Demonstrating compliance a priority
The Financial Markets Authority is educating financial advice providers about how they can demonstrate compliance with record-keeping obligations.
Under the new financial advice regime, Standard Condition 1 for both transitional FAP licences and full FAP licences states that “advisers must create in a timely manner and maintain adequate records in relation to your financial advice service”.
The FMA has released an information sheet that provides an overview of the record-keeping obligations for advisers and sets out areas for them to consider when reviewing their record-keeping practices. It also includes examples to illustrate how FAPs can demonstrate compliance with the requirements.
“Our monitoring of the previous financial advice regime consistently identified poor record-keeping as an area of concern,” said FMA director of supervision James Greig (pictured above). “This included insufficient records about the services provided to clients and incomplete information on whether key obligations had been fulfilled.”
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The new financial advice regime came into force on 15 March 2021. Under the new regime, entities and individuals granted a FAP licence under the Financial Markets Conduct Act 2013 (FMC Act) were now subject to certain standard conditions.
Standard Condition 1 (for both transitional FAP licences and full FAP licences) states that financial advisers must create in a timely manner and maintain adequate records in relation to their financial advice service and consider record-keeping critical, as it will help FAPs demonstrate compliance with their duties and obligations under the FMC Act.
“Good record-keeping ultimately helps financial advice providers to demonstrate that they are serving client interests,” Greig said. “We know that many financial advice providers are adapting and evolving their processes to comply with this standard condition, so we are trying to help the industry with this practical information sheet.”
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Financial advisers’ records will be considered adequate if they clearly demonstrate (together with their systems, process and controls) how they and any person engaged by them and the regulated financial advice given to retail clients by them on their behalf, met their duties and obligations.
The records must be created in a timely manner, kept in a form (which may be electronic) and manner that ensures the integrity of the information and enables it to be conveniently inspected and reviewed by the FMA.
It must be available for inspection by the FMA at all reasonable times readily available to the adviser, and in any event within 10 working days or as otherwise agreed by the FMA when requested. Files must be kept for a period of at least seven years from the date the record is made.
