABS where the information is subject to constant change.	Agree – the requirement to have an ABS recognises that this is an evolving and changing document. We have made a slight amendment (see comment 3 i) below) to Standard Condition 1 to make this clear and will also explain in guidance.
	d) confidential submission	The ABS Guide should provide definitions around conflicts of interest and what needs to be included in an ABS.	Noted. The Commission does not intend to produce additional guidance on this point at this time.
	e) confidential submission	Suggest that in monitoring the Commission anonymously publishes examples of good and bad practice. This would be helpful to industry.	Over time guidance will be developed to assist industry with examples of good practice.

Issue raised (Standard Condition ref.)	From	Submission	Securities Commission response
	f) Westpac	The Commission should recognise that AFAs can provide advice as employees or nominated reps. Under s20F an employer is responsible. So, the conditions and guidance should recognise that employers have a right to require an ABS is consistent with the employer and enable an QFE employee or NR to adopt portions of an ABS that relate to the QFE’s systems.	AFAs are not included in the definition of “QFE advisers” therefore our view is that 20F (a) applies, not (b). An AFA may use parts of an employer provided template but the AFA is ultimately responsible for having and maintaining this document.
	g) ING	Problematic to require AFAs to update their ABS as per the current ABS Guide. This includes all administrative, non-material amendments. How will AFAs be alerted to a new version? Will key changes be highlighted? Suggest including a materiality qualification and a timely notification to AFAs when an updated guide will be published.	The Commission is required to consult on all changes to the ABS Guide.
	h)Kiwibank	The second sentence should take into account AFAs that are employees or NRs.	Noted however the AFA’s ABS should give details of their own clients and advice processes etc.
	i)Kiwibank	Should delete ‘at all times’ because potentially unachievable.	Agree. Amendment made to Standard Condition 1.
	j)Kiwibank	Consider whether the condition should require that the ABS substantially reflect the minimum business and compliance arrangements. This would allow flexibility about when it should be updated. Currently, an AFA would breach the condition by updating the ABS first or by updating the arrangements first.	As per response in 3 c) above, the ABS is supposed to be a living document that will evolve over time. The ABS Guide is intended to support this flexibility.

Issue raised (Standard Condition ref.)	From	Submission	Securities Commission response
	k)NZ Mortgage Brokers Association	The Commission should provide consultation around an ABS that is suitable for Cat 2 elective AFAs.	The Commission does not intend to have a separate approach to Category 2 AFAs. All AFAs should be subject to the same minimum standards to avoid consumer confusion and a ‘watering down’ of the AFA brand.
	l)PAA	Some discretion is needed for updates to ABS (at least 6 months or 1 year) unless a major change has occurred.	Noted. We expect AFAs to review their ABS at least annually and more frequently when there are changes to the business. Note the condition requires the document to be up to date – but please also see comment at 3 c). Additional guidance will be provided on this point.
*Total*	12
4. Reporting (Standard Condition 2)	a) Securities Industry Association	Support alignment with AML requirements.	Noted.
	b) Securities Industry Association	Could the AFAs employer (or at the very least a QFE employer) satisfy the requirement rather than the individual AFA?	The professional obligations are personal to the AFA – it is an individual licence, however the QFE may well also have an obligation to report; both could be done at the same time.
	c) Securities Industry Association	Concern about potential for competitors to gain commercially sensitive information provided to the Commission under the OIA. Can we consider protections to reduce or remove this risk.	*See OIA footnote below.
	d) Institute of Financial Advisers	Should be simple and in a standardised format- not overly onerous.	Noted.

Issue raised (Standard Condition ref.)	From	Submission	Securities Commission response
	e) Institute of Financial Advisers	Should be in electronic format.	Noted.
	f) Institute of Financial Advisers	Should logically coincide with other reporting requirements eg annual statement, registration renewal and authorisation renewal.	Noted.
	g) Westpac	QFEs should provide the primary reporting on their adviser business of their AFAs. Otherwise there is duplication, cost and practical difficulties.	Noted – however the reporting obligation rests with the AFA – they are individually responsible for reporting in accordance with the Reporting Guide for AFAs.
	h) Westpac	AFAs employed by registered financial service providers do not have individual AML reporting obligations and AML reporting should be aligned to reflect this.	Noted.
	i) Westpac	Serious concern that actual reporting obligations are not yet known. Issues of confidentiality, data capture and compliance cost. Need time to develop systems.	Noted. Currently the reporting obligations are in relation to the *ABS* and the matters listed in the *notifications*. Adequate lead time will be factored in to any additional requirements imposed by the Regulatory reporting guide. The Commission will consult on the guide in the early part of 2011.
	j) ING	Reporting is a key compliance obligation and impacts on an AFA’s processes. The consultation should be published ASAP.	Noted.
	k) ING	Concern about any obligation to collate and provide extensive factual business information. Information required must be meaningful to the Commission.	Noted.

Issue raised (Standard Condition ref.)	From	Submission	Securities Commission response
	l) ING	Information should be kept confidential by the Commission and related government bodies.	*see OIA footnote below.
	m) Kiwibank	Suggest exempting AFAs employed by a QFE from direct reporting obligations.	See response at 4 b) above.
	n) NZ Mortgage Brokers Association	Need to know what the information required is to ensure processes are implemented with minimal cost. Information should be clearly defined and relevant to the sector.	Noted – see comment 4 i) above.
	o)Confidential submission	Concern about a duplication of reporting for AFAs in QFEs. Information requests should go to the QFE in the first instance.	Noted – we will consider copying the information request to the QFE on a case by case basis.
	p)PAA	Opposes this requirement- onerous and unproductive to require regular reporting. Administrative overload for AFAs without added value for the public. Recommend the requirement is scaled back to be absorbed into the ABS.	Noted – However reporting obligations are an essential part of the regulatory relationship between the licensed individual and the licensing authority.
	q)PAA	Concern that the Reporting Guide is still being developed and the details are yet to be finalised.	See comment at 4 i) above.
	r)PAA	Acknowledge AML requirements but essential that duplication of compliance costs is avoided and administrative costs on AFAs are minimized.	Noted.

Issue raised (Standard Condition ref.)	From	Submission	Securities Commission response
	s)PAA	Concern that commercially sensitive data should not be shared with other govt agencies unless unlawful or criminal activity.	Noted - The Commission is permitted to communicate, for a proper purpose, information to the agencies listed in section 151 of the Financial Advisers Act. See also footnote on OIA below.
*Total*	19
5. Notifications (Standard Condition 3)	a)Securities Industry Association	Draws Commission’s attention to the NZ Markets Disciplinary Tribunal Rules Penalty Band Guidance Procedure re how to assess the materiality of a breach and whether self reporting is warranted.	Noted.
	b)Securities Industry Association	Please consider practically how notifications will be made, suggest using existing mechanism like companies office registration system. Where the registrar needs to be notified about something this should also satisfy the Commission and separate notification should not be required.	Noted.
	c)Westpac	Urgent notifications should be limited to serious breaches by the AFA AND Adverse findings or convictions. These would enable the Commission to take disciplinary action to protect the public. Notifications should not include changes that can be dealt with administratively. 5 days is unnecessarily short and should be ‘as soon as practicable’ or ‘at the earliest opportunity’.	Noted. We will clarify in our guidance that the notification required within 5 days does not need to be a full report and can be followed with further/more detailed information.
	d)Westpac	The notification about changes to the business or activities including changes that may affect a FAS Scope is unclear. Should be covered in reporting, not notifications. An AFA wanting a change in a FAS Scope should re-apply to the Commission not send in an urgent notification.	Noted – we consider the current notifications to be appropriate particularly for matters that are in consumers’ interests.

Issue raised (Standard Condition ref.)	From	Submission	Securities Commission response
	e)Westpac	Changes that may impact on the certificate of authorisation, period or exemption should be covered by an administrative process to apply for changes not an urgent notification.	As above.
	f)Westpac	Change of employer should be dealt with in a change to an ABS not an urgent notification.	As above.
	g)ING	Should amend the condition to clarify what is meant by each notification requirement- it is unclear. Also, a guidance note should be published.	Please see guidance notes to standard conditions - we will also continue to develop guidance over time as to what is expected.
	h)Kiwibank	Suggest removing bullets and putting in guidance. Concerns with the matters in bullets 1, 2 and 3. 1 and 2 are unclear and unnecessarily burdensome. 3 could jeopardize a fair hearing and could be inconsistent with the Bill of Rights. An AFA should not have to notify the Commission of a suspected breach.	Noted – The Commission views self reporting as an important part of the AFA’s regulatory obligations. This is an established and well used tool in other jurisdictions. All matters reported to the Commission will be subject to due process.
	i)Kiwibank	Suggest amending to just notifying the Commission of the following: Within 5 business days of the AFA becoming aware of any material matter relevant to the AFA’s authorization, and Within 5 business days of any material change to the AFA’s relationship with a QFE or employer or within 5 business days of any relevant adverse finding etc.	Noted, however it may be difficult to measure the point in time that the AFA has ‘become aware’ and therefore we have avoided this wording. We will look at this in context of the reporting guide.
	j)NZ Mortgage Brokers Association	Suggest extending 5 day period to 20 days. The process of ascertaining the breach takes longer than 5 days.	Noted – see comments at 5 c) above.

Issue raised (Standard Condition ref.)	From	Submission	Securities Commission response
	k)PAA	5 days is not always practical although appreciated that NZX firms are subject to this now. What about small firms with 1 or 2 individuals? Suggest restricting the 5 day requirement to very serious compliance issues.	As above.
*Total*	11
6. Records (Standard Condition 4)	a)Securities Industry Association	Concern about an AFA having access to records of his/her employer or in the situation of a nominated rep of a QFE. Suggestion that this condition only applies to the extent that the AFA has the authority to provide records.	AFAs will need to ensure they can provide files relating to the clients they service or have serviced in the past. The Commission expects employers and AFAs to work together to fulfill such requests and notes that Code Standard 13 also contemplates co-operation.
	b)ING	Should include an express condition that records may be kept electronically.	It is the responsibility of the AFA to ensure files can be accessed in a timely manner and are able to be reviewed. The Commission should not need to specify format as long as those requirements are met.
	c)Kiwibank	Unreasonable to require records ‘at any time’. Should be during business hours and upon reasonable notice.	Agree that reasonable notice periods should be given in all but extreme cases – guidance will make it clear that the Commission will give reasonable notice.
	d)Kiwibank	Suggest that the condition be deemed to be satisfied if the AFA’s employer or QFE provides the records.	The Commission will hold the licensed individual to account and therefore the individual should take steps to ensure the condition can be met.
	e)Confidential submission	Requests to examine files should go to the QFE rather than directly to AFA employees.	As above.

Issue raised (Standard Condition ref.)	From	Submission	Securities Commission response
	f)PAA	Even the IRD gives reasonable warning when inspecting records. There should be specific and compelling reasons before the Commission makes minor administrative or random visits.	For routine visits reasonable notice will be given.
*Total*	6
7. Client Money (Standard Condition 5)	a) confidential submission	If the AFA is involved in the handling of client funds then it would be more consistent to make the AFA meet the same standards required of registered brokers ie disclosure, conduct and trust accounting etc not just conduct and trust accounting.	Noted – however this may be confusing to consumers and AFAs (two sets of disclosure obligations) If the AFA is also registered as a broker then he or she will be subject to brokers disclosure but otherwise the employer’s disclosure regarding any broking services should be sufficient.
	b)Securities Industry Association	Suggest amending to clarify that an AFA can fulfill the obligation using his/her employer’s structures. It is not clear whether an employee must set up separate structures.	Agree. Further guidance will be provided to make it clear individuals should adhere to those standards but they don’t also need to duplicate their employer’s systems.
	c)ING	Suggest removing this conditions, possibly ultra vires, or re-drafting so that it only applies to AFAs who provide a broking service.	Further guidance on this will be provided – see comments above. We do not consider that this is ultra vires see section 55 (2) Financial Advisers Act.
	d)Confidential submission	Concern that brokers’ obligations may contradict specific rules which apply to trustees. Recommend that regulations state that brokers’ obligations do not apply to trustee corporations who have their own legal duties.	We do not consider there is overlap – if trustees are acting as brokers they will be registered as such and need to comply with Part 3A Financial Advisers Act.
*Total*	4

Issue raised (Standard Condition ref.)	From	Submission	Securities Commission response
Supervising trainee advisers (Standard Condition 6)	a)Confidential submission	Provision needs to be made for trainees to be able to create client files to qualify for authorisation by meeting Unit Standard C assessment requirements. We feel the present wording is a Catch-22. We would ask that additional wording be included to the effect: An exception exists for services to clients provided by a trainee for the purposes of the assessment requirements under Unit Standard Set C, in which case, the supervising AFA is not only responsible for the services but is also required to co-sign with the trainee in writing to the client the advice or services.	Please refer to ETITO’s website for guidance on trainee advisers and preparation of client files for Set C. The trainee can not provide advice that is reserved for AFAs so the supervisory will always need to “sign off” on the advice. This does not render the client file (prepared by the trainee) invalid for assessment purposes.
	b)Institute of Financial Advisers	Support but there needs to be enough flexibility to make it practical. An adviser can only learn by doing. No overly rigorous interpretations of the Act and the Code.	Please see above.
	c)Institute of Financial Advisers	Cost issue- AFAs who take on trainees need them to be involved in the process as early as possible to generate revenue. An overly restrictive approach makes the situation worse.	Noted.
	d)ING	The Commission should provide guidance on the extent and nature of supervision that would satisfy this condition.	Supervisory practices will vary and the Commission does not intend to prescribe how to train and supervise advisers. The law applies in all cases – an adviser can not provide advice on services for which he or she is not authorised.
	e)NZ Mortgage Brokers Association	The AFA should take responsibility, should be limited to what is fair and reasonable. The trainee needs to be made to take responsibility of the process used.	As above – a trainee can not provide any services for which authorisation is required and therefore an AFA needs to take responsibility.
*Total*	5

Issue raised (Standard Condition ref.)	From	Submission	Securities Commission response
8. No endorsement (Standard Condition 7)	a)Securities Industry Association	It could be argued that an AFA is not permitted to disclose he is an AFA, contradicting with disclosure requirements. Granting AFA status in itself suggests endorsement by the Commission. Suggest that it is appropriate to promote that one is an AFA and the standards that an AFA must meet.	Noted – the ‘no endorsement’ wording is consistent with wording already used in other authorisations granted by the Commission AFA status is not ‘granted’ rather the AFA is authorised to provide the relevant service by reference to minimum levels of competency, knowledge and skills specified in the Code. Therefore the Commission should not be taken to endorse the advice or business of the AFA.
	b)ING	Concern that there is no guidance. Suggest the Commission provide a phrase for AFAs to use to describe their AFA status.	Noted – see above.
	c)Confidential submission	Seek clarity that AFAs will be able to state that they are AFAs on items like business cards.	This is permitted.
	d)PAA	Recommend clarifying this because it is confusing. The Commission’s website explicitly endorses the AFA logo as reflective of higher standards.	Noted – The Commission’s website uses the AFA abbreviation to pose the question “Are you an AFA?” but with the strapline “Minimum standards for professional advisers” as distinguished from “higher standards”.

Issue raised (Standard Condition ref.)	From	Submission	Securities Commission response
*Total*	4
9. Display of Certificate (Standard Condition 8)	a)Confidential submission	We feel the requirement should go further to achieve the purpose intended subject to point 7, i.e. that it, and any detail of special terms of authorisation, be clearly visible to clients and prospective clients. In practice, an adviser may conduct an interview or meeting with a client at a place other than the principal place of business, e.g. at a client's home or a client's place of business. Furthermore many advisers have "out-of- town" clients. We understand that the "visibility" could be improved by providing a prospective client a copy of the certificate along with the disclosure statement. In the case where only the standard terms of authorisation apply, this could be met by the adviser's Disclosure Statement containing the following or similar: Authorisation <AFA full name> has been authorised by the Securities Commission as an Authorised Financial Adviser (AFA) under the Financial Service Act 2008 for the period until <authorisation expiry date> subject to the standard conditions that apply to all AFAs. The Securities Commission does not endorse the AFA's business, advice, or solvency or any other agreements or business arrangements of the AFA. The disclosure requirements to advise clients when a material change to the disclosure details occur would then apply to any new non-standard term of authorisation or any change to a non-standard term of authorisation.	Agree – the display of the certificate will be optional and the suggestion to display via website is a practical solution. This condition has been removed. We consider that disclosure regulations will adequately address when changes to the adviser’s circumstances need to be notified to the client.

Issue raised (Standard Condition ref.)	From	Submission	Securities Commission response
	b)Securities Industry Association	Suggest this is unnecessary and potentially problematic in many office environments and offers little if any benefit to consumers. Suggest deleting it, but suggest that an AFA be allowed to voluntarily display the certificate. ie the ‘no endorsement’ term would not preclude this.	Agree – now optional and not a condition.
	c)Westpac	Will not work for those advisers working in call centres or with no public interaction. Question as to what location should be used- under SMA means registered office of their employer.	Agree – as above.
	d)Kiwibank	Unclear how this would work for an AFA in a large branch without a dedicated office. More effective to require FAS Scope disclosed in the AFA’s disclosure statement.	As above. We expect regulations to require the FAS scope to be disclosed.
	e)NZ Mortgage Brokers Association	Condition should be extended to apply to websites. Also, should encourage an AFA to display their disclosure document to the public.	See above.
	f)PAA	Should be optional. Unnecessary and impractical for large adviser businesses that may not have the display space. Also, many clients never go to an office but are visited by the adviser.	Agree – see comments above
*Total*	6
10. Miscellaneous	a)Securities Industry Association	Suggestion that the Commission state a rationale for each of the conditions to show how the conditions fit with the objectives of the legislation.	Explanations have been provided for all conditions.

Issue raised (Standard Condition ref.)	From	Submission	Securities Commission response
	b)Sovereign Ltd	Conditions are appropriate for individual AFAs but not for those in a QFE. For example, an ABS should not be required, nor should displaying a certificate be required for advisers who do not have face to face contact with consumers. The QFE should be empowered to set appropriate conditions.	Disagree – as per responses in 1 b), c) and f) above. Re certificate see comments above.
	c)NZ Mortgage Brokers Association	Prior to gazetting, the Commission should consult with financial adviser associations to ensure requirements are appropriate	Noted, however the Commission is unable to re consult on the final form of the standard conditions. These need to be in force by 1 December (and gazetted 28 days prior to this).
	d)Confidential submission	We await the class advice disclosure regulations under s36.	Noted.
	e)PAA	Concern that the Commission will take an unduly punitive approach to AFAs at the outset. Suggest the Commission work with industry associations on the practical application of authorisation, not against them. PAA would welcome the opportunity to work with the Commission. Suggests a grace period for AFAs to meet new compliance requirements.	As outlined in the consultation paper, the Securities Commission intends to work collaboratively with industry but will take action where standards fall below the required level.
	f)Confidential submission	Welcome voluntary authorisation.	Noted.

The Commission will respect the confidential nature of information received in any ABS (or other reports) submitted to it. Information held by the Commission is subject to the Official Information Act 1982 and the Privacy Act 1993. Any request for release of information we hold must be considered in accordance with the requirements of those Acts on a case by case basis. There are a number of grounds likely to provide good reason to withhold sensitive information submitted to the Commission, such as where its release would disclose a trade secret, prejudice the commercial position of the financial adviser business, or breach an obligation of confidence where release of the information would be likely to prejudice future supply or similar information, or information from the same source. Whilst we understand that information submitted to us will generally be submitted on a confidential basis, we suggest applicants state if they consider the information provided is confidential.

New Zealand Securities Commission

Response to submissions on consultation paper - standard conditions for AFAs [2010] NZSecCom 19 (5 November 2010)