Disclosure

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DISCLOSURE

NR19 - Disclosure-245

Updated 10 July 2020
The Ministry of Business, Innovation and Employment (MBIE) released disclosure regulations on 25 June 2020. The regulations come into force on 15 March 2021. 

The disclosure regulations will apply to anyone who gives regulated financial advice to retail clients (this includes robo-advice). 

The regulations set out what to disclose and when, but not how. This is intended to ensure that the regulations are flexible enough to adapt to innovation. 


Jump to sections
 
Publicly available information | By the time nature and scope is known
When making a recommendation | When a complaint is received | Frequently Asked Questions | Next Steps
 


Publicly available information
Each financial advice provider (FAP) must disclose the following information publicly, such as on its website prominently, or provide it to members of the public on request:
  • Licensing information. A summary of the licensing status of the financial advice provider and a brief summary of any conditions on the licence that may limit or restrict the advice that can be given. 
  • Nature and scope of the advice. Information relating to the types of advice that the financial advice provider gives, the financial advice products that can be advised on (specifically or by adequate description), and whether there are any material limitations (including on the product providers whose products can be advised on).
  • Fees or expenses. An explanation of any fees that might be charged for financial advice, including the circumstances in which they may be payable. 
  • Conflicts of interest and incentives. A description of any material conflicts of interests, an explanation of the circumstances in which material commissions or other incentives will be received and a brief explanation of how any conflicts will be managed. 
  • Complaints handling and dispute resolution. An explanation of how to complain, and information regarding the internal complaints procedure and external dispute resolution scheme. 
  • Duties information. A statement that the advice must meet legal duties to meet standards of competence, knowledge and skill in the Code of Conduct; give priority to the client’s interests; exercise care, diligence and skill; and meet standards of ethical behaviour, conduct and client care in the Code of Conduct.
  • Contact details. The name and contact details of the financial advice provider.


By the time nature and scope is known
By the time the nature and scope of advice is known, the following information must be disclosed:
  • Nature and scope of the advice. Information relating to the types of advice that will be given, the financial advice products that will be advised on (specifically or by adequate description), and whether there are any material limitations (including on the product providers whose products can be advised on).
  • Reliability history. Information regarding any recent material instances of being publicly disciplined, relevant convictions or civil proceedings and, in the case of financial advisers, any recent bankruptcies or insolvencies. 
  • Identifying information. Information to help identify the financial advice provider and financial adviser. 
  • Fees and expenses. Information regarding any fees or expenses that may need to be paid in relation to the giving of financial advice, including the circumstances when they are payable, terms of payment, and the amount of any fees (if known) or how they will be determined and an estimate (if practicable). 
  • Conflicts of interest and incentives. A description of any material conflicts of interests and any material commissions or other incentives that will or may be received, including the amount or value of these, who is involved, and a brief explanation of how any conflicts will be managed. 
  • Availability of information. If not given in writing, a statement that the client is able to request the information in writing.


When making a recommendation
The following information must be disclosed when making a recommendation:
  • Fees or expenses. Where different from that previously disclosed, information regarding any fees or expenses that may need to be paid in relation to the giving of financial advice, or following the advice, including the circumstances when they are payable, terms of payment, the amount of any fees (if known) or how they will be determined and an estimate (if practicable), and a statement about any fees or expenses in relation to acting on the advice.
  • Conflicts of interest and incentives. Where different from that previously disclosed, a description of any material conflicts of interests and any material commissions or other incentives that will or may be received, including the amount or value of these, who is involved, and a brief explanation of how any conflicts will be managed. 
  • Complaints handling and dispute resolution. An explanation of how to complain, and information regarding the internal complaints procedure and external dispute resolution scheme. This can be a reference to the provider’s website, unless the information has materially changed. 
  • Duties information. A statement that the advice must meet legal duties to meet standards of competence, knowledge and skill in the Code of Conduct; give priority to the client’s interests; exercise care, diligence and skill; and meet standards of ethical behaviour, conduct and client care in the Code of Conduct.
  • Identifying information. Information to help identify the financial advice provider and financial adviser. 
  • Availability of information. If not given in writing, a statement that the client is able to request the information in writing.


When a complaint is received
As soon as practicable after a complaint about the financial advice or financial advice service is received, if it is not resolved within two working days, the financial advice provider or a person engaged to give advice on their behalf must provide: 
  • An overview of the financial advice provider’s complaints handling process; and 
  • Prescribed information about the financial advice provider’s disputes resolution scheme.

 
Frequently asked questions
  • How clear must disclosure be?
    Disclosure must be clear, concise and effective. If it is presented with other information, it must be prominent. If it is in writing, it must be in a format, font and type size that are easily readable. It must be provided free of charge.
     
  • Will I have to disclose commission in dollars or as a percentage?
    Commission may be disclosed as either dollars or as a percentage.
     
  • Will there be a prescribed summary disclosure document?
    No, there is no specified format for disclosure, except that it must be available to customers in writing, and it must be clear, concise and effective. 
     
  • Will someone give me templates?
    Disclosure in the new regime is customised for each interaction, so you will need to understand the requirements. When the nature and scope of advice is known, and when you make a recommendation, you must disclose information specific to the customer’s situation. 
     
  •  Will it be possible to disclose verbally? Will there be additional requirements if disclosure is verbal or online?
    Yes, it is possible to disclose verbally. The financial advice provider must provide disclosure in writing if the client requests it. Also note the record-keeping standard condition for financial advice provider licences.
     
  • Will there be additional disclosure requirements for replacement business, e.g. the risks of replacement?
    The regulations do not specify additional disclosure requirements for replacement business (but additional disclosure may be necessary to meet the requirements of the Code of Conduct). 
     
  • Will there be reduced requirements when disclosing to existing clients?
    Yes. If the client already received information that must be provided by the time the nature and scope is known or when making a recommendation, it does not need to be provided again unless the client requests it, or it has materially changed. 
     
  •  What is “material”?
    Information is material if a reasonable client would expect the information to, or to be likely to, influence their decision relating to the advice.
     
  • What if the scope is agreed, and recommendations are made, in the same meeting?
    There is flexibility around the timing of disclosure if the scope is agreed and advice is provided in the same conversation. The required information only needs to be disclosed once.
     
  •  Should wholesale clients be informed of their ability to opt-out, and be treated as retail clients?
    The regulations apply to financial advice given to retail clients. They do not include financial advice given to wholesale clients.


Next steps
MBIE released disclosure regulations on 25 June 2020. FSLAA comes into force on 15 March 2021, and the regulations come into force on the same day. The regulations are available here. They amend the Financial Markets Conduct Regulations 2014, primarily by inserting new regulations 229A to 229J, and Schedule 21A.
 
FSLAA
NR19-FSLAB
 
CODE OF CONDUCT
NR19-CodeofConduct-567
 
DISCLOSURE
NR19 - Disclosure-245
 
LICENSING
NR19-License-791
 
FEES & LEVIES
NR19-FeesLevies-890

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