In a portent of the looming step up in the adviser-licensing regime, the Financial Markets Authority (FMA) has fired off another compliance reminder.
The new FMA ‘information sheet’ released last week details best-practice record-keeping expectations for financial advice providers (FAP).
James Greig, FMA director supervision, said in a release that previous regulatory monitory of the advice sector had “consistently identified poor record keeping as an area of concern”.
Quality record-keeping is a key standard of the new adviser code established under the Financial Services Legislation Amendment Act (FSLAA).
The FSLAA regime is currently in the middle of a two-year transition period but the regulator has warned FAPs to lodge their full-licensing applications by September this year to ensure approval before the March 2023 start date.
“We consider record keeping critical, as it will help FAPs demonstrate compliance with their [legal] duties and obligations…,” the new FMA record-keeping guide says.
“… We also encourage FAPs to consider their conduct obligations. Good conduct, at its core, means focusing on customers – the result of which is good customer outcomes.
“Consistently delivering good outcomes requires sound systems, controls, record keeping, being disciplined about meeting compliance obligations, and good disclosure. It needs to be part of an organisation’s culture, including setting clear expectations and leading by example.”
The FMA guide includes details of what information FAPs need to record as well as expectations around storage, security, complaints management and regular reviews.
“Care should also be taken to put in place arrangements for non-financial advice related records. This could include records relating to managing conflicts of interest as well as the organisation’s gift register,” the FMA guidance says.
“Absence of processes, systems and controls could lead to inadequate record keeping, which in the context of recording financial advice may result in poor customer outcomes.”
However, the FMA guide says record-keeping practices should reflect the “scale and nature” of the advice business in question with some flexibility around cultural preferences, too.
“The records may be in any language, providing that for records kept in a language other than English, if required by the FMA, you provide in a timely manner a full translation of the record into English by a translator approved by the FMA,” the information sheet says.
Poor record-keeping has been a factor in a number of disciplinary findings against advisers, the regulatory information sheet notes.
“Good record keeping ultimately helps financial advice providers to demonstrate that they are serving client interests,” Greig said in the release. “We know that many financial advice providers are adapting and evolving their processes to comply with this standard condition, so we are trying to help the industry with this practical information sheet.”