Are You A Financial Service Provider under New Zealand Law?

New laws which are designed to increase transparency and achieve greater regulation in the financial services sector will apply to the finance industry in New Zealandfrom 1 December this year.

The legislative scheme comprises of two major statutes – Financial Advisers Act 2008 (FAA) and the Financial Service Providers (Registration and Dispute Resolution) Act 2008 (FSPA).

A system of registration is introduced whereby all financial service providers (FSPs), as defined in the legislation, are required to be registered on a unifying electronic register – the financial service providers register (FSPR).

Some examples of FSPs required to register are:

  • Banks
  • Insurance companies
  • Sharebrokers
  • Financial advisers (including financial planners)
  • Finance companies and credit lenders of any kind
  • Retailers providing goods to the public on credit terms
  • Fund managers
  • Trustees of trust funds other than for charitable or family trusts
  • Investment portfolio managers
  • Operators of credit cards, Bartercard, Taxicharge and a variety of other payment mechanisms including Paypal or other online payment systems
  • Money changers
  • Foreign currency exchange dealers

The above list is not exhaustive. As such, it is important for businesses and individuals who are based in New Zealand providing financial or similar type of services in New Zealand (and/or overseas) to find out whether they are a FSP. If so, they will need to comply with the registration requirement and make sure that, if they fall within the definition of “FSP”, they are registered as an FSP by 30 November 2010.

If FSPs are not registered by 30 November they will be breaching the law by providing, or offering to provide financial services on 1 December. Trading without current registration is a criminal offence and the penalties are significant.

In the case of an individual offender, he or she could face up to 12 months imprisonment or a fine not exceeding NZ$100,000, or both. For a body corporate offender such as a company, it could face a fine not exceeding NZ$300,000. In addition, directors of an offending company could be held liable for knowingly authorising the offence or knowingly failing to prevent the offence from occurring.

Extension of time has been given to financial advisers who will have to be registered on the FSPR by 31 March 2011. Advisers also need to be “authorised” separately by the Securities Commission under the FAA at the same time.

All FSPs are advised to consider their options as soon as possible and take steps to apply to the FSPR without delaying till the last moment. The consequences of being unregistered on 1 December are very serious.

Please note that the above information is intended to provide general information only. The contents contained in this article do not constitute legal advice and should not be relied on as such. For legal advice please contact our professional team at Forest Harrison.