Terminology Flashcards
Code of Professional Conduct for Financial Advice Services
PART 1: Ethical Behaviour, Conduct and Client Care:
- Treat clients fairly
- Act with integrity
- Give financial advice that is suitable
- Ensure that the client understands the financial advice
- Protect client information
PART 2: Competence, Knowledge and Skill
- Have general competence, knowledge, and skill
- Have particular competence, knowledge, and skill for designing an investment plan
- Have particular competence, knowledge, and skill for product advice
- Keep competence, knowledge, and skill up-to-date
Consumer Guarantees Act 1993
The Consumer Guarantees Act 1993 is an act that provides consumers with protection for the quality of goods and services that they purchase. It requires that the goods and services must meet certain guarantees that are set out and fixed by law. The three key requirements that apply to providing LDHI advice are:
- That the service must be provided with reasonable care and skill
- The service and any product resulting from the service, must be reasonably fit for any particular purpose
- Services must be provided within a reasonable time frame and at a reasonable price.
Fair Trading Act 1986
The Fair Trading Act 1986 is an Act to protect consumers against being misled or treated unfairly by traders or businesses, including financial advisers. The Act prohibits misleading or deceptive conduct and practices in trade and provides for the disclosure of consumer information relating to the supply of goods and services. The Act also promotes product safety. The provisions of the Act cover any form of sales and advertising, even casual communications with customers about a product or service. It applies to anyone in trade and to the products or services they sell or offer for sale. Failure to comply with the Fair Trading Act could incur a fine.
Advisers:
- Must not mislead clients e.g. telling a client that they can make a claim immediately on Trauma insurance when some conditions have a stand-down period.
- Must not falsely represent themselves e.g. must not claim to have qualifications they don’t have.
- Must not falsely represent their business e.g. must not say their business can provide a service they can’t provide.
- Must not falsely represent the products and/or services they present e.g. must not say the product and/or service has a feature it does not have.
- Must not falsely represent the product providers e.g. must not say something about the product providers that is untrue.
- Must not make false advertising claims e.g. must not make a claim, or statement about anything (themselves, their organisation, the product, etc.), that is untrue.
Financial Markets Conduct Act 2013 (as amended by the Financial Services Legislation Amendment Act 2019)
The Financial Markets Conduct Act 2013 applies to a wide range of financial markets participants, including providers of managed investment schemes, insurance companies, registered banks and financial advice providers (which may include some of the other participants).
The key provisions of the FMCA Act relate to:
- Fair Dealing
- Disclosure and advertisements to investors
- Governance of regulated financial products
- Dealing on financial markets
- Licensing and regulation of certain market services (note this is the section that the FSLAA modified)
- Financial reporting obligations
Financial Service Providers (Registration and Dispute Resolution) Act 2008
All financial service providers and financial advisers in New Zealand must be registered on the Financial Service Providers Register, FSPR (Read More [1]) to legally provide financial services. However, not all Financial Service Providers will be Financial Advice providers, and not all entities that are on the Financial Service Providers Register will need a licence to provide a service.
A person (or a business if their director(s) are any of the following) can’t register as an FSP if they are:
- An undischarged bankrupt
- A banned director
- Subject to the Proceeds of Crime Act 1991
- Convicted of Anti-Money Laundering and Countering Financing of Terrorism Act 2009
- Convicted of dishonesty in the last 5 years
Financial advice providers must also be a member of an approved external disputes resolution scheme and have in place internal disputes resolution (complaints handling) processes.
Insurance Intermediaries Act 1994
This Act states that any adviser who is appointed, under a signed agreement, as an agent of a product provider shall be deemed as an agent of the product provider for the purposes of receiving money that is due to the product provider.
This means that an insurer can agree to a financial advice provider (broker) collecting premiums on their behalf. The Act sets out that money received by a broker from a client for premiums must be paid through a trust account, i.e. not into the FAP’s general business account. This money must be paid to the insurer within 50 days of the end of the month that the premium relates to (or any other period as agreed with the insurer).
The Insurance Law Reform Act 1977
The Insurance Law Reform Act 1977 limits the circumstances in which a product provider can avoid a claim on the basis of a misstatement on the application. These clauses are linked to the insurance principle of “duty of disclosure.”
Sections 5 & 6 of this Act relate to “Material Facts”. This refers to information that has been told to the adviser in the course of the fact find or while completing an application, that relates to the product providers decision or is deemed to have been told to the product provider who is offering terms. It reinforces an adviser’s duty to “act in good faith” and do all they can to uphold the client’s “duty of disclosure.”
Insurance Law Reform Act 1985
Section 2 obligates a product provider to pay Interest on any unsettled payable claim from 91st day after date of death.
Sections 6 & 7 of the Insurance Law Reform Act 1985 limits the circumstances in which insurance companies can refuse to pay a claim on the grounds of what is called “insurable interest”. This section also applies to general insurance, where an insurable interest (usually) must exist for a claim to be valid.
Privacy Act 2020
The Privacy Act 2020 is administered by the Privacy Commission and is primarily concerned with good personal information handling practices.
The Act contains thirteen information privacy principles dealing with collecting, holding, use and disclosure of personal information and assigning unique identifiers. The principles also give individuals the right to access personal information and to request correction of it. They do not override other laws which govern the collection, use or disclosure of personal information.
Insurance Council Fair Insurance Code
The “Fair Insurance Code” sets services standards for insurance companies. It describes the responsibilities that exist between an insurer and an insured and encourages professionalism in the insurance industry.
The code includes specific requirements that deal with aspects of claims such as fair and prompt action, and transparency of information.
It also gives consumer and small business customers’ access to disputes resolution services to resolve disputes about claims.
The Code covers all products sold by the Insurance Council’s members.
