Key changes to the
Entities without a strong New Zealand connection currently find it harder to register on the Financial Service Providers Register (‘FSPR’).
The key changes to the FSP Act include:
- Tightening of the territorial scope so that it may be clearly noticed that New Zealand is also one of your target markets;
- New regulation-making powers that can prescribe circumstances and thresholds for when an entity must register on the FSPR, and required warning statements for certain advertisements
- Provision for registration (and de-registration) of financial advisers (but not nominated representatives)
- Increased obligations for dispute resolution scheme providers to report regulatory breaches.
Issues with the current registration regime?
The past few years have seen growing concerns that a number of overseas entities are registering on the FSPR to mislead investors into thinking they are regulated or supervised in New Zealand.
The key concern is that some may be involved in fraudulent activities offshore or are unable to obtain registration in their home jurisdiction, with their registration in New Zealand negatively impacting on our international reputation.
In response to these concerns, amendments were made to the FSP Act in 2014 to give the FMA broader powers to deregister entities from the FSPR.
Despite this regulatory activity, concerns about misuse still exist, with that misuse threatening the integrity and international reputation of New Zealand’s financial markets regulation.
So, what are the key changes?
The Bill aims to address the continued misuse of the FSPR by tightening the rules around who can register and arming the FMA with broader powers to direct de-registration.
The FSP Act currently requires financial service providers to register on the FSPR (regardless of where the financial service is provided) if they:
- are ordinarily resident or have a place of business in New Zealand, or
- are required to be licensed or registered under New Zealand legislation.
It has previously agreed that entities registering on the FSPR should be required to have a stronger connection with New Zealand.
As a result, the Bill proposes replacing the current territorial scope provision with a much stricter requirement. The new provision will only allow entities to register on the FSPR if they are in the business of providing a financial service, and:
- either that financial service is provided to persons in New Zealand by or on behalf of the entity, or
- the entity is required to be licensed or registered under New Zealand legislation.
The new provision also makes it clear that merely allowing services to be accessible by persons in New Zealand is insufficient to result in the services being caught.
In addition to the tightening of FSP Act registration provisions, the Bill also creates new regulation-making powers, which may prescribe:
- minimum thresholds for providing financial services in New Zealand before any entity can be registered
- specific circumstances where registration is required
- warnings that must be included when advertising financial services.
The Bill has also enhanced information sharing and regulatory breach reporting by dispute resolution schemes, no longer requiring a series of material complaints to occur before regulators must be notified.