Risk Regulatory Update
/NZ overhauls advice regulations
From 15 March 2021, all financial advice providers to retail clients are subject to a new regulatory regime with a host of new requirements. Automated advice is now subject to the same regulations as personal advice, there are new licensing requirements, and a new Code of Conduct.
New Zealand’s financial advice industry has in the past had three adviser types: Registered Financial Adviser (RFA), Authorised Financial Adviser (AFA) and Qualifying Financial Entities (QFE) adviser. There are now no such categorisations, and all advisers must meet the same standards and abide by the Code of Conduct.
An individual adviser must hold a Financial Advice Provider (FAP) licence or operate beneath one as a financial adviser or nominated representative. Anyone providing advice is able to do so under a transitional licence that is valid for two years, or a full licence. The cut-off for transitional licences is 16 March 2023.
The new Code of Professional Conduct for Financial Advice Services explains the standards of behaviour for advice providers with nine standards covering ethics, conduct, client care, competence, knowledge and skill. Advisers must also disclose any prior disciplinary action including some criminal convictions and civil proceedings, and bankruptcy.
Poor pass-rate on FASEA’s January exam results
The Financial Adviser Standards and Ethics Authority (FASEA) has released its exam results from the January 2021 test, revealing that just 67 per cent of candidates passed this time. There is an average pass rate of 78 per cent across all exams. Just over 1,000 advisers sat this exam.
Underperformance this time around were financial advice regulatory and legal obligations, applied ethical and professional reasoning and communication, and financial advice construction.
TAL found to have breached utmost good faith duty in Federal Court
The Federal Court has found TAL Life breached the ‘utmost good faith’ duty under the Insurance Contracts Act in a case presented to the Royal Commission. The case relates to a policyholder diagnosed with cancer but her insurance payout was denied due to undisclosed prior medical history.
The Court found TAL failed to act towards the policyholder with decency and fairness in terms of its decision and didn’t offer the policyholder proper opportunity to put material to TAL.
The Australian Securities and Investments Commission (ASIC) also alleges that TAL engaged in false and misleading conduct during the handling of the claim by saying in a claims pack that TAL had a right to delay the processing of the claim and to withhold benefits until she provided certain executed authorities. The court found these allegations were not made out.
ANZ and CBA settle US class action
ANZ and Commonwealth Bank (CBA) have reached an agreement with a United States class action relating to trading of bank bill swap (BBSW) products in 2016. Many global banks were involved in the class action, including NAB and Westpac. The class action alleged that the banks conspired to price-fix BBSW-based derivatives. Neither bank is admitting liability. In 2018 CBA paid $25 million to settle the BBSW scandal with ASIC. ANZ also settled ASIC’s court action in 2017. The latest is that ANZ was accused of silencing a whistleblower with cash.
