New Zealand Regulator Adds Extra Layer of Checks for Advisers Selling FX & Futures

New Zealand's financial regulator has enhanced the licensing procedure for financial advisers promoting regulated financial instruments. Advisers will need to

FMAThe main financial watchdog in New Zealand, Financial Markets Authority, that regulates financial markets products has increased the licensing procedure for Authorised Financial Advisers (AFAs). Under the new guidelines advisers will be required to supply references from key parties, show a Certificate of Standing from a professional body and additional information such as a CV and professional memberships. The move comes on the back of an ongoing programme to strengthen New Zealand’s regulatory environment.

The regulator’s announcement for AFAs means advisers will need to fulfil enhanced requirements before gaining authorisation as an approved adviser. According to the notification on the regulator’s website, the changes are focused on: “Testimonials and the introduction of a new Supplementary Application Information Form.”

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Under the FMA’s authorisation AFAs can engage in a range of activities relating to financial transactions. These are categorised under different categories. Under Category 1. Advisers can deal in investment focus products which include; securities, land investment products, futures contracts and investment-linked insurance contracts. In addition, Category 2. Products which are generally less complex (non-financial).

AFAs are managed under legislation that was introduced in 2008, known as the Financial Advisers Act 2008. The legislation was introduced to create a regulated and efficient marketplace for financial services. According to the official documentation, the purpose of the act is to: “Promote the sound and efficient delivery of financial adviser and broking services, and to encourage public confidence in the professionalism and integrity of financial advisers and brokers.”

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The additional checks the regulator will take for advisers are:

  • A testimonial from a manager, a peer and client
  • A Certificate of Standing from a professional body if appropriate. This replaces the Professional Body Testimonial.
  • Supplementary information: including a CV; details of professional memberships; copy of your ABS; DRS membership history; plus additional requirements for applicants whot have worked overseas.

The FMA regulates futures and OTC brokers offering currency trading. There are over 56 regulated brokers and banks.

New Zealand became an easy target for brokerage firms looking for lapsed regulations, the least corrupt nation in the world offers a two tier system. One mode of regulation which regulates listed and OTC instruments with capital requirements similar to those in developed markets such as the UK and Singapore. And a second system which does not govern FX as such, but gives an impression of regulation under the Financial Service Providers Register (FSP), a directory of firms offering financial services products in New Zealand. The FSP registration process is being strengthened by the authorities, thus impacting the status of FX firms operating in the island nation.

Forex Magnates believes that FX brokers registered under the FSP will be gradually removed or migrated to full regulation under the FMA as regulated futures brokers (category 1) over the next 12 months.

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