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Code of Professional ConductFor Authorised Financial Advisers
Please refer to the updated version available here -http://fma.govt.nz/compliance/role/afas/your-on-going-obligations/
code-of-professional-conduct/
The Code of Professional Conduct for Authorised Financial Advisers was approved by the Minister of Commerce under section 92 of the Financial Advisers Act 2008 on 21 September 2010. The Code was published in the Gazette by the Commissioner for Financial Advisers on 28 October 2010. It came into force on 1 December 2010.
Financial Markets Authority Level 8, Unisys House56 The TerraceP O Box 1179Wellington 6140New Zealandwww.fma.govt.nz
May 2011
ISBN 978-0-478-36871-0 (print) ISBN 978-0-478-36872-7 (online)
Contents
A BAckground 4
B IntroductIon 5
c MInIMuM stAndArds of ethIcAl BehAvIour 6
Standard1 Placingclientinterestsfirstandactingwithintegrity 7Standard2 Notbringingthefinancialadvisoryindustryintodisrepute 7Standard3 Usingtheterm“independent” 8Standard4 Borrowingfromorlendingtoaclient 9Standard5 RestrictionsthatapplywhereAFAisrelatedperson 9
ofproductprovider
d MInIMuM stAndArds of clIent cAre 11
Standard6 Behavingprofessionally 12Standard7 Ensuringretailclientsareabletomakeinformeddecisions13Standard8 Suitabilityofpersonalisedservicesforretailclients 13Standard9 Explainingthebasisofpersonalisedservices 14
forretailclientsStandard10 Providingclassservicesforretailclients 15Standard11 Complaintsprocesses 15Standard12 Keepinginformationaboutpersonalisedservices 16
forretailclientsStandard13Recordretention 17
e MInIMuM stAndArds of coMpetence, knowledge, And skIlls 18
Standard14 Overarchingcompetencerequirement 19Standard15 Requirementtohaveanadequateknowledge 19
ofCode,Act,andlawsStandard16 NationalCertificateinFinancialServices(FinancialAdvice) 20
(Level5)requirementandalternativequalifications
f MInIMuM stAndArds for contInuIng professIonAl trAInIng 22
Standard17 Professionaldevelopmentplanrequirement 23Standard18Undertakingcontinuingprofessionaltraining 23
g coMpetence AlternAtIves schedule 25
h defInItIons schedule 30
3
A Background
ThisistheCodeofProfessionalConductforAuthorisedFinancialAdvisersforthepurposesoftheFinancialAdvisersAct2008.
ThissectionoftheCodeprovidesabriefoverviewofthescopeandaimsoftheCode.TheremainderoftheCodecontainstheoperativeprovisionswhichmustbecompliedwithbyallAuthorised Financial Advisers.
Financial advisersarerequiredtobeauthorisedundertheFinancialAdvisersAct inordertoprovideapersonalised service to a retail clientthatis:
(a) financial advice or a discretionary investment management service in relation to a category 1 product; or
(b) aninvestment planning service.
Financial advisersmayalsoelecttobecomeauthorisedundertheActinothersituationsspecifiedinregulationsmadeundertheAct.AsatthedateofthisCode nosuchregulationshavebeenmade.
TheoverarchingpurposeoftheFinancialAdvisersActis“topromotethesoundandefficientdeliveryoffinancialadviserandbrokingservices,andtoencouragepublicconfidenceintheprofessionalismandintegrityoffinancialadvisersandbrokers”.
OneofthekeywaystheActseekstoachieveitspurposesinrelationtofinancial adviser servicesisbyrequiringallAuthorised Financial Advisers (alsoreferredtoasAFAs)tocomplywithacodewhichprovidesforminimumstandardsofprofessionalconduct.TheoverarchingpurposeoftheActprovidesthespiritunderpinningtheCode.WhenconsideringtheirconductanddisclosureobligationsundertheAct andtheCode, AFAsshouldhavethatspiritinmind.
TheActrequirestheCodetocontainminimumstandardsofcompetence,knowledge,andskills,ofethicalbehaviour,andofclientcare.TheCodeisalsorequiredtoprovideforcontinuingprofessionaltrainingforAuthorised Financial Advisers,includingspecifyingrequirementsthatanAFAmustmeetforthepurposeofcontinuingprofessionaltraining.AFAsmaybedisciplinedforbreachesoftheCode.
AnumberoftheCode StandardsincludereferencetolegalobligationsthatwouldapplytoAFAsirrespectiveoftheCoderequirements.Suchreferencesareincludedlargelyforthesakeofcompleteness.However,theCodedoesnotrefertoalllegalobligationsofAFAs.AFAsmustcomplywithallapplicablelaws,whetherornotreferredtointheCode.
ThisCodehasbeenapprovedbytheMinisterundertheFinancialAdvisersActandcomesintoforce,eitherinpartorinfull,onadateordatesspecifiedbyGazette noticeundersection94oftheAct.TheCommissionermayspecifydifferentdates forthecommencementofdifferentprovisionsofthisCode.
4
ABACKg
ROUN
d
EachstandardinthisCodeconsistsofanoverarchingprincipleidentifiedasaCode Standard togetherwithadditionalprovisionsthatcontainfurtherdetailabouttheapplicationoftheCode Standard.
Unless otherwise stated, the additional provisions do not limit the application of the overarching principle under which they are stated, or the application of any other Code Standard. AFAs must apply the Code Standards in a way that encourages public confidence in the professionalism and integrity of financial advisers.
TermsusedinthisCodethatappearinitalicsaredefinedinthe definitionsschedule.
ThisCodedoesnotlimitanAFA’slegalobligations,includingthose undertheAct.
B Introduction 5
BINTROd
UCTION
Minimum standards of ethical behaviour
code stAndArd 1
Pg7 Placingclientinterestsfirstandactingwithintegrity
code stAndArd 2
Pg7 Notbringingthefinancialadvisoryindustryintodisrepute
code stAndArd 3
Pg8 Usingtheterm“independent”
code stAndArd 4
Pg9 Borrowingfromorlendingtoaclient
code stAndArd 5
Pg9 RestrictionsthatapplywhereAFAisrelatedpersonofproductprovider
code stAndArd 1
An Authorised Financial Adviser must place the interests of the client first, and must act with integrity.
C Minimum standards of ethical behaviour
This Code StandardappliestoanyactivityofanAFAthatrelatestotheAFA’s financial adviser services.
Whatisrequiredtoplaceaclient’sinterestsfirstforthepurposesofthisCode Standardisdeterminedbywhatisreasonableinthecircumstances,includinganyregulatoryobligationsbindingontheAFAinadditiontotheCode.
AnAFAisrequiredtoadviseaclientonlyinrelationtofinancial products or mattersthatarewithinthescopeofthe AFA’s financial adviser services,asadvisedtotheclient in writing.AnAFAisnotrequiredtoconsiderorprovidefinancial adviser services in relation to financial productsormattersthatarenotwithinthatscopeinordertocomplywiththisCode Standard.
AnAFA’sobligationunderthisCode Standardtoplaceaclient’sinterestsfirstwillnotbebreachedbyreportingtotheSecuritiesCommissionanybreachesoftheActthattheAFAreasonablybelievestohaveoccurred.
code stAndArd 2
An Authorised Financial Adviser must not do anything or make an omission that would or would be likely to bring the financial advisory industry into disrepute.
This Code Standard prohibitsanAFAfromconductthatwouldunderminepublicconfidenceintheprofessionalismorintegrityofthefinancialadvisoryindustry.However,thisCode StandarddoesnotpreventanAFAfromcommentingingoodfaithonthebusiness,actions,orinactionsofanyperson (includinganyother financial adviser,financialadvisergroup,financialserviceproviderorindustrybody)orfromexercisingtheAFA’sreportingpowersundersection45AoftheAct.
7
CMINIMUM
STANdARd
SOFETHICALBEH
AvIOUR
code stAndArd 3
An Authorised Financial Adviser must not state or imply that the Authorised Financial Adviser is independent, or that any financial adviser services provided are independent, if a reasonable person in the position of a client would consider that the Authorised Financial Adviser or the services provided are not independent.
ThefollowingareexamplesofcircumstanceswhereneithertheAFA northeAFA’sprovisionoffinancial adviser servicesmaybedescribedas“independent”:
(a) arelated personoftheAFA,ora related personoftheAFA’semployer,or principal,istheproduct provider ofafinancial productrelevanttothefinancial adviser serviceprovided;or
(b) theAFAissubjecttoacontractualobligationto:
– recommendaparticularfinancial product or financial products; or
– limittheAFA’srecommendationsordiscretionary investmentmanagement servicestoaparticularfinancial product or financialproducts; or
– attainormaintainatargetinrelationtoaparticularfinancial productor financial products.
However,thecontractualobligationsfallingwithinthisparagraph(b)donotincludetheuseofwrapaccountservices,platforms,orotherportfolioadministrativeorcustodialservices,wheretheuseofsuchservicesandthearrangementstheAFAisabletoputinplacefortheAFA’s clientspermitaccesstoawiderangeoffinancial products and product providers; or
(c) theAFA or a related personoftheAFAwillormaydirectlyorindirectlyreceiveabenefitfromapersonotherthantheclientforprovidingtheservicesorfromtheclient’sacquisitionofafinancial product orproducts.
However,forthepurposesofthisparagraph(c)thefollowingbenefits donotaffectanAFA’sabilitytodescribetheAFAortheAFA’sservicesasindependent:
– thosethatarepaid,credited,ortransferredtotheclient; and
– thosethatareremoteorinsignificant;and
– thosethatarereceivedbytheAFAintheformofsalaryorwagesasanemployee,orintheformoffeesasacontractor,thatarenotdeterminedinwholeorinpartbyreferencetovolumeorothertargetsrelatingtoaparticularfinancial product orproduct provider.
8
CMINIMUM
STANdARd
SOFETHICALBEH
AvIOUR
AnAFAmustnotstateorimplythataresearcherorotherthirdpartyserviceproviderusedbytheAFAinrelationtotheAFA’s financial adviser services isindependentunlesstheAFAhasreasonablegroundstobelievethethirdpartywouldbeabletodescribethemselvesasindependentunderthisCode Standard,ifthethirdpartywereanAFA.
code stAndArd 4
An Authorised Financial Adviser must not borrow from or lend to a retail client.
This Code Standarddoesnotapplyiftheclient is
(a)arelated personoftheAFA; or
(b)inthebusinessofborrowingorlendingmoneyorvaluablepropertyandtheAFA’sborrowingorlendingisintheordinarycourseoftheclient’s businessontermsconsistentwiththeclient’snormalbusinessterms.
ThisCode StandarddoesnotpreventanAFA or an AFA’semployerorprincipalfromenteringintofinancialarrangementsonbehalfofaclient astheclient’sagenttomeetsettlementobligationsinrelationtoany financial product.
AnAFAmustnotarrangefortheAFA’semployerorprincipaltoborrowfrom or lend to a retail client,otherthanintheordinarycourseoftheemployer’s or principal’sbusiness.
code stAndArd 5
An Authorised Financial Adviser must not provide financial advice to a retail client in relation to a financial product that is not offered to the public if the Authorised Financial Adviser is a related person of the product provider of that financial product.
ThisCode Standarddoesnotapply:
(a) iftheclient is a related personoftheAFA,orisarelated personoftheAFA’semployerorprincipal; or
(b) iftheAFAissatisfiedonreasonablegroundsthattheAFA’s financial adviceisappropriatefortheclientand,beforetheclientmakesadecisioninrelationtothe financial producttowhichthe financial advice relates,theAFAprovidestotheclient in writing:
9
CMINIMUM
STANdARd
SOFETHICALBEH
AvIOUR
(i) anexplanationoftheAFA’srelationshipwiththeproduct providerofthefinancial product,therisksofthe financial product,anddetailsofhowtheAFAmanagesanyconflictofinterestarisingasaresultofthatrelationship;and
(ii) arecommendationthattheclienttakesfinancial advicefromanotherAFAwhoisnotarelated person oftheproduct provider.
ThepurposeofthisCode Standardistoprotecttheinterestsofretail clients intheraresituationswherearetail clientmayhold,orlawfullybeoffered theopportunitytoacquire,afinancial productthatisnot offered to the public.Accordingly,thisCode Standardisverylimitedinitsapplication. It does not enable an AFAtoprovidefinancial advice to a retail client inrelationtotheacquisitionofafinancial productthatisnotableto belawfullyofferedtotheclient.
10
CMINIMUM
STANdARd
SOFETHICALBEH
AvIOUR
Minimum standards of client care
code stAndArd 6
Pg12 Behavingprofessionally
code stAndArd 7
Pg13 Ensuringretailclientsareabletomakeinformeddecisions
code stAndArd 8
Pg13 Suitabilityofpersonalisedservicesforretailclients
code stAndArd 9
Pg14 Explainingthebasisofpersonalisedservicesforretailclients
code stAndArd 10
Pg15 Providingclassservicesforretailclients
code stAndArd 11
Pg15 Complaintsprocesses
code stAndArd 12
Pg16 Keepinginformationaboutpersonalisedservicesforretailclients
code stAndArd 13
Pg17 Recordretention
D Minimum standards of client care
code stAndArd 6
An Authorised Financial Adviser must behave professionally in all dealings with a client, and communicate clearly, concisely, and effectively.
Whenproviding financial adviser services to a client,anAFAmust:
(a) provideonlyservicesthattheAFAhasthecompetence,knowledge,andskilltoprovide;and
(b) providetheservicesandperformtheAFA’sobligationsinatimelyway;and
(c) transparentlymanageanyconflictsofinterestthatmayariseinprovidingtheservices;and
(d) makerecommendationsonlyinrelationtofinancial productsthathavebeenanalysedbytheAFAtoalevelthatprovidesareasonablebasisforanysuchrecommendation,oranalysedbyanotherpersonuponwhoseanalysisitisreasonable,inallthecircumstances,fortheAFAtorely.
Communicating“effectively”forthepurposesofthisCode Standard requiresanAFAtotakereasonablestepstoensuretheclientunderstandsthecommunication.
Whentransmittingthefinancial advice ofanotherperson to a client,anAFA musttakereasonablecaretoensurethatthepersonprovidingthefinancial advicehasanappropriatelevelofcompetence,knowledge,andskilltoprovidethatadvice,andeither:
• ensuretheclientisawarethattheAFAhasnotpreparedthefinancialadviceorassesseditssuitabilityfortheclient; or
• accompanythefinancial advice withtheAFA’sown financial advice inrelationtothesamesubjectmatter(inwhichcasetheAFAmayhavefurtherobligationsunderCode Standards 8 and 9).
Whenprovidingfinancial adviser services to a wholesale client,anAFAmusttakereasonablestepstoensuretheclientisawarethattheclient is regarded as a wholesale client forthepurposesoftheActandtheCode,andalsoisawareoftheconsequencesofthatstatus.
12
dM
INIMUM
STANdARd
SOFCLIEN
TCARE
code stAndArd 7
An Authorised Financial Adviser must ensure each retail client has sufficient information to enable the client to make an informed decision about whether to use the Authorised Financial Adviser’s financial adviser services and/or to follow any financial advice provided by the Authorised Financial Adviser.
TheinformationanAFAmayberequiredtoprovidearetail client underthis Code Standardincludes(butisnotlimitedto)informationaboutanylimitsonthescopeoftheAFA’s financial adviser services,theAFA’squalificationstoprovidethoseservices,thefeestheclientmustpay,thebenefitstheAFAoranyrelated personoftheAFAwillormayreceive,andanyconflictsofinteresttheAFAmayhave,inrelationtotheAFA’s financial adviser services providedtotheclient.
InmanycircumstancesanAFAwillsatisfytherequirementsofthisCode Standard bycomplyingwiththeAFA’sdisclosureobligationsundertheAct.However,insomecircumstancesadditionalinformationmayneedtobeprovidedtoaretail clienttoensuretheclienthassufficientinformation tobeabletomakeaninformeddecision.
TheinformationrequiredunderthisCode StandardmustbeupdatedwhenthereisanychangeintheAFA’scircumstancesthatismaterialtothefinancial adviser servicesprovidedbytheAFAtotheclient.
code stAndArd 8
When providing a personalised service to a retail client an Authorised Financial Adviser must take reasonable steps to ensure that the personalised service is suitable for the client.
AnAFAisonlyrequiredtodeterminesuitabilityunderthisCode Standard basedontheinformationprovidedbytheclientandinformationotherwiseknowntotheAFA.However,anAFAmustmakereasonableenquiriestoensuretheAFAhasanup-to-dateunderstandingoftheclient’sfinancialsituation,financialneeds,financialgoals,andtoleranceforrisk,havingregardtothenatureofthepersonalised service beingprovided.
Whereaclient:
(a) declinestoprovidesomeoralloftheinformationrequiredunderthisCode Standard,anAFAmusttakereasonablestepstoensuretheclient isawarethatthepersonalised service islimitedandspecifythoselimitations;or
13
dM
INIMUM
STANdARd
SOFCLIEN
TCARE
(b) instructsanAFA(oranAFA’semployerorprincipal)nottodeterminethesuitabilityofthefinancial adviser service provided,theAFAisrelievedfromtheobligationtodeterminesuitabilitytotheextentprovidedforinthatinstruction.However,thisreliefisonlyavailableiftheinstructionisprovidedinadocumentthatissignedanddatedbytheclient,andthatincludesaclearacknowledgementfromtheclientastotheadvantagesoftheAFAdeterminingsuitabilitybasedontheprovisionofalltheinformationcontemplatedunderthisCode Standard.
AnAFAmustnotdirectorinfluenceaclienttoinstructtheAFA not to determinethesuitabilityofafinancial adviser servicetobeprovidedfortheclient,ordirectorinfluenceaclienttodeclinetoprovideanyoftheinformationcontemplatedunderthisCode Standard.However,thisrestrictiondoesnotpreventanAFA:
• drawingtheclient’sattentiontotheclient’sabilitytooptoutofhavingsuitabilitydeterminedascontemplatedunderthisCode Standard; or
• quotingorestimatingareasonablefeefordeterminingsuitabilityunderthisCode Standard.
Iftheextentofaninstructiongivenbyaclientunderparagraph(b)ofthisCode Standardissuchthatthe financial adviser serviceprovidedbytheAFA totheclientisnotorwillnolongerbeapersonalised service,theAFAwillthenneedtocomplywithCode Standard 10.
code stAndArd 9
Where an Authorised Financial Adviser provides a personalised service to a retail client that is an investment planning service or that relates to a category 1 product, the Authorised Financial Adviser must provide a written explanation to the client of the basis on which those services are provided. The Authorised Financial Adviser must also take reasonable steps to ensure the client is aware of the principal benefits and risks involved in following any financial advice provided as part of that service, having regard to the characteristics of the personalised service.
AllexplanationsrequiredunderthisCode Standard mustbeprovidedtotheclientatthetimethepersonalised serviceisprovidedorassoonaspracticableafterthattime.However,therequirementtoprovideanexplanationunderthisCode Standard doesnotapplywhere:
• theAFAhaspreviouslyprovidedtheclientwithanexplanationunderthisCode Standardthatissufficienttocoverthepersonalised serviceprovided;or
14
dM
INIMUM
STANdARd
SOFCLIEN
TCARE
• theclienthaseitherinstructedtheAFA(ortheAFA’semployerorprincipal)orconfirmedapriorinstructionthatanexplanationunder thisCode Standard isnotrequired.Anysuchinstructionorconfirmationneed not be in writing,butmustreflectanunambiguous,activeinstructionorconfirmationthatisrelevanttothepersonalised servicecurrentlybeingprovided.
TheextentofanyexplanationrequiredunderthisCode Standard is determinedbywhata retail clientwouldreasonablyrequireforthepurpose ofdecidingwhethertofollowanyadviceorguidanceprovidedbytheAFA.
AnAFAmustnotdirectorinfluenceaclienttodeclinetheexplanationcontemplatedunderthisCode Standard.However,thisrestrictiondoesnotpreventanAFAfrom:
• drawingtheclient’sattentiontotheclient’sabilitytooptoutofreceivingtheexplanationcontemplatedunderthisCode Standard; or
• quotingorestimatingareasonablefeeforprovidinganexplanationunderthisCode Standard.
code stAndArd 10
When providing a class service to a retail client, an Authorised Financial Adviser must take reasonable steps to ensure the client is aware of the limitations of the service provided.
code stAndArd 11
An Authorised Financial Adviser must ensure there is an appropriate internal process in place for resolving client complaints in relation to the Authorised Financial Adviser’s financial adviser services.
ThecomplaintresolutionprocessunderthisCode Standard mustensurethat:
(a) theclientis,assoonasreasonablypracticableaftermakingacomplaint,providedwithacknowledgementofthecomplaint,informationabouttheAFA’s internal complaints handling process,andhowtocomplaintotheSecuritiesCommissionandtoanyapplicableexternal dispute resolution scheme; and
(b) aregisteriskeptrecordingallcomplaints,andactiontakentowardsresolvingthosecomplaints.
ThecomplaintsresolutionprocessrequiredunderthisCode Standard is requiredinadditiontotheAFA’s external dispute resolution scheme(ifany).
15
dM
INIMUM
STANdARd
SOFCLIEN
TCARE
code stAndArd 12
An Authorised Financial Adviser must record in writing adequate information about any personalised services provided to a retail client.
TheinformationrequiredtoberecordedunderthisCode Standard in relation toeachretail client mustinclude:
(a) informationabout:
(i) any personalised serviceprovidedoranyfinancial product recommendedtotheclient; and
(ii) anyrequiredexplanation,andadviceastosuitability,giventotheclient in relation to a financial adviser service or financial product; and
(iii) theresultsofanyenquiryoranyoralconfirmationfromtheclient declininganexplanationorsuitabilityassessmentunderCode Standards 8 and 9; and
(b) copiesofallinformationanddocumentsprovidedtothe client in writing, orreceivedfromtheclient,inconnectionwiththeAFA’s personalised servicesincluding–
(i) anyinformationprovidedunderCode Standard 7; and
(ii) anyprovisionorconfirmationoffinancial advice; and
(iii) anyexplanationprovidedinaccordancewithCode Standard 9; and
(iv) anyinstructionsfromtheclientdecliningtoprovideinformationordeclininganexplanationunderCode Standards 8 or 9; and
(v) anyinstructionsfromtheclientdecliningoracknowledginganylimitationsofasuitabilityanalysisinaccordancewithCode Standard 8; and
(vi) detailsofanycomplaintreceivedinrelationtotheAFA’sservices.
AnAFAwhoisanemployeemaysatisfytheAFA’sobligationsunderthisCode StandardbytakingreasonablestepstoensurethatrelevantmeasurestakenbytheAFA’semployerareconsistentwiththemeasurescontemplatedunderthisCode Standard.
AnAFAmustcomplywithallobligationsunderthePrivacyAct1993.Withoutlimitation,thisincludesobligationsinrelationtotheuseanddisclosureofclients’ personalinformationandtheprotectionofthatinformationfrom lossandunauthorisedaccess,use,modification,ordisclosure.
16
dM
INIMUM
STANdARd
SOFCLIEN
TCARE
code stAndArd 13
An Authorised Financial Adviser must ensure that records of all information and documents required under this Code are kept for a minimum of 7 years.
The7-yearminimumperiodrequiredunderthisCode StandardgenerallycommencesonthelastdatethattheAFAprovidesafinancial adviser servicetotheclient.However,forinformationrelatingtoafinancial product transactionenteredintobytheclient,the7-yearminimumperiodforthatinformationcommencesonthedatethatallbenefitspotentiallyavailabletotheclientfromthefinancial producthavebeenrealised,ifthatdateisearlierthanthedatethatwouldotherwiseapply.
TherecordsrequiredunderthisCode Standard maybekeptinelectronicform,providedtherecordsarereadilyretrievable.
AnAFAwhoisanemployeemaysatisfytheAFA’sobligationsunderthisCode StandardbytakingreasonablestepstoensurethatrelevantmeasurestakenbytheAFA’semployer(ortheAFA’spreviousemployer,whereapplicable)areconsistentwiththemeasurescontemplatedunderthisCode Standard.
WhereanAFAtransferstheAFA’sfinancialadvisoryrelationshipwithaclient to anotherfinancial adviser,theAFAmaysatisfytheAFA’sobligationsunderthisCode Standard bytakingreasonablestepstoensurethattheotherfinancial adviserkeepstherecordscontemplatedunderthisCode Standard foratleastaslongastheAFAwouldotherwisehavebeenrequiredtokeepthem.
17
dM
INIMUM
STANdARd
SOFCLIEN
TCARE
Minimum standards of competence, knowledge, and skills
code stAndArd 14
Pg19 Overarchingcompetencerequirement
code stAndArd 15
Pg19 RequirementtohaveanadequateknowledgeofCode,Act,andlaws
code stAndArd 16
Pg20 NationalCertificateinFinancialServices(FinancialAdvice)(Level5)requirementandalternativequalifications
E Minimum standards of competence, knowledge, and skills required to provide financial adviser services
code stAndArd 14
Before providing a financial adviser service, an Authorised Financial Adviser must have the competence, knowledge, and skills to provide that service.
ThisCode Standard 14appliesinadditiontotherequirementsofCode Standards 15 and 16thatrelatetoparticularqualificationsanAFAmustattain.
AnAFAmustbeabletodemonstratethattheAFAhasareasonablebasisforbelievingthattheAFAhasthelevelofcompetence,knowledge,andskillsrequiredbythisCode Standard.
code stAndArd 15
An Authorised Financial Adviser must have a knowledge of the Act, the Code, and other legal obligations relevant to the operation of the Authorised Financial Adviser’s practice as a financial adviser (including relevant consumer protection laws), that is adequate for the proper operation of that practice.
AnAFAmustattainUnit Standard SetBandbeabletodemonstratetheadequacyoftheAFA’sknowledgeofrelevantlegislativeobligations.
19
EMINIMUM
STANdARd
SOFCOM
PETENCE,KNOW
LEdgE,ANdSKILLS
code stAndArd 16
To be an Authorised Financial Adviser, a financial adviser must attain the Unit Standard Sets within the National Certificate in Financial Services (Financial Advice) (Level 5) that are relevant to the financial adviser services provided by the AFA.
For the purposes of the Code, an Authorised Financial Adviser is deemed to have attained a particular Unit Standard Set where the Authorised Financial Adviser has attained an alternative qualification or designation to that Unit Standard Set specified in the Code’s Competence Alternatives Schedule.
AnAFAwhohasattainedUnit Standard SetsA,B,C,anddoftheNationalCertificateinFinancialServices(FinancialAdvice)(Level5)isnotrestricted intherangeoffinancial adviser servicestheAFAcanprovideoroffertoprovide,subjecttoCode Standard 14andthetermsoftheAFA’s authorisationundertheAct.
However,providedtheAFAsatisfiesCode Standard 14 an AFA:
(a) mayprovideaclass serviceforanyclient,andanyformoffinancial adviser serviceforawholesale client,withouthavingattainedUnit Standard Set C or Unit Standard Setd;and
(b) mayprovideadiscretionary investment management servicefor a clientwithouthavingattainedUnit Standard Set C; and
(c) mayprovidefinancial adviser servicesforaclientwithouthavingattainedUnit Standard SetdiftheAFAhasattainedUnit Standard SetEandthefinancial productsthatmightbeincludedwithinthescopeofthefinancial adviser servicesprovidedfortheclientconcerneddonotincludeanycategory 1 products.
IfanAFAhasattainedUnit Standard SetdthisCode Standard does not also requiretheAFA to attain Unit Standard SetEinordertoprovidefinancial adviser servicesthatinvolvecategory 2 products,solongastheAFAsatisfiesCode Standard 14.ForthepurposesofthisCode Standard,anAFAwillbedeemedtohaveattainedUnit Standard Set EiftheAFAhaseitherpassedbothoftheresidentialpropertylendingunits(units26286and26287), ortheAFAhaspassedunit25644andatleastoneofunits25645,25646,or25647(beingunitsrelatingtoinsurance).
20
EMINIMUM
STANdARd
SOFCOM
PETENCE,KNOW
LEdgE,ANdSKILLS
Competence Alternatives Schedule
ForthepurposesoftheCompetence Alternatives Schedule:
• adesignationpreviouslyattainedthathasnotbeenretainedatthetimean AFAseeksauthorisationwillstillberecognizedforthepurposesoftheSchedule,providedtheAFAhascompletedatleast20hoursCPDinthe 12monthsimmediatelybeforefirstbecomingauthorised,includingatleast10hoursofstructuredtrainingasdescribedin Code Standard 18; and
• referencestoaqualificationpaperordesignationbeing“subjecttotheeligibility sunset”meantherelevantqualification,paper,ordesignationmustbefullyattainedatthetimetheAFAseeksauthorisationforthefirsttime,andthequalification,paper,ordesignationwillonlyberecognisedforauthorisationsthatcomeintoeffectpriorto1January2014.
21
EMINIMUM
STANdARd
SOFCOM
PETENCE,KNOW
LEdgE,ANdSKILLS
Minimum standards for continuing professional training
code stAndArd 17
Pg23 Professionaldevelopmentplanrequirement
code stAndArd 18
Pg23 Undertakingcontinuingprofessionaltraining
F Minimum standards for continuing professional training
FMINIMUM
STANdARd
SFORCO
NTINUINgPRO
FESSIONALTRAININg
code stAndArd 17
An Authorised Financial Adviser must maintain and keep current a professional development plan for each CPD period.
AnAFA’sprofessionaldevelopmentplanmust:
(a) identifyanyareasforimprovementintheAFA’scompetence,knowledge,andskillsinrelationtothefinancial adviser servicesheorsheprovidesorintendstoprovide;
(b) includetheAFA’sproposalsformakingthoseimprovements;and
(c) whereavailable,includedetailsofcourses,seminars,workshops,andanyothertrainingorprofessionaldevelopmentplannedtobeundertaken.
code stAndArd 18
An Authorised Financial Adviser must undertake sufficient continuing professional training to maintain the Authorised Financial Adviser’s competence at a level appropriate for the financial adviser services the Authorised Financial Adviser provides or intends to provide, and keep up to date with developments relevant to the Authorised Financial Adviser’s practice.
AnAFAmustineach CPD periodcompleteaminimumof20hours ofprofessionaldevelopmentrelevanttothefinancial adviser services theAFAprovidesorintendstoprovide.
Thatprofessionaldevelopmentmust,ineachCPD period,comprise atleast10hoursofstructuredtraining.
Tobestructuredtraining,thetrainingmustformpartoftherequirements foraqualificationoneithertheNationalQualificationsFrameworkorthenationalregisterofqualityassuredqualifications,orbepartofastructuredcontinuingprofessionaldevelopmentprogrammemanagedbyaDAO, QFE, or professional body.
23
AnAFAmustkeepappropriaterecordsofanyCPDactivitycompletedthatisrequiredbythisCode StandardinaformsuitablefordemonstratingcompliancewiththisCode Standard.Therecordscontemplatedunder thisCode Standardinclude:
(a) thenameoftheCPDactivity;and
(b) thedateofcompletion;and
(c) howmanyhoursofCPDitinvolved;and
(d) abriefdescriptionoftheCPDcontentcoveredbyit;and
(e) whetheritconstitutedstructuredtraining;and
(f) inrelationtostructuredtraining,relevantthird-partyverification ofthesuccessfulcompletionofthattraining,suchasconfirmation bythetrainingproviderorbytheAFA’semployerorprincipal.
24
FMINIMUM
STANdARd
SFORCO
NTINUINgPRO
FESSIONALTRAININg
Competence Alternatives Schedule
G Competence Alternatives Schedule
ForthepurposesoftheCode,apersonwishingtobeanAFA is treated as havingsatisfiedtherequirementsofaparticularUnit Standard SetwherethepersonhasattainedanalternativequalificationordesignationasspecifiedinthisSchedule.
ReferencesinthisScheduletoaqualification,paper,ordesignationbeing“attained”or“subjecttotheeligibility sunset”areexplainedunderthe“CompetenceAlternativesSchedule”headinginCode Standard 16.
ALTerNATive quALiFiCATioN ALTerNATive deSigNATioN
National Certificate in Financial Services (Financial Advice) (Level 5)
Unit Standard Sets
ForthepurposesoftheCode, a personwhohasattainedone ofthefollowingqualificationsistreatedashavingsatisfiedtherequirementsofthespecified Unit Standard Set
ForthepurposesoftheCode, a personwhohasattainedone ofthefollowingdesignationsistreatedashavingsatisfiedtherequirementsofthespecified Unit Standard Set
Unit Standard Set A
(Comprisingunits 24755,25642, and25643)
Knowledgeoftheindustry,financialmarkets,theadviceprocessandproducts
• AnyNewZealand-issuedtertiaryqualificationatdegreeleveloraboveinormajoringinaccountancy,business(includingbusinessadministrationandbusinessanalysis),commerce,economics,finance,ormanagementstudies(includingappliedmanagement)
• graduatediplomainBusinessStudies(PersonalFinancialPlanning)(MasseyUniversity)*
• graduatediplomainBusinessStudies(PersonalRiskManagement)(MasseyUniversity)*
• Postgraduatediplomain PersonalFinancialPlanning(WaikatoUniversity)*
• CertificateinFinancialServicesfromAdviserlinkLearningLimited
• NewZealandStockExchangediploma(NZSEdiploma)
• NZXdiploma
• Associate Financial Planner
• Associate Life Underwriter
• Certified Financial Planner
• CFA Charterholders
• Chartered Life Underwriter
• MemberoftheNewZealandInstituteofCharteredAccountants (Accounting Technician, Associate Chartered Accountant, and Chartered Accountant)
• NZFMA Accredited individual
• NZX Advisor
• NZX Associate Advisor
• Registered Legal Executive
* ineachcase,includingtheirrespectivepredecessordiplomaqualifications
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ALTerNATive quALiFiCATioN ALTerNATive deSigNATioN
National Certificate in Financial Services (Financial Advice) (Level 5)
Unit Standard Sets
ForthepurposesoftheCode, a personwhohasattainedone ofthefollowingqualificationsistreatedashavingsatisfiedtherequirementsofthespecified Unit Standard Set
ForthepurposesoftheCode, a personwhohasattainedone ofthefollowingdesignationsistreatedashavingsatisfiedtherequirementsofthespecified Unit Standard Set
Unit Standard Set B
(Comprisingunit26360)
Knowledgeofthe Codeandconsumerprotectionlaws
Norecognisedalternative Norecognisedalternative
Unit Standard Set C
(Comprisingunits 25650,25651, 25652,and25653)
Professionalpracticeadviceprocessandcomplyingwithlegislation
• CertificateinFinancialServicesfromAdviserlinkLearningLimited,attainedpriorto1January2010
• Associate Chartered Accountant
• Chartered Accountant
• Certified Financial Planner
• CFA Charterholder
• Chartered Life Underwriter
• NZX Advisor
ineachcasesubjecttothe eligibility sunset
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ALTerNATive quALiFiCATioN ALTerNATive deSigNATioN
National Certificate in Financial Services (Financial Advice) (Level 5)
Unit Standard Sets
ForthepurposesoftheCode, a personwhohasattainedone ofthefollowingqualificationsistreatedashavingsatisfiedtherequirementsofthespecified Unit Standard Set
ForthepurposesoftheCode, a personwhohasattainedone ofthefollowingdesignationsistreatedashavingsatisfiedtherequirementsofthespecified Unit Standard Set
Unit Standard Set d
(Comprisingunits 25648and25649)
Investment Unit Standards
• graduatediplomainBusinessStudies(PersonalFinancialPlanning)(MasseyUniversity)*,subjecttotheeligibility sunset
• PostgraduatediplomainPersonalFinancialPlanning(WaikatoUniversity)*,subjecttotheeligibility sunset
• NewZealandStockExchangediploma(NZSEdiploma)
• NZXdiploma,subjecttotheeligibility sunset
• CFA Charterholder
* ineachcase,includingtheirrespectivepredecessordiplomaqualifications
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ALTerNATive quALiFiCATioN ALTerNATive deSigNATioN
National Certificate in Financial Services (Financial Advice) (Level 5)
Unit Standard Sets
ForthepurposesoftheCode, a personwhohasattainedone ofthefollowingqualificationsistreatedashavingsatisfiedtherequirementsofthespecified Unit Standard Set
ForthepurposesoftheCode, a personwhohasattainedone ofthefollowingdesignationsistreatedashavingsatisfiedtherequirementsofthespecified Unit Standard Set
Unit Standard Set e
(Comprisingeither units 25644 and 25645,orunits 25646and25647)
Insurance Unit Standards
OR
ResidentialPropertyLendingUnitStandards
• graduatediplomainBusinessStudies(PersonalRiskManagementORPersonalFinancialPlanning)(MasseyUniversity)*,providedthe diplomaincludesapaperonpersonalriskmanagement,subjecttotheeligibility sunset
• Associate Life Underwriter or Chartered Life Underwriter whohascompletedfourpapersfromthegraduatediplomainBusinessStudies(PersonalRiskManagement)(MasseyUniversity)*includingapaperonpersonalriskmanagement,subjecttotheeligibility sunset
• Associate Financial Planner or Certified Financial PlannerwhohascompletedfourpapersfromthegraduatediplomainBusinessStudies(PersonalFinancialPlanning)(MasseyUniversity)*includingapaperonpersonal riskmanagement,subjectto theeligibility sunset
• Chartered Life Underwriterwho,priorto1January2010,hasattainedtheNewZealanddiplomainLifeAssurance,theNewZealandCertificateinLifeInsurance(OpenPolytechnic),anAssociateshipoftheInsuranceInstituteofNewZealand(Life),orhascompletedthepersonalriskmanagementcourseprovidedbyAdviserlinkLearningLimited
* ineachcase,includingtheirrespectivepredecessordiplomaqualifications
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Definitions schedule
H Definitions schedule
InthisCode,unlessthecontextotherwiserequires,thefollowingtermshavethemeaningssetoutbelow.Toassist,thosetermsareshowninitalics wherevertheyappearinthebodyoftheCode.Anytermthatisnotdefined inthisSchedule,butisdefinedintheActorinregulationsmadeundertheAct,hasthesamemeaningintheCodeasintheActorinthoseregulations,asapplicable.
Accounting Technician
amemberoftheNewZealandInstituteofCharteredAccountantswho,undertherulesoftheInstitute,isentitledtousethedesignationaccountingtechnician
Act theFinancialAdvisersAct2008
AFA an Authorised Financial Adviser
Associate Chartered Accountant
amemberoftheNewZealandInstituteofCharteredAccountantswho,undertherulesoftheInstitute, isentitledtousethedesignationAssociateCharteredAccountant
Associate Financial Planner
anindividualwhohasbeenawardedthisdesignationbytheInstituteofFinancialAdvisersInc
Associate Life underwriter
anindividualwhohasbeenawardedthisdesignationbytheInstituteofFinancialAdvisersInc
Authorised Financial Adviser
a persondescribedinsection51oftheActwhoisauthorisedbytheSecuritiesCommissionundersection55oftheAct
Bank hasthesamemeaningastheterm“bankin NewZealand”insection5oftheAct
benefit anymoney,property,orothervaluableconsideration
business partner a personwhoisamemberofapartnershipasdefinedinsection4ofthePartnershipAct1908
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category 1 product meansanyofthefollowingproducts(otherthanaproductthatisacategory2product):
(a) a security; or
(b) alandinvestmentproduct(asdefinedbyregulations);or
(c) afuturescontract;or
(d) aninvestment-linkedcontractofinsurance(asdefinedbyregulations);or
(e) anyotherproductspecifiedbyregulationsmadeundertheAct; or
(f) arenewalorvariationofthetermsorconditionsofanexistingcategory 1 product
category 2 product meansanyofthefollowingproducts:
(a) abanktermdeposit;or
(b) anybonusbond;or
(c) anycallbuildingsocietyshare;or
(d) acallcreditunionshare;or
(e) acalldebtsecurity;or
(f) ashareinaco-operativecompany(asdefinedinsection2(1)oftheCo-operativeCompaniesAct1996);or
(g) aunitinacashortermportfolioinvestmententity(asdefinedbyregulations);or
(h) aconsumercreditcontractwithinthemeaningoftheCreditContractsandConsumerFinanceAct2003;or
(i) acontractofinsurance(otherthananinvestment-linkedcontractofinsurance);or
(j) alifeinsurancepolicy(withinthemeaningofsection2(1)oftheSecuritiesAct1978)issuedbefore1January2009;or
(k) anyotherproductspecifiedbyregulationsmadeundertheAct; or
(l) arenewalorvariationofthetermsandconditionsofanyexisting category 2 product
Certified Financial Planner
anindividualwhohasbeenawardedthisdesignationbytheInstituteofFinancialAdvisersInc.
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CFA Charterholder anindividualentitledtousethecharteredfinancialanalystdesignationgrantedbytheCFAInstitute
Chartered Accountant
hasthesamemeaningasinsection2oftheNewZealandInstituteofCharteredAccountantsAct1996
Chartered Life underwriter
meansanindividualwhohasbeenawardedthisdesignationbytheInstituteofFinancialAdvisersInc.
class service a financial adviser servicethatisnota personalised service
client means,inrelationtoanAFA,–
(a) apersonwhoreceivesaservicefromtheAFA (whetherornotonpaymentofacharge);but
(b) doesnotincludeapersonwhoreceivesanyservicesfromtheAFAiftheserviceisbothprovidedandreceivedinthecourseof,andforthepurposesof:
(i) thesamebusiness;or
(ii) thebusinessesofrelatedbodiescorporate;or
(iii) thebusinessesofmembersofaQFEgroup,
irrespectiveofwhetherthepersonprovidingorreceivingtheserviceisthepersoncarryingonthebusiness,acontrollingowner,adirector,anagent,oranyotherperson
client information informationaboutaclient
Code theCodeofProfessionalConductforAuthorisedFinancialAdvisersapprovedbytheMinister andbroughtintoforcebyGazettenoticeundersection94oftheAct
Code Standard astandardspecifiedintheCode
Commissioner for Financial Advisers and Commissioner
thepersonappointedundersection79(3)oftheAct
Competence Alternatives Schedule
thescheduleofthisCodenamedassuch
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complaint anexpressionofdissatisfactionbyaclient to an AFA abouttheAFA’s financial adviser servicesprovidedtotheclient,otherthananexpressionofdissatisfactionthatistrivialorvexatiousorthattheclient indicates isnotintendedtoconstituteacomplaintforthepurposesoftheCode
CPd continuingprofessionaldevelopmentortrainingrelevanttothe financial adviser servicestheAFA providesorintendstoprovide
CPd period inrespectofanAFA,a12-monthperiodfromthedayoftheyearspecifiedforthispurposeintheAFA’s termsofauthorisationor,intheabsenceofanysuchdaybeingspecified,acalendaryearwiththefirstsuchperiodcommencingonthe1stdayofJanuaryfollowingtheAFA’sauthorisation
dAo anentityregisteredbyETITO as a delegated assessmentorganisationaccreditedfortheprovisionoftrainingandassessmentforUnit Standard Set C
director hasthemeaninggivenbysection126oftheCompaniesAct1993,butalsoincludes,inrelation toabodythatisnotacompany,apersonwhooccupiesapositioncomparabletothatofa director(suchasatrusteeorapartner)
discretionary investment management service
aservicewhichanAFA,actingunderanauthoritygrantedtotheAFA(ortotheAFA’semployerorprincipal)managesallorsomeoftheclient’s holdingsoffinancial product,anddecideswhichfinancial productstoacquireordisposeofon behalfoftheclient
eligibility sunset partofthetransitionalmeasuresexplainedatCode Standard 16underthe“CompetenceAlternativesSchedule”heading
eTiTo ElectrotechnologyIndustryTrainingOrganisationIncorporated
external dispute resolution scheme
inrespectofanAFA,theschemeundersection48oftheFinancialServiceProviders(RegistrationanddisputeResolution)Act2008towhichanycomplaintconcerningtheAFAmustbereferred
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financial advice makingarecommendationorgivinganopinioninrelationtoacquiringordisposingof(includingrefrainingfromacquiringordisposingof)afinancial product,notingthatwhetherornotadviceisfinancialadviceisnotaffectedbyhowtheadvice isgivenorcommunicated.
Themereprovisionofinformationormaking arecommendationorgivinganopinionrelatingtoaclassoffinancial products,ormakingarecommendationorgivinganopinionabout theprocedureforacquiringordisposingofafinancial product,ortransmittingthefinancial adviceofanotherorrecommendingthata personconsultafinancial adviser,doesnot amounttofinancial advice
financial adviser a personwhoprovidesafinancial adviser service
financial adviser service
givingfinancial advice,orprovidingan investment planning service,orprovidingadiscretionary investment management service,intheordinarycourseofbusiness
financial product a category 1 product or a category 2 product
internal complaints handling process
an AFA’sinternalprocessforhandlingandresolvingcomplaints as described in Code Standard 11
investment planning service
aserviceprovidedbyanAFAunderwhichthe AFAdesigns,orofferstodesign,aplanforanindividualthat:
(a) isbasedon,orpurportstobebasedon,ananalysisoftheindividual’scurrentandfutureoverallfinancialsituation(whichmustinclude hisorherinvestmentneeds)andidentification oftheindividual’sinvestmentgoals;and
(b) includes1ormorerecommendations oropinionsonhowtorealisethosegoals (or1ormoreofthem),
regardlessofwhethertheanalysisandidentificationisoftheindividual’sparticularfinancialsituationandgoalsorofthefinancialsituationsandgoalsattributabletoaclassofpersonsthattheindividualisidentifiedascomingwithin
Minister hasthesamemeaningasinsection5oftheAct
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HdEFINITIONSSCHEd
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NZFMA Accredited individual
anindividualwhohasachievedaccreditedindividualstatusfollowingthecompletionoftheNewZealandFinancialMarketsAssociationFinancialServicesAccreditationProgram
NZX Advisor and NZX Associate Advisor
anindividualwhohasbeenaccreditedand approvedbyNZXasanNZXAdvisororNZX AssociateAdvisor(asapplicable)asprovided intheNZXParticipantRules
offered to the public in relation to a security,hasthesamemeaningastheconstructionofreferencestoofferingsecuritiestothepublicinsection3oftheSecuritiesAct1978;
andinrelationtoanyotherfinancial product meansthefinancial productisbeingorhasbeenofferedto:
(a) anysectionofthepublic,howeverselected;or
(b) individualmembersofthepublicselectedatrandom;or
(c) apersonifthepersonbecameknowntotheofferorasaresultofanypublicadvertisingof theofferorthatwasintendedtolikelytoresult inthepublicseekingfurtherinformationaboutthefinancial product
person includesanindividual,acorporationsole,abodycorporate,andanunincorporatedbody(includingthetrusteesofatrust)
personalised service a financial adviser service:
(a) giventoorinrespectofanamedclient or a clientthatisotherwisereadilyidentifiable bytheAFA; and
(b) theAFAhastakenintoaccounttheclient’s particularfinancialsituationorgoals(orany oneormoreofthem)inprovidingtheservice, ortheclientwould,inthecircumstancesin whichtheserviceisprovided,reasonablyexpecttheAFAtotakeintoaccounttheclient’s particularfinancialsituationorgoals(oroneoranymoreofthem),
however,aserviceisnotpersonalisedmerelybecausetheclientcomeswithinaclassofpersons havingpredefinedcharacteristicsandtheAFA takesthefactthattheclientcomeswithinthat classintoaccount
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principal a personwhoistheprincipal in an agencyrelationship
product provider means:
(a) theissuer,inthecaseofasecurity:
(b) thecreditor,inthecaseofaconsumercreditcontract(withinthemeaningoftheCreditContractsandConsumerFinanceAct2003):
(c) theinsurer,inthecaseofacontractof insurance(otherthananinvestment-linkedcontractofinsurance):
(d) thepersonspecifiedbyregulationsinany othercase
professional body amembership-basedorganisationwhoseprincipalactivitiesareassociatedwiththefinancialservicesindustryinNewZealandwhereongoingmembershiprequirescompliancewithcontinuingprofessionaldevelopmentortrainingrequirementsspecified bytheorganisation
qFe anentitythatisregisteredandhasQFEstatusoranumberofpartnerentitiesthatareeachregisteredandjointlyhaveQFEstatus
registered Legal executive
anindividualwhoisentitled,undertheRulesoftheNewZealandInstituteofLegalExecutivesInc,tousethedesignationregisteredlegalexecutive
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related person (a) inrelationtoanindividual,aparent,child,sibling,spouse,defactospouse,civilunionpartner,employer,orbusiness partnerofthatindividual,oraprincipalonwhosebehalftheindividualprovidesfinancial adviser services bywayofacontractforservices;and
(b) inrelationtoabodycorporateA:
(i) apersonwho
• isalsoabodycorporate;and
• eitherhassubstantiallythesameshareholdersasA;or
• isunderthecontrolofthesameperson or personsasA;or
(ii) apersonwhoisable,directlyorindirectly,to–
• exercise,orcontroltheexercise,of25%ormoreofthevotingatameetingoftheshareholdersofA;or
• appointorcontrol25%ormoreofagoverningbodyofA
retail client a clientwhoisnotawholesale client
security hasthesamemeaningasinsection5oftheAct
unit aunitstandardformingpartoftheNationalCertificateinFinancialServices(FinancialAdvice)(Level5)ontheNationalQualificationsFramework
unit Standard Set asetofunitsspecifiedintheNationalCertificateinFinancialServices(FinancialAdvice)Level5, withUnitStandardSetsA,B,C,dandE comprisingtherespectiveunitsspecified intheCompetenceSchedule
wholesale client a clientclassifiedasawholesale clientundersection5CoftheAct
written or in writing includesinelectronicform.
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