With just six weeks to go before the Financial Services Legislation Amendment Act (FSLAA) regime goes live, transitional financial advice provider (FAP) licence numbers have tipped above 1,400, according to figures supplied to Investment News NZ.
In December last year the Financial Markets Authority (FMA) confirmed it had received about 1,700 transitional licence applications.
Based on the latest licensing figures it appears most of the 1,747 advisory firms listed on the Financial Services Providers Register (FSPR) should make it across the FSLAA start line.
The data update also shows a surge in the number of authorised bodies (ABs) seeking shelter in the FSLAA regime since the end of last year. As at close of business in December, the FMA had approved about 460 ABs compared to 715 at the latest count.
Under FSLAA rules, FAPs can take responsibility for specified regulated advice activities of authorised bodies, which are not required to be licensed in their own right.
However, the FMA says if ABs also offer financial advice on their “own account”, they will also need a FAP licence.
But the AB system allows advisory firms to outsource some regulatory duties to FAPs, similar to the current qualifying financial entity (QFE) rules where the licensed business can take legal compliance responsibility for a range of underlying third-party (or employed) advisers.
Once FSLAA comes into force, the FMA says a “licensed FAP must agree to an authorised body operating under its licence”.
“The authorised body must be named on the financial advice provider’s transitional licence application, and the licensed FAP will be required to provide information about the authorised body when it applies for its licence,” the regulator says.
While FSLAA will sweep aside the current legal designations of QFE, authorised financial advisers (AFAs) and registered financial advisers (RFAs), the law ushers in its own problematic terminology.
As well as FAPs and ABs, the industry will have to adapt to the new legal definitions of ‘financial adviser’ and ‘nominated representative’, which essentially demarcate a line those who face direct responsibility for giving advice and those operating under strict orders of an overarching business.
The FSLAA regulations further divide the financial advisory world into three separate licensing classes – now numbered 1 to 3 after originally conceived in ABC format – based on whether the business operates as a sole practice, has multiple advisers or ABs under its wing, or uses nominated representatives.
Of the 1,400 or so current transitional licenses about half fall into the Class 1 – or sole adviser practice – suggesting a large number of small businesses will continue to populate the NZ advice landscape post March 15.
The latest statistics count roughly 9,300 ‘financial advisers’ and 12,000 nominated representatives.
Last November the FMA also published the final version of the ‘standard conditions’ all FSLAA-captured firms will need to comply with from March 2021.
John Botica, FMA director market engagement, said at the time: “Standard conditions play an important role in setting the bar for the businesses the FMA licenses.”
The regulator will begin processing full licence applications once the transitional period begins on March 15 this year.