Financial Adviser Regulations – Discretionary Investment Management Services and Custody

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Ministry of Business, Innovation and Employment

Thank you for the opportunity to make some general comments on the Discussion Document ‘Financial Adviser Regulations – Discretionary Investment Management Services and Custody’ (Discussion Document). While we do not follow the submission template, I have framed the comments where possible to reflect specific questions in the Discussion Document. In addition to this general industry submission I understand that a number of our members have provided more specific individual submissions.

Consistency between FAA and FMCB regimes

A major focus for the banking sector is regulatory certainty and consistency. It is of fundamental importance that where regulatory regimes overlap, that they are aligned as far as possible to reduce uncertainty and the chance for regulatory arbitrage.

The Financial Markets Conduct Bill (FMCB) will allow for the granting of licences which will enable entities to provide class and personalised DIMS services under the new regime. This will overlap with the provisions of the Financial Advisers Act 2008 (FAA) which regulates the provision of personalised DIMS services by AFAs. As such, retail clients accessing identical personalised DIMS services will be covered by different regimes, depending on whether the product is being provided by an AFA or an employee of a licensed entity.

The Discussion Document recognises this, and NZBA supports the efforts in the Discussion Document to align the two regimes. However, NZBA notes that the Discussion Document states that the regimes will be aligned ‘where appropriate’. NZBA submits that the preference should be to align the requirements in all cases unless there is real evidence that alignment would create serious undesirable outcomes.

NZBA notes that the draft FMCB regulations have not yet been consulted on, and so it is difficult to fully compare the provisions under the two regimes. It would be useful if drafts of the FAA regulations and FMCB regulations dealing with DIMS could be published for consultation at the same time to allow the industry to comprehensively compare the proposals under the two regimes.

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