CODE OF PROFESSIONAL CONDUCT

Question 1

CODE OF PROFESSIONAL CONDUCT

New Code of Professional Conduct for Financial Advice Services:
-when it was introduced
-Prepared in accordance to what

Answer 1

The Code of Professional Conduct for Financial Advice Services is prepared in accordance with Part 4 of Schedule 5 of the Financial Markets Conduct Act 2013 (the FMC Act).

The Code was approved by the Minister of Commerce and Consumer Affairs on 7 May 2019 and the obligation to comply with the Code came into force on 15 March 2021.

Question 2

CODE OF PROFESSIONAL CONDUCT

What the FMC Act requires from FA?

Answer 2

It requires that advisers comply with the standards of ethical behaviour, conduct and client care required by the Code, and to meet the standards of competence, knowledge and skill, including any continuing professiona development requirements provided in the Code relating to providing advice.

Question 3

CODE OF PROFESSIONAL CONDUCT

What’s the structure of the Code?

Answer 3

There are 9 standards divided into 2 parts:
1- Ethical behaviour and conduct, and client care - 5 standards
2- Competence, knowledge and skills - 4 standards

Question 4

CODE OF PROFESSIONAL CONDUCT

PART 1: ETHICAL BEHAVIOUR, CONDUCT, AND CLIENT CARE
Name the standards

X 5

Answer 4

1 - Treat clients fairly
2 - Act with integrity
3 - Give financial advice that is suitable
4 - Ensure that the client understands the financial advice
5 - Protect client information

Question 5

CODE OF PROFESSIONAL CONDUCT

PART 2: COMPETENCE, KNOWLEDGE, AND SKILL
Name the standards

X 4

Answer 5

6 - Have general competence, knowledge and skill
7 - Have particular competence, knowledge and skill for designing an investment plan
8 - Have particular competence, knowledge and skill for product advice
9 - Keep competence, knowledge and skill up-to-date.

Question 6

PART 1: ETHICAL BEHAVIOUR, CONDUCT, AND CLIENT CARE

Standard 1 - Treat client fairly

Answer 6

Show respect, empathy and proper communication. Avoid taking advantage of the client’s lack of knowlege.

Question 7

PART 1: ETHICAL BEHAVIOUR, CONDUCT, AND CLIENT CARE

Standard 2 - Act with integrity

Answer 7

Avoid or manage any conflict of interest.

Question 8

PART 1: ETHICAL BEHAVIOUR, CONDUCT, AND CLIENT CARE

Standard 3 - Give financial advice that is suitable

Answer 8

Consider the client’s financial situation, needs, goeals, risk tolerance, or make reasonable assumptions to design a strategy or recomend products.

Question 9

PART 1: ETHICAL BEHAVIOUR, CONDUCT, AND CLIENT CARE

Standard 4 - Ensure the client understands the financial advice

Answer 9

Take reasonable steps to ensure the client understand the scope, nature, risks and consequences of the advice.
Your client must be clear about what sort of advice they will receive from you and what won’t be covered.

Question 10

PART 1: ETHICAL BEHAVIOUR, CONDUCT, AND CLIENT CARE

Standard 5 - Protect client information

Answer 10

Comply with the Privacy Act 2020

Question 11

PART 2: COMPETENCE, KNOWLEDGE, AND SKILL

Standard 6 - Have general competence, knowlege and skill

Answer 11

Hold the NZ Certificate in Financial Advice (level 5) version 2 approved by the NZ Qualifications Authority in 2019, or give advice through someonr who meets this condition.

Question 12

PART 2: COMPETENCE, KNOWLEDGE, AND SKILL

Standard 7 - Have particular competence, knowledge and skill for designing an investment plan

Answer 12

Hold the investment strand of the certification

Question 13

PART 2: COMPETENCE, KNOWLEDGE, AND SKILL

8 - Have particular competence, knowlege and skill for product advice

Answer 13

Hold the relevant strand of the certification

Question 14

PART 2: COMPETENCE, KNOWLEDGE, AND SKILL

9 - Keep competence, knowledge and skill up-to-date

Answer 14

Commit to continuous professional development and stay updated with the regulatory framework.

Question 15

How advisers can demonstrate competence, knowledge or skill?

Answer 15

1 - Hold a Certificate in Financial Advice (level 5)
2 - Was an autorised financial advicer immediately before the commencement of the code
3 - Give financial advice only through an individual who satisfies any of the other ways.

Question 16

8 Duties/obligations of an adviser under the FMA Act

Answer 16

1. Duty to meet standards of competence, knowledge, and skill
2. Duty to ensure client understands nature and scope of advice
3. Duty to give priority to client’s interests
4. Duty to exercise care, diligence, and skill
5. Duty to comply with code of conduct
6. Duty to make prescribed information available
7. Not disclose information that is false or misleading
8. Not recommend products offered under a regulated offer that contravenes the FMC Act

Question 17

Duties/obligations of an adviser

1 - What it means the duty to meet standards of competence, knowledge, and skill

Answer 17

You must meet the relevant competence standards and comply with continuing professional development requirements in the Code of Professional Conduct for Financial Advice Services.

The competence standards are equivalent to the qualification outcomes of the New Zealand Certificate in Financial Services (Level 5). The qualification
outcomes you need vary based on the type of advice you are giving.

Question 18

Duties/obligations of an adviser

2 - What it means the duty to ensure client understands nature and scope of advice

Answer 18

Your client must be clear about what sort of advice they will receive from you and what will not be covered.
You must take reasonable steps to ensure your client understands any limits before giving advice.

Question 19

Duties/obligations of an adviser

3 - What it means the duty to give priority to client’s interests?

Answer 19

If you know (or you should reasonably know) about a conflict between your interests and those of your client, you must give priority to your client’s
interests. This will include your associates, the financial advice provider you
give advice for and the provider’s associates.

For example, you should only recommend products most suitable for your client, regardless of the level of commission you receive from them.

Question 20

Duties/obligations of an adviser

4 - What it means the duty to meet standards of competence, knowledge, and skill

Answer 20

Helps to ensure professional standards, and that clients have access to quality advice that is suitable for them. This promotes confident participation in financial advice services.

Question 21

Duties/obligations of an adviser

5 - What it means the duty to comply with code of conduct

Answer 21

To participate with confidence in financial advice services, your clients need to
be treated fairly and professionally, receive suitable financial advice that
they understand, and have their information protected.

-Standards 1 to 5 of the Code

Question 22

Duties/obligations of an adviser

6 - What it means the duty to make prescribed information available?

Answer 22

Ensures clients get timely, accurate and understandable
information to help them make decisions about financial products and financial services.
The information you must disclose has been set in regulations:
* Initial statge: Publicly available information
* Information gathering stage: Nature and scope of the advice (fees and expenses, conflict of interests, etc)
* Advice stage: document of advice, ods,investment plan
* Post-advice stage: advice on material changes, periodical statements, confirmation of transactions, etc
* Complaints stage: procedure and details of the external dispute resolution scheme.

Question 23

Duties/obligations of an adviser

7 - What it means not disclose information that is false or misleading?

Answer 23

When you disclose prescribed information, you must not make information available if it includes a statement that is (or is likely to be) false or misleading, or it leaves out required information that is materially adverse from the client’s point of view.

Question 24

Duties/obligations of an adviser

8 - What it means the duty of not recommend products offered under a regulated offer that contravenes the FMC Act?

Answer 24

Makes sure clients are not recommended products where usual retail investor protections required under the FMC Act regime are not available.