As the new financial advice regime is implemented, anyone giving regulated financial advice to retail clients will have to be engaged by a licensed financial advice provider. Licensing will occur in two phases:
- A transitional licence; and
- A full licence.
The Financial Markets Authority (FMA) are expected to consult with the market about licensing during the first half of 2019.
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Financial advice providers must apply for a transitional licence during a six-month period between the last quarter of 2019 and the second quarter of 2020 (estimated).
All transitional licences become effective on the same day, at the end of the transitional licensing period. On that day, the old regime ends, and the new regime begins. From that day, anyone not engaged by a licensed financial advice provider may not give regulated financial advice to retail clients.
The process will involve fit and proper tests of the applicant’s directors and senior managers. There are also likely to be some questions about the business. The process is likely to be entirely online.
Entities with a transitional licence must meet all the requirements of the new regime, except the education requirements in the Code of Conduct. There is a competence safe harbour during the full licensing period.
During the transition period, if an entity extends the range of financial advice products on which it provides financial advice, it must apply to the FMA to modify the conditions of its transitional licence.
Financial advice providers must apply for a full licence during a two-year period between the second quarter of 2020 and the second quarter of 2022 (estimated).
The FMA has the power to require entities to apply for a full licence at particular times during that period.
There are six existing licence types issued under the Financial Markets Conduct Act 2013. These license types require applicants to meet minimum requirements in five areas:
- Fit and proper (see transitional licensing, above);
- Operational infrastructure;
- Financial resources; and
Licences are usually issued with standard conditions, and may also have specific conditions.
The process to apply for a licence is expected to be online, and proposed licensing fees suggest that the FMA should spend few hours evaluating most applications. They will spend more time on complex applications.