New rules for client money and property services
The Financial Markets Authority (FMA) has released updated guidance on how providers of client money or property services, and custodians, can meet their obligations under the Financial Markets Conduct Act 2013 (FMC Act).
FMA’s updated guidance for compliance
The new guidance replaces the FMA’s 2014 guidance note for brokers and the information sheet on custodians’ obligations.
This update aligns with the current regulatory regime and provides additional directives for custodians who have specific obligations beyond those applying to all client money and property service providers.
Addressing previous issues
The guidance aims to resolve issues identified during FMA monitoring visits and misconduct cases. It was finalised after consulting providers and custodians in 2022.
Roles and obligations
Under the FMC Act, a provider is defined as a financial service provider who manages client money or property. This replaces the broker role from the Financial Advisers Act 2008.
A custodian is a provider who holds money or property for clients, with additional obligations including audit engagements, client reporting, and reconciliations.
Key takeaways
- Client reporting: FMA stipulates that custody reports should be sent directly to clients via their chosen address, not through financial advisers or intermediaries.
- Electronic platforms: Reporting provided through electronic platforms must be the custodian’s own or have robust systems to prevent alteration by the platform provider or other parties.
- Verifying addresses: The guidance includes recommendations for verifying clients’ electronic addresses.
- Exemptions: It confirms that the client money and property rules do not apply to brokers under the Insurance Intermediaries Act 1994. A non-IAA broker is not considered a provider of client money or property services.
Expert opinions
FMA emphasises the importance of these guidelines in ensuring compliance and protecting client interests. The detailed steps for verification and reporting are designed to enhance transparency and trust in financial services.
For further details, download the Guide for providers of client money or property services. For the FMA media release, click here.
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