Disclosure

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DISCLOSURE

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Updated 24 October 2019
The Ministry of Business, Innovation and Employment (MBIE) released draft disclosure regulations on 10 October 2019. Regulations will come into force on 29 June 2020.

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

The draft 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
Transition Period | Frequently Asked Questions | Next Steps
 


Publicly available information
Each financial advice provider (FAP) will have to disclose the following information publicly, such as on its website, or provide it to clients 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, and whether there are any 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 conflicts of interests, an explanation of the circumstances in which commissions or other incentives will be received and a brief explanation of how any conflicts will be managed. 
  • Complaints handling and dispute resolution. Information regarding the internal complaints procedure and external dispute resolution process. 
  • Availability of information. A statement to the effect that the client is able to request for the information to be provided in a hard copy or an electronic copy.


By the time nature and scope is known
By the time the nature and scope of advice is known, the following information will be disclosed:
  • 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 will be given. 
  • 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, and whether there are any limitations (including on the product providers whose products will be advised on). 
  • Reliability history. Information regarding any recent 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, financial adviser or nominated representative. 
  • 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 and the amount of any fees (if known) or an estimate (if practicable). 
  • Conflicts of interest and incentives. A description of any conflicts of interests and any commissions or other incentives that will or may be received, including the amount or value of these, and a brief explanation of how any conflicts will be managed. 
  • Availability of information. A statement to the effect that the client is able to request for the information to be provided in a hard copy or an electronic copy.


When making a recommendation
The following information will be disclosed when making a recommendation:
  • Identifying information. Information to help identify the financial advice provider, financial adviser or nominated representative. 
  • Fees or expenses. If not 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 and, the amount of any fees (if known) or an estimate (if practicable). 
  • Conflicts of interest and incentives. A description of any conflicts of interests and any commissions or other incentives received in relation to the advice, including the amount or value of these, and a brief explanation of how any conflicts will be managed. 
  • Complaints handling and dispute resolution. Information regarding the internal complaints procedure and external dispute resolution process. 
  • Duties information. A description of the duties in the FMC Act that the person is required to meet. 
  • Availability of information. A statement to the effect that the client is able to request for the information to be provided in a hard copy or an electronic copy.
     


When a complaint is received
As soon as practicable after a complaint is received, 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.
     


Transition Period
MBIE requests submissions on whether financial advice providers can adapt their systems and processes to these disclosure requirements by June 2020, or whether additional time is required. 
 
 
Frequently asked questions
  • Will I have to disclose commission in dollars or as a percentage?
The draft regulations are unclear on this point. Refer to the new Schedule 21A clauses 5(2)(f)(iii) and 6(1)(f)(iii). 
 
  • 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. See regulation 229G in the draft regulations.
 
  • 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 provide must provide a hard copy or electronic copy if the client requests one. 
 
  • Will there be additional disclosure requirements for replacement business, e.g. the risks of replacement?
The draft 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 received the relevant information within the last 12 months, it does not need to be provided again unless the client requests it (regulations 229D(7) and 229E(5) in the draft regulations). However, the client must be informed of any material changes and disclosure must be provided in writing if the client requests it.
 
  • Should wholesale clients be informed of their ability to opt-out, and be treated as retail clients?
The draft regulations apply to financial advice given to retail clients. They do not include financial advice given to wholesale clients.


Next steps
MBIE released draft disclosure regulations on 10 October 2019. Submissions are due on 8 November 2019. FSLAA comes into force on 29 June 2020, and the regulations, once passed, will come into force on that day – read the Commencement Order.
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