Financial Advisers Must Comply With new Code of Professional Conduct From mid-2020

Financial Advisers Must Comply With new Code of Professional Conduct From mid-2020

The Minister of Commerce and Consumer Affairs has released the content of a new Code of Professional Conduct for Financial Advice Services that should come into effect in mid-2020.  The Code will require those persons who provide regulated financial advice to retail clients to meet certain standards of professional conduct, and will follow the commencement of the Financial Services Legislation Amendment Act 2019 ("FSLA").

The Code follows the Code Working Group's task of developing a draft Code, in consultation with the Minister, the Financial Markets Authority and relevant members of the financial advice industry.

The Code is separated into two areas and focuses on duties surrounding:

1. Standards of ethical behaviour, conduct and client care required; and

2. Standards of competence, knowledge and skill (including any continuing professional development ("CPD")    
   requirements).

The standards in relation to ethical behaviour, conduct and client care require those who give financial advice to:

1. Always treat clients fairly;

2. Always act with integrity;

3. Ensure that the financial advice is suitable for the client and in regard to the nature and scope of the financial    
   advice;

4. Take reasonable steps to ensure the client understands financial advice; and

5. Take reasonable steps to protect the client information he has lost and authorised access use modification with    
   disclosure.

The standards surrounding competence, knowledge and skill require those who give financial advice to act as follows:

       
  1. Not give financial advice unless the person meets a standard of general competence knowledge and skill;
  2.    
  3. Not give financial advice that includes designing and investment plan unless the person meets a standard of particular competence knowledge and skill  for designing investment plans;
  4.    
  5. Not give financial advice that includes a recommendation or opinion about either:        
    (a) Acquiring or disposing of (or not acquiring or disposing of) a financial advice product; or        
    (b) Switching funds within a managed investment scheme unless the person meets the standard of particular competence knowledge and skill for product  advice;
  6.    
  7. To undertake CPD to ensure that they maintain:        
    (a) The competence, knowledge and skill for the financial advice they give; and        
    (b) To the extent relevant to the financial advice they give, an up-to-date understanding of the judicial framework of financial advice in New Zealand.

While the introduction of the Code is some time away, it is important that those who provide regulated financial advice to retail clients take heed of its requirements. Businesses will have at least six months to get a transitional licence, and a further two years to become fully licensed and meet the competency requirements.

Furthermore, certain people may need to complete further relevant qualifications to comply with part 2 of the competency aspects of this code – including    the completion of a new National Certificate in financial services (regulated by NZQA). Those persons who are authorised financial advisors immediately before the commencement of the Code should not need to requalify, but will need to ensure that they have practices in place to manage CPD both individually and within a business. Please click here for access to the Code.

Please contact one of our team if you require our advice as to whether you are covered by the Code and what steps you may need to take to ensure compliance with the Code, or with the FSLA or FMCA more generally.

For enquiries or requests for assistance related to the subject matter of this article, or more general corporate/commercial law enquiries, please contact McVeagh Fleming's corporate/commercial law specialists:

Andrew Knight on (09) 306 6730 (aknight@mcveaghfleming.co.nz)  

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© McVeagh Fleming 2019

This article is published for general information purposes only. Legal content in this article is necessarily of a general nature and should not be relied upon as legal advice. If you require specific legal advice in respect of any legal issue, you should always engage a lawyer to provide that advic