Module One

Question 1

Cornerstone Financial Advisor Legislation?

Answer 1

• The Financial Service Providers (reg. And dispute res.n) Act 2008
• Financial Advisors Act 2008

Question 2

Financial Service Providers are req.d to register with…

Answer 2

The registrar of Financial Service Providers at the Companies Office.

Question 3

To apply to be registered as a FSP you must apply to the Registrar with what information?

Answer 3

• state name and business address
• state if/which licensed services the app. Relates too
• confirm the applicant is not disqualified (sec.14)
• contain any other prescribed documents
• accompany the fee

Question 4

People who provide advice on high risk or long term investment products must be registered with _______, and separately authorised by_______.

Answer 4

• Reg. with registrar

- Separately authorised by the FMA under FAA 2008.

Question 5

Details recorded on the FSPR under FSPA 2008:

Answer 5

• reg. fin. Service. Providers name and business address
• name and bus. Address of approved dispute resolution scheme of which provider is a member.
• types of fin. Service the provider is registered for.
• a licensed provider should state relevant licensed service and name and bus. Address of licensing authority.

Question 6

When is a person providing a DIMS?

Answer 6

When the client has authorised an advisor or advisors employee to manage some/all of their FMCA financial products.
These include debt or equity securities, managed inv.t products, and derivatives.

Question 7

What is the FAA section 13 exemption from the scope of financial advisors service?

Answer 7

When the service is incidental to another business, specifically where credit is given under a credit contract I.e.
Sales assistant primary role is to sell retail goods, and the arrangement of finance for the purchase is ‘incidental’.

Question 8

What are FAA Category One financial products?

Answer 8

• FMCA financial product other than simple securities listed in Category Two.
• a DIMS Facility, other than category two listings.
• an investment linked contract of insurance

Question 9

What are FAA Category Two financial products?

Answer 9

• TD
• Bonus bond
• call building soc. share, call credit union square, or call debt security.
• share in a co-op. Company
• a unit in a cash or term PIE
• consumer credit contract under Consumer Finance Act 2003
• Life insurance policy pre 2009
• DIMS facility where it covers category 2 only.

Question 10

RFA’s can give advice on…

Answer 10

Category two products only. They are not bound by the Code but must still act with care, diligence and skill, and not mislead clients.
They must be reg. with an approved dispute resolution scheme.

Question 11

AFA’s have the highest level of authorisation. In addition to being registered, they must:

Answer 11

…be licensed by the FMA. They can apply to provide DIMS, investment planning, advise on category One services or any combination.

Question 12

AFA’s must comply with the Code of…

Answer 12

…Professional Conduct for AFA’s. They must meet minimum standards for professionalism, ethical behaviour, and continued education.

Question 13

5 Key facts on QFE’s:

Answer 13

• a mechanism for licensing fin. advisors.
• resp. For the actions of it’s employees and representatives.
• suits large companies I.e. Banks.
• licensed as an entity
• must provide FMA with a list of representatives

Question 14

QFE Advisors may give advice on:

Answer 14

Category One products issued by their QFE or member of their QFE group, and category two products from other advisors.

Question 15

When does an advisor under a QFE need to be individually registered?

Answer 15

If they provide an investment planning service, or give advice on Category One products issued/promoted by third parties, including products white labelled under the QFE.

Question 16

Name 5 types of Fin. Advisor.

Answer 16

RFA, AFA, QFE, QFE Advisor, Exempt provider.

Question 17

Define a Wholesale Client.

Answer 17

Section 5c

• a Fin. Advisor or broker receiving the service in the course of their business.
• an entity with net assets or net turnover in excess of 1 million dollars, and any related body corporate.
• a wholesale investor as defined in the FMCA 2013.
• an eligible investor as defined in s5d FAA 2008.

Question 18

Who can give personalised advice to a retail client on DIMS?

Answer 18

AFA only.

Question 19

Who can give personalised advice to a retail client on investment planning services?

Answer 19

AFA only.

Question 20

Who can give personalised advice to a retail client on Category one products?

Answer 20

An AFA, or a QFE where the products are issued or promoted but the QFE, a partner entity or associated entity.

Question 21

Who can give personalised advice to a retail client on a Category 2 product?

Answer 21

An RFA, AFA, or QFE advisor.

Question 22

What is a Broker?

Answer 22

“An individual or entity that offers a broking service”, must be registered on the FSPR (unless exempt).

Question 23

What is broking?

Answer 23

The receipt of client money or property, in order to hold, pay, or transfer that property.

Question 24

Examples of types of brokers?

Answer 24

Stock brokers, portfolio admin services, and Fin. advisors that provide DIMS.

Question 25

Examples of businesses that are NOT brokers...

Answer 25

Lawyers, law firms, conveyancing practitioners, chartered accountants, tax agents, and real estate agents.

Question 26

Define Custodian.

Answer 26

A custodian is a Broker who holds money or property in trust, rather than purely to transfer it to another person. Must comply with Broker obligations under FAA, as well as Financial Advisors (Custodians of FMCA Fin. Products) Regulations 2014.

Question 27

What is the FMA role in the licensing process for a QFE?

Answer 27

The FMA will: - Determine the eligibility of the entity - Require an advisor business statement that describes the entities business and compliance arrangements - designate any products beyond the scope of the QFE advisors * QFE status, t's and c's, and special terms are notified in writing to the QFE, and to the registrar.

Question 28

What is the FMA role in the process for licensing an AFA?

Answer 28

The FMA will: - Determine the eligibility of the applicant - Require an advisor business statement that describes the adviser's business and compliance arrangements * The FMA will notify in writing the scope of services approved, period of authorisation, and t's and c's, as well as notifying the registrar.

Question 29

Summarise AFA Licensing Conditions: actions and documents essential to meet requirements (7).

Answer 29

* Current Advisor Business Statement (ABS) * Periodic reporting/accounting/notification per Regulatory Reporting Guide for AFA's. * Notify FMA in writing within 5 business days of any reportable concerns. * Ensure records are available for FMA inspection at any time. * Comply with broking/trust accounting obligations. * Supervision of trainees incl. during client interaction. * Never imply the FMA has endorsed or approved any aspect of your business.

Question 30

Minimum steps to become an AFA, once qualified:

Answer 30

- Join DRS - Register on FSPR - evidence of good character - minimum standards for competence and skills - Advisor Business Statement - primary and secondary disclosure statements - meet standards for DIMS if applicable.

Question 31

List minimum standards for a person/service offering a personalised DIMS.

Answer 31

Fit and Proper - good character, qualifications, experience. Capability - People, skills, experience to manage business competently. Infrastructure - Resources, Controls and Procedures. Financial Resources - adequate for effective service performance. Governance - Framework for compliance and appt. risk management processes.

Question 32

When can an AFA provide DIMS without FMCA license or FAA authorisation?

Answer 32

Contingency DIMS can be provided to a retail client, if: The service is secondary to other services you provide (not in your normal provision of service), and is temporary due to a situation of absence or incapacity I.e. Holiday or illness.

Question 33

When providing contingency DIMS, you must:

Answer 33

- do this for no more than 6 months. - not do this is someone you know is already providing this service. - the client portfolio must be held by the client or independent custodian. - have a written agreement.

Question 34

A written client agreement for contingency DIMS should include:

Answer 34

- a statement that you will comply with FAA obligations - provide for timing and content of reports to client - allow for the client to revoke the authority orally or in writing

Question 35

An investment authority for contingency DIMS must:

Answer 35

- Be in writing - Clearly describe the scope of investment authority - not be changed without clients prior written agreement.

Question 36

Regulatory Reporting: When and how must you submit your Information Return?

Answer 36

To cover the preceding year up until 30th June and submitted by 30 September. To be completed and submitted online via FMA website. Print and retain a copy, with your ABS, for your own records.

Question 37

In the annual Information Return, what key information must be reported?

Answer 37

The service you provide Your business or employer Number/type of clients/services provided Compliance information

Question 38

Why does the FMA require the Information Return?

Answer 38

To keep accurate data on the Financial Services industry, services provided, and compliance with regulations. Model answer: - to understand the business and characteristics of AFA's - focus resources appropriately to monitor AFA's - inform the risk based approach to monitoring

Question 39

What are the consequences of failing to report in accordance with the Regulatory Reporting guide?

Answer 39

The FMA can take action for breaching the terms of authorisation, which may include suspending or cancelling the AFA's authorisation. An offence under the FAA 2008 this also carries a maximum penalty of $5000.