Objectives of the review. Context. February 2015

Transcription

1 Review f the peratin f the Financial Advisers Act 2008 and Financial Service Prviders (Registratin and Dispute Reslutin) Act 2008 Terms f Reference February 2015 Objectives f the review The bjectives f this review are t: analyse the rle f financial advice and financial service prvider registratin and dispute reslutin in imprving financial utcmes fr New Zealanders, and t assess and update the bjectives f, and ratinale fr, regulatry interventin in this area assess the perfrmance f the Financial Advisers Act 2008 (FA Act) and Financial Service Prviders (Registratin and Dispute Reslutin) Act 2008 (FSP Act) against the updated bjectives f, and ratinale fr, regulatry interventin in this area meet the statutry review requirements in sectin 161 f the FA Act by: reviewing the peratin f the FA Act since its cmmencement preparing a reprt n the review fr the Minister f Cmmerce and Cnsumer Affairs, including recmmendatins n whether any amendments t the FA Act are necessary r desirable by July 2016 meet the statutry review requirements in sectin 45 f the FSP Act by: Cntext reviewing the peratin f Part 2 f the FSP Act since its cmmencement preparing a reprt n the review fr the Minister f Cmmerce and Cnsumer Affairs, including recmmendatins n whether any amendments t Part 2 f the FSP Act are necessary r desirable by August The Ministry f Business, Innvatin and Emplyment (the Ministry) is respnsible fr legislatin regulating financial markets and financial service prviders. It als has Crwn entity mnitring respnsibilities fr the Financial Markets Authrity (FMA) and Cmmissin fr Financial Capability (CFFC). Financial Advisers Act 2008 Under the FA Act, persns in the business f prviding financial advice are subject t a number f different regulatry requirements, depending n the tpic f the advice, the nature f the advice and the type f client. Only persns wh have been authrised by the Financial Markets Authrity (FMA) are permitted t ffer persnalised advice n mre cmplex r risky financial prducts t retail investrs. These requirements were put in place with the intentin f prmting the sund and efficient delivery f financial adviser services, and t encurage public cnfidence in the prfessinalism and integrity f financial advisers. The FA Act is the result f a lengthy prcess, which included significant changes t the riginal regulatry structure at the select cmmittee stage, alng with a number f subsequent

2 adjustments befre its full cmmencement in This resulted in legislatin which was relatively cmplex t implement and which has been the subject f varius criticisms since its cmmencement. An effective and well-functining system f regulatin fr financial advice is imprtant because: a healthy financial advice sectr requires a level f public trust. This trust was undermined by real and perceived issues with financial advice prir t the implementatin f the FA Act. clients expect a level f care, skill and diligence frm financial advisers. Where advisers d nt meet these expectatins, r where they d nt act in the client s best interests, this can lead t significant financial detriment t thse clients. the csts impsed by regulatin can make advice mre cstly and less attractive t cnsumers, reducing the number f peple receiving advice abut financial matters. In additin, the Gvernment has made a cmmitment t imprve the quality f regulatin. This cmmitment includes reviewing existing regulatin t identify and remve requirements that are unnecessary, ineffective r excessively cstly. Financial Service Prviders (Registratin and Dispute Reslutin) Act 2008 The FSP Act requires all financial service prviders t be registered and, if they prvide services t retail clients, t belng t a dispute reslutin scheme. The FSP Act aimed t: facilitate efficient regulatin and public access t infrmatin abut financial service prviders prhibit certain peple frm being invlved in prviding financial services in New Zealand meet New Zealand s internatinal bligatins under the Financial Actin Task Frce Recmmendatins ensure that cnsumers have access t effective dispute reslutin mechanisms in respect f financial services, withut the cst and cmplexity f the judicial system. The substance f the FSP Act cmmenced in August There are currently fur dispute reslutin schemes: The Banking Ombudsman The Insurance and Savings Ombudsman Financial Services Cmplaints Limited Financial Dispute Reslutin Scheme. Develpments since 2011 Since the cmmencement f the FA Act and FSP Act, a number f ntable changes have been made t bth Acts: significant changes were made t the FA Act by the Financial Markets (Repeals and Amendments) Act In particular, it aligned definitins with the Financial Markets Cnduct Act 2013 and limited Authrised Financial Advisers t prviding a narrwer type f discretinary investment management services (DIMS) withut the need fr a separate licence. These changes came int frce frm 1 April The Financial Services (Registratin and Dispute Reslutin) Amendment Act 2014 strengthened the registratin prvisins in the FSP Act and remved the requirement

3 fr a gvernment-run reserve dispute reslutin scheme. These changes came int frce n 1 June A number f ther changes have als impacted n the financial adviser sectr, including: the creatin f the Financial Markets Authrity (FMA) in 2011, which, amng ther things, tk ver the functins f the Securities Cmmissin, including the regulatin f financial advisers. the cmmencement f the Anti-Mney Laundering and Cuntering the Financing f Terrrism Act 2009 in Authrised Financial Advisers are reprting entities under this legislatin, supervised by FMA. The dispute reslutin part f the FSP Act (Part 3) was reviewed by the Ministry in September 2013, in accrdance with the statutry review requirement. This review fcussed n issues f cnsumer awareness f dispute reslutin schemes and n issues effecting accessibility. Given that the dispute reslutin framewrk had nly been perating fr arund three years at that pint, and the FSP Act was in the prcess f being amended, the review recmmended that financial service prvider dispute reslutin be re-evaluated as part f a brader review f the FSP Act and FA Act. Apprach t the review The review will be led by the Ministry in cnjunctin with FMA, CFFC and Treasury. We plan t run the review in an pen and transparent manner and will actively seek input frm stakehlders thrughut the prcess. It will be imprtant t ensure that nt nly d we understand the views f the sectr, but that we als understand the changing needs and expectatins f cnsumers f financial advice and ther financial services. T this end, we plan t prvide a number f different types f pprtunities fr input int the prcess, beynd frmal cnsultatin prcesses. We expect that this will include targeted fcus grups and wrkshps, pen frums and active engagement thrugh nline channels. The initial fcus f the review will be updating ur understanding f the rle f financial advice and financial service prvider registratin and dispute reslutin in imprving financial utcmes fr New Zealanders. Our analysis will include cnsideratin f changes t the regulatry envirnment, t cnsumer needs and expectatins and t gvernment pririties. This understanding will help us t test and update the bjectives f, and ratinale fr, gvernment interventin in this area. Current regulatry settings will then be cnsidered in light f this interventin lgic in rder t identify key issues fr cnsideratin. Our analysis f these issues will fcus n areas where the FA Act and FSP Act may nt be meeting the needs f cnsumers and where the benefits f their requirements may nt be justifying their csts. This analysis will be infrmed by the gvernment s best practice regulatin guidelines. The Ministry s analysis f bjectives, interventin lgic and issues will be cnsulted n in an issues paper planned fr release in early May This will prvide the pprtunity fr interested parties t cmment n, crrect and challenge the analysis. We will lk t actively participate in a range f discussins n these issues during this time. In August 2015 the Ministry intends t prvide a reprt t the Minister f Cmmerce and Cnsumer Affairs utlining the prgress f the review s far and prviding further detail n the ptins identificatin prcess. The Ministry will als prvide a standalne reprt n the peratin f Part 2 f the FSP Act, in accrdance with the requirements f sectin 45 f the FSP Act. We expect that this reprt will recmmend carrying n further wrk in this area as part f the brader review.

4 We then expect t develp and cnsult n an ptins paper befre the end f The ptins paper prcess will reflect the extent f the issues identified thrugh the issues paper cnsultatin prcess. Details f the ptins paper prcess will be updated accrdingly and cmmunicated thrugh the Ministry s website. The final reprt n the peratin f bth the FA Act and FSP Act will be prvided t the Minister f Cmmerce and Cnsumer Affairs by 1 July This reprt will include any recmmendatins fr changes arrived at after the ptins paper cnsultatin prcess.

5 Indicative timing fr the achievement f key milestnes is set ut belw: Key stages f the review prcess 1. Research: Analysis f the interventin lgic Literature review Cnsumer fcus grups Cnsumer surveying Adviser surveying 2. Issues Identificatin: Stakehlder meetings Cnsultatin n the interventin lgic and issues Open frums n issues paper Engagement thrugh stakehlder frums Analysis f submissins Indicative timing First half f 2015: Cnsumer surveying, supplemented by cnsumer fcus grups and adviser surveys January-February 2015: cmplete initial meetings with stakehlders February-April 2015: develpment f issues paper May-July 2015: public cnsultatin n issues paper and nging stakehlder engagement 3. Reprt t Minister Reprt n the results f ur research and issues identificatin and utlining the ptins identificatin prcess Statutry reprt n Part 2 f the FSP Act, with the intentin f further wrk in this area being undertaken as part f the brader review By 15 August 2015: statutry deadline fr reprt n the peratin f Part 2 f the FSP Act 4. Optins identificatin: Develpment f ptins t address key issues identified Discussins and wrkshps n ptins Release ptins paper fr cnsultatin Analysis f submissins Nvember 2015: release ptins paper fr public cnsultatin 5. Reprt t Minister: Overall findings f the review Recmmendatins n what, if any, legislative changes are needed and a plan fr these changes Tabling f reprt in Parliament 1 July 2016: statutry deadline fr reprt t the Minister n the peratin f the FA Act.

6 Scpe The full peratin f bth Acts will be cnsidered during the review, with cnsideratin given t the impact f ther related legislatin. We will seek t understand the impact f the Anti-Mney Laundering and Cuntering Financing f Terrrism Act 2009 n the adviser sectr and will wrk with the Ministry f Justice and FMA t ensure that any feedback is fed int any future changes t this Act. If there are areas where this legislatin is impsing undue cmpliance csts n the adviser sectr, we may recmmend that amendments r exemptins be cnsidered. The fllwing areas are ut f scpe fr the review: While we will seek t understand the relatinship between financial literacy and financial advice, the develpment f strategies t prmte financial literacy are utside f the scpe f this review. We will nt prpse substantive changes t ther financial markets legislatin, ther than thse that are cnsequential t any changes prpsed t the FA Act r FSP Act.