Licensing

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LICENSING

NR19-License-791

Updated 16 April 2021
Anyone giving regulated financial advice to retail clients must 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) released transitional licence requirements on 25 July 2019. They released standard conditions for full licences on 6 November 2020, and the full licence guide
 on 17 November 2020.
 

Jump to sections
 
Transitional licensing | Transitional licence standard conditions | Engaging financial advisers | Types of financial advice provider full licences | Full licence requirements | Full licensing application process | Full licence standard conditions | Next Steps
 


Transitional licensing

All transitional licences became effective on 15 March 2021. Anyone not engaged by a licensed financial advice provider may not give regulated financial advice to retail clients.

Entities with a transitional licence must meet all the requirements of the Financial Markets Conduct Act 2013 (FMCA) from 15 March 2021. Financial advisers who were registered on the FSPR on 15 March 2021 do not have to meet the competence requirements in the Code of Professional Conduct for Financial Advice Services until 15 March 2023 (there is a competence safe harbour for financial advisers during the transition period).

During the transition period, if an entity extends the range of financial advice products on which it provides financial advice beyond what its advisers could give advice on under the Financial Advisers Act 2008 prior to 15 March 2021, it must apply to the FMA to modify the conditions of its transitional licence.


 
Transitional licence standard conditions
The FMA issued transitional licences subject to standard conditions. Individual licences may also have specific conditions, and there are other obligations in the Financial Markets Conduct Act and Regulations. The standard conditions are: 

1. Record keeping
You must create in a timely manner and maintain adequate records in relation to your financial advice service. Your records: 
  • must be kept in a form (which may be electronic) that maintains the integrity of information, and can be inspected and reviewed by the FMA conveniently; 
  • may be in any language, but must have a summary in English, and must provide translations to the FMA if requested (at your cost and by a translator the FMA approves);
  • must be available for inspection by the FMA at all reasonable times; 
  • must be kept for at least 7 years after the date it is made or relied on (whichever is later). 

2. Internal complaints process
You must have an internal process for resolving client complaints relating to your financial advice service that provides for:
  • complaints to be dealt with in a fair, timely and transparent manner; and
  • records to be kept of all complaints and any action taken in relation to them including the dates on which each complaint was received and any action was taken in relation to that complaint.

Other conditions
Other conditions on transitional licences include: 
  • under the licence, you can only provide the service to which the licence relates (financial advice);
  • you can only engage nominated representatives or interposed persons if you met specified requirements before 9 April 2019;
  • you must report certain matters to the FMA if and when they occur.

Engaging financial advisers

By 15 June 2021, which financial advisers are engaged by which licensed financial advice providers (FAPs) must be reflected on the FSPR. After that date, the FSP Registrar may commence proceedings to deregister any financial adviser who is not engaged by a licensed financial advice provider.

FAPs must log onto the FSPR and link all financial advisers they engage to their FAP. The rules of engagement for financial advisers, and a video demonstrating how FAPs can link advisers, is available here.

If a financial adviser changes FAP, the FAP will log onto the FSPR and disengage the financial adviser. The financial adviser has three months to be engaged by a new FAP. After three months, if the financial adviser is not engaged by another FAP, the FSP Registrar may commence proceedings to deregister the financial adviser.



Types of financial advice provider full licences
There are three classes of financial advice provider licence: 
  • Class 1, a financial advice provider with only one financial adviser (who is also a director if it is a company), and may also provide advice directly to clients. Class 1 explicitly does not permit the use of interposed persons, authorised bodies, multiple financial advisers, or nominated representatives.
  • Class 2, a financial advice provider that may have authorised bodies and multiple financial advisers. A Class 2 licence does not allow the licence holder or authorised bodies to engage nominated representatives or entities to provide advice on its behalf. Interposed persons are only permitted with the FMA’s approval. 
  • Class 3, a financial advice provider that can engage authorised bodies, financial advisers and nominated representatives, and any structure permitted by the Act. Interposed persons are only permitted with the FMA’s approval.
The licence classes are incremental, so a Class 2 licence includes everything permitted in a Class 1 licence, and a Class 3 licence includes everything permitted in Class 1 and 2 licences. However, if a business changes beyond its current licence class, it will have to apply for a new licence of the appropriate class.
 
 
Full licence requirements
Financial advice providers must apply for and obtain a full licence during a two-year period between 15 March 2021 and 15 March 2023. The FMA has the power to require entities to apply for a full licence at particular times during that period.

The FMA released full licensing requirements on 17 November 2020. The guide is updated periodically, check you have the latest version (the version number and date are in the bottom right corner of each page of the guide). Full licensing questions fall into multiple topics:
 
  • Business structure
  • Business Continuity Plan
  • Cybersecurity
  • Relevant parties
  • How advice will be provided
  • Client money and client property service
  • Competency
  • Oversight
  • Outsourcing
  • Nominated Representatives
  • Customer care and handling conflicts
  • Code compliance processes
  • Complaints handling
  • Record keeping
  • Reviewing conduct
  • Digital advice
  • Confirmations
  • Authorised Bodies’ details
  • Fit and proper
Applicants will only be asked questions relevant to the licence class for which they apply.

Most questions have structured answers (yes/no, dates, checklists). Some questions are free text fields requiring descriptive answers.
Full licence application process
Full licence applications are online. You need a RealMe login to apply. The financial advice provider (and all authorised bodies) must be registered on the FSPR.
The FMA aim to process full licensing applications within 60 working days of receiving the completed application.

The FMA may contact applicants to request clarification or additional information.

 
Full licence standard conditions

There are seven standard conditions that licence holders and those authorised under a licence must comply with. These are:

  • Record keeping – a requirement that adequate records must be retained in relation to the financial advice service, in a form that ensures the integrity of the information, in English, available for inspection and kept for a minimum of seven years. This is the same as the record keeping condition for transitional licences.
  • Internal complaints process – a requirement that there is an internal process for resolving client complaints that provides for complaints to be dealt with in a fair, timely and transparent manner and records to be kept of the complaints. The standard condition wording is the same as that applied to other licences under the Act.
  • Regulatory returns – a requirement that all information is provided to the FMA that is necessary to monitor the adviser’s ongoing capability to effectively perform the financial advice service in accordance with the applicable eligibility criteria and other requirements with the Act. The standard condition wording is the same as that applied to other licences under the Act.
  • Outsourcing – if a system or process is outsourced there is a requirement that arrangements are in place to meet the adviser’s market service licensee obligations. The purpose of this requirement is to ensure that outsource providers and associated arrangements are regularly reviewed.
  • Business continuity and technology systems – a requirement to have and maintain a business continuity plan that is appropriate for the scale and scope of the financial advice service to ensure that they are able to manage disruptions in the business.
  • Ongoing eligibility – a requirement to meet section 396 and, if applicable, section 400 of the FMCA which specify the matters in respect of which the FMA must be satisfied in order to grant a licence, or authorise an entity as an authorised body.
  • Notification of material changes – a requirement to notify the FMA in writing within 10 days of commencing to implement material change to the nature of, or manner in which the financial advice service is provided.

The FMA may issue specific conditions on a licence on a case-by-case basis. They will inform licensees about specific conditions when they grant the licence.

Licence conditions may be made pursuant to regulations under the Financial Markets Conduct Act 2013. As at November 2020, the only regulation that imposes an additional licence condition on a FAP licence is regulation 191 of the FMC Regulations, which is a general reporting condition.


 
Next steps
Read the guides on the FSPR:

and from the FMA:

FMCA
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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