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Standard conditions for qualifying Financial Entities [2010] NZSecCom 25 (22 December 2010)

Last Updated: 16 November 2014

22 December 2010

Standard Conditions for Qualifying Financial Entities (QFEs)

Section 67 of the Financial Advisers Act 2008 provides that a grant of QFE status may be subject to terms and conditions and may also incorporate standard conditions. The standard conditions in force from 20 January 2011 are set out below.

1. CAPACITY

1.1 The QFE must at all times maintain governance and compliance arrangements appropriate to the financial adviser services of the QFE, the QFE Group and its nominated representatives.

1.2 The QFE must at all times maintain procedures to:

i) ensure that retail clients receive adequate consumer protection, including clients of the QFE, any member of the QFE Group and its nominated representatives

ii) for personalised services provided by QFE advisers to retail clients in relation to category 1 products, ensure that consumer protection is of a similar standard to that provided by advisers who are subject to the Code of Professional Conduct for Authorised Financial Advisers taking into account the scope of category 1 products for which the financial adviser service is provided

iii) train employees of the QFE and the QFE Group and nominated representatives

iv) set standards for employees of the QFE and the QFE Group and nominated representatives.

1.3 The QFE must maintain procedures for monitoring the matters referred to in

1.2.

1.4 The QFE must ensure that its governance and compliance arrangements and procedures are substantially the same as, or improve on, the arrangements and procedures set out in the QFE’s Adviser Business Statement (ABS) referred to in the letter of grant of QFE status from the Securities Commission (the QFE’s

‘Initial ABS’).

1.5 The QFE must maintain and keep current a written ABS, in accordance with the current QFE ABS Guide.

The QFE must ensure that this accurately reflects:

i) the financial adviser services of the QFE, the QFE Group and its nominated representatives; and

ii) the governance and compliance arrangements of the QFE over these services.

The QFE must provide a copy of its ABS to the Securities Commission with its

Annual Report and on request within the time period specified.

1.6 The QFE must notify the Securities Commission in writing within five business days of becoming aware of any matter that the QFE or any member of the QFE Group believes has resulted or is likely to result in material non-compliance with the QFE’s governance and compliance arrangements in 1.4.

1.7 The QFE must notify the Securities Commission in writing within five business days of becoming aware of any matter that the QFE or any member of the QFE Group believes has materially affected or is likely to materially affect the capacity of the QFE to fulfil its financial adviser service obligations.

1.8 The QFE must notify the Securities Commission if it intends to materially change:

i) the governance and compliance arrangements; or

ii) the financial adviser services of the QFE, a member of the QFE Group or its nominated representatives

from those set out in the QFE’s Initial ABS.

1.9 When making any notification under 1.6 to 1.8 above, the QFE should, as far as practicable, indicate to the Securities Commission its planned actions to maintain its capacity under section 1 of the standard conditions and its compliance with its obligations under the Financial Advisers Act.

2. REPORTING AND NOTIFICATIONS

2.1 The QFE must report in accordance with the reporting and accounting requirements contained in the Reporting and Notifications Standard Conditions for QFEs.

3. RECORDS

3.1 The QFE must ensure that relevant records pertaining to the financial adviser services of the QFE or QFE Group (including previous members of a QFE Group) and its nominated representatives are available for inspection by the Securities Commission at any time.

3.2 The QFE must ensure that relevant records pertaining to the financial adviser services of the QFE, QFE Group (including previous members of a QFE Group) or its nominated representatives are kept for a minimum of seven years.

3.3 The QFE must ensure that it keeps complete lists of the QFE’s nominated representatives including commencement and termination dates.

4 DISCLOSURE

4.1 In making disclosure under s25 of the Financial Advisers Act the QFE must disclose the information in Table 1 and Table 2 for the financial adviser services specified in the Tables.

4.2 If a QFE makes disclosure under s25 of the Financial Advisers Act in a form other than that set out in Regulation 8(5)(a-d) of the Financial Advisers (Disclosure) Regulations 2010, it must document why it believes the disclosure is appropriate for the service provided, taking into account the objectives for disclosure in s3(2)(b)(i) of the Act.

4.3 Where the QFE’s disclosure under s25 of the Financial Advisers Act is not in writing, the QFE must inform the client that written disclosure is available on request.

TABLE 1: About the business

This table forms part of condition 4.1

TABLE 2: About the service

_{This table forms part of condition 4.1}

Definitions

_{In the conditions, the following terms have the meanings set out below:}

Material influence

(in Tables 1 and

₂₎

An influence which a reasonable client would find reasonably likely to influence the adviser in providing the financial adviser service.

Remuneration Any commission, fee, or other benefit or advantage, whether pecuniary or non pecuniary, and whether direct or indirect; but does not include salary or wages of a fixed amount.

5. NO ENDORSEMENT

5.1 The QFE, any member of the QFE Group and its nominated representatives must not at any time state or imply that the Securities Commission has endorsed or approved the QFE’s business, financial adviser services, or solvency, or any other agreements or business arrangements of the QFE.