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New Zealand

FAP weighs in on Class 2 advice firms

John Botica: FMA Director Regulation and Operations

Based on early financial advice provider (FAP) data, multi-advisor businesses are expected to outperform sole proprietorships by about 2 to 1 when a full regulatory regime is introduced next year.

According to figures contained in a new Financial Markets Authority (FMA) consultation document, the regulator counted 750 full Class 2 FAP licenses either approved or in training as of October 1, but alone The class 1 version of was licensed 364.

A Class 2 FAP may operate under its license with any number of financial advisors or “licensed institutions”, while a Class 1 business is limited to only one person (for short-term purposes a Locombe There is a temporary exemption for appointing a

The FMA’s consultation document, which outlines plans for annual regulatory filings for Class 1 and 2 FAPs, reported a total number of 1,168 licensees (including applications) on October 1, with a full regime due next March. Once launched, this means 54 organizations will be licensed under Class 3 terms. According to previous FMA regulatory filing consultation documents, as of August 1, approximately 37 Class 3 licenses have been approved and 17 are in progress.

Firms with a Class 3 status may be liable to financial advisors, licensed agencies, or “designated representatives,” a group likely to include banks, insurance companies, and other large financial institutions. I can do it. Designated representatives face less burdensome direct regulatory scrutiny than advisors, including exemption from listing on the Financial Services Providers Registry (FSPR).

Under the regulatory return proposition, which is substantially identical for all license classes, all FAPs are required to submit annual information detailing the “size and nature of their business, compliance performance, and potential risks.” Must be submitted to FMA.

All FAPs must file their first regulatory return by September 30, 2024, covering the 12-month period ending June 30, 2024.

“The framework and methodology are subsidiary laws detailing the technical requirements to be applied. Neither need be legally implemented,” said the consultation. “At this time, given the specific types of information we need from this group of market service licensees, we do not believe they are necessary. may decide to introduce the , and should be consulted prior to issuance.”

In early October, the FMA’s head of regulation and operations, John Botica, said that full FAP licenses currently approved or filed account for about two-thirds of the 1,750 firms operating under the transition rules. said to account for

Botica said another 20%, or about 350 companies (probably all Class 1 or 2), have registered with the FSPR as intending to apply for a full FAP license.

Previously, the FMA had announced a September 30th cut-off for FAP licenses to secure approval by the scheme start date of March 17th next year.

“We have been proactively warning, and we know there are some applications all the way to the network,” he said. “Advice providers who have not yet submitted their applications are encouraged to do so as soon as possible to avoid the risk of not being able to obtain a business license by the March 2023 deadline.”

The filing deadline for return consultations for Class 1 and 2 regulations is November 18th, with a similar Class 3 feedback filing deadline set for October 28th.

https://investmentnews.co.nz/investment-news/fap-figures-weight-to-class-2-advice-firms/ FAP weighs in on Class 2 advice firms

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