The Financial Markets Authority (FMA) has set the stage for increased monitoring of advice firms under the imminent full licensing regime in new terms of engagement released last week.
According to the FMA information sheet, the regulator will require unfettered access to financial advice provider (FAP) documents and business records of those selected for a full-on monitoring procedure.
“Our monitoring will include an assessment of your business records and documentation related to your financial advice service. This may include your client files, disclosure documents, marketing material, complaints, competency (training and development) records, any compliance assurance undertaken, product information and/or commission information,” the FMA guide says. “Our monitoring will also look at your processes and documentation to check for compliance.”
However, the rules of the monitoring game also give FAPs a four-week window between FMA notification and deployment of regulatory troops on the ground (or, more accurately, bums on office seats).
As well as fossicking through client and business records, the FMA monitors may also buttonhole FAP staff members for a quiet chat in the back room.
“We are monitoring your understanding of the business, processes, and obligations you work to in practice,” the FMA guide says.
“It is therefore our preference that interviews are only attended by relevant internal staff who can speak to these details.”
Unlike many other regulatory services, monitoring comes at no charge to the chosen FAPs that only have to supply FMA staff members with a private room, WiFi and power for the duration of the visit.
Lunch, however, is off the menu.
“We appreciate your hospitality but cannot accept any meals or gifts,” the FMA guide says.
Full FAP licensing begins next March with the regulator currently processing the usual last-minute rush of applications.
In October the FMA director regulations and operations, John Botica, said about two-thirds of the current FAP community had either been approved or had applied for a full licence with a further 20 per cent noting an intention to do so in the Financial Services Providers Register.