Just a couple of mooring lines remain to be cast off before the Financial Services Legislation Amendment Act (FSLAA) floats free but the boatload of reforms has already raised anchor.
With FSLAA and its accompanying code now in place, the latest Ministry of Business, Innovation and Employment (MBIE) update shows a few – relatively minor – outstanding items on the regime departure list.
Most notably, the industry is awaiting news of final disclosure and transitional licensing requirements before boarding but MBIE says “now is the time to familiarise yourself with the Code of Conduct and the Amendment Act”.
However, all financial advice firms queuing up to join the good ship FSLAA should be doing much more than reading the brochures, according to Myles Allan, Mosaic Financial Services Infrastructure founding partner.
Allan said that rather than waiting for the final regime details, FSLAA-affected businesses need to start work now on “a plan that translates legal obligations translate into a practical application”.
Mosaic has teamed up with global business legal firm DLA Piper to design a pragmatic action plan and support for businesses about to board the new advice regime.
The Mosaic/DLA Piper FSLAA to-do list covers more than a dozen points ranging through the three phases of assessment, preparation and implementation.
And while the program is targeted at offering a cost-effective, turn-key FSLAA compliance solution for medium-to-large financial institutions, Allan said the basic principles applied to all advice businesses.
“For example, all firms should, at a minimum, undertake a gap analysis that compares their current state with where they want be in an FSLAA world,” he said. “We already know enough about the future regime to map out options now.”
Of course, the FSLAA adaption process would be more complex for large diversified financial services businesses such as banks and insurers, which are facing an onslaught of compliance obligations, Allan said.
The recent regulatory investigation of NZ banks and insurers – and ensuing proposed legislation – has been a huge distraction for those institutions. NZ banks are also digesting the implications of the Reserve Bank of NZ capital adequacy proposals.
There was a danger FSLAA could be lost in the compliance mix, Allan said.
“But FSLAA will fundamentally alter the way you do business across the organisation, It’s a substantial change management project.” he said. “And it’s critical to have a clearly-articulated legal and compliance map to navigate through with the right sponsorship and business buy-in.”
DLA Piper partner, Tracey Cross, said the FSLAA compliance partnership with Mosaic would result in a “seamless service offering to clients”.
“Often in implementing significant regulatory reform companies end up working with a variety of service providers, each with a different focus and priority, but leaving the client to operationalise the advice provided.
“Our focus is on providing the total solution, in a cost-effective and pragmatic way.”
She said not all NZ businesses had the resources to prepare in time for the fast-approaching FSLAA regime.
MBIE projections set the FSLAA transitional licensing phase to begin in the final quarter of this year once the final regulations are in place (expected within weeks). The law allows a little wriggle room but FSLAA part one will launch some time in the second quarter of 2020.
“The planning window is rapidly closing,” Allan said. “If you fail to comply by the deadline then you can’t give advice.”
FSLAA’s two-year transitional period is slated to end in the second quarter of 2022 when all financial advice providers (FAPs) will require a full licence while closing the ‘competency safe harbour’ – which gives educational breathing space for current advisers.
The Mosaic/DLA Piper pre-FSLAA check-list includes:
- a thorough legal overview of how the new obligations will apply to each business;
- ‘gap analysis’ mapping current business state against future regulatory requirement;
- licensing decisions – for example, to create a FAP or operate under another’s licence; whether to opt for ‘financial adviser’ or ‘nominated representative’ status;
- training schedules;
- distribution strategies;
- disclosure and other documentation preparation; and,
- system upgrades.
DLA Piper partners Cross, Alasdair McBeth and special counsel, Nicole MacFarlane provide the legal crew for the joint project while senior consultants Erin Hutchings, Magdalena Andonoska and Stephen Ladányi lead the Mosaic contingent.