Financial Service Provider

Check out all advantages to be licensed in New Zealand as a FSP

New Zealand licensed market services

Financial services requiring FMA license

If you intend to provide financial services under the FMC Act and, if you are registered, or in the process of getting registered as a financial service provider (FSP), you must apply to the Financial Markets Authority (FMA) for a license to provide services under the Financial Markets Conduct Act 2013 (FMC Act).

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Financial services you need to be licensed for defined in the FMC Act Manager of a registered scheme – licensed

A manager of a registered scheme manages the scheme’s investments, and administers the scheme. A registered scheme is offered in accordance with regulations under the FMC Act. A managed investment scheme pools money from a number of investors, who rely on the expertise of the scheme manager to preserve their investment.

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Discretionary Investment Management Service (DIMS)

Discretionary investment management services (DIMS) are those where an investor gives a provider the authority to make decisions about buying and selling financial products on their behalf, often without having to refer to them. If the DIMS provider’s clients include retail investors, they must be licensed by the FMA, except where the provider is:

a provider to wholesale investors only;
not required to be licensed, owing to an FMA exemption, or exemption in the FMC Act;
an authorised body that is authorised to provide the service under a licensee’s license.

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Independent trustee of a restricted scheme – licensed

Every restricted managed investment scheme must have a licensed independent trustee. A restricted scheme is a KiwiSaver, superannuation or workplace savings scheme registered as a managed investment scheme on the Register.

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Derivatives issuer – licensed

A derivatives issuer is anyone in the business of entering into derivatives. The FMC Act contains a wide definition of derivatives, which include:

futures contracts and forwards;
options (except options to acquire an equity security, a debt security or a managed investment product by way of issue);
swaps;
contracts for difference, margin contracts and rolling spot contracts, caps, collars, floors, and spreads;
a provider to wholesale investors only;
not required to be licensed, owing to an FMA exemption, or exemption in the FMC Act;
an authorised body that is authorised to provide the service under a licensee’s license.

A derivatives issuer must hold a license from the FMA if they make a regulated offer of derivatives, except where they are.

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Provider of prescribed intermediary services – licensed

This financial service is split into 2 categories: the provision of crowdfunding, and peer-to-peer lending services. A crowdfunding service (licensee) is where you act as an intermediary between companies issuing shares and investors by providing the facility, usually a website, where the offer can be made to the public.

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Financial advice service as financial advice provider (FAP) – licensee

Regulated financial advice to retail clients can only be provided by, or on behalf of, a financial advice provider (FAP) licensed by the FMA. Financial advice is where a provider:

makes a recommendation, or gives an opinion, about buying or selling financial advice products, or
designs an investment plan based on a client’s investment goals and analysis of their financial situation, which includes one or more recommendations on how to achieve those goals.

This service can be offered directly, or through a financial adviser or nominated representative, who are not required to be licensed themselves.

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Operating a peer-to-peer lending service – licensee

A peer-to-peer lending service is one where you act as an intermediary between borrowers and lenders. Loans are usually for personal, charitable or small business purposes.

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Supervisor under an FMC offer

A supervisor is defined as a person licensed to supervise either a registered scheme or a regulated offer of debt securities.

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Administrator of a financial benchmark

An administrator of a financial benchmark is a person who controls the generation and operation of a financial benchmark. A benchmark administrator licensed by the FMA should select this service.

Applying for a license

Before you apply for a license to the FMA you’ll need to be either registered or preparing to register as an FSP on the Financial Service Providers Register (FSPR).

When you apply to register on the FSPR, you’ll be asked to select the financial service(s) you intend to provide. If any of these are licensed services under the FMC Act, you must then apply to the FMA for a license. The licensed service will only display on your FSP registration once the FMA has approved the license.

NOTE: All information from New Zealand Companies Office website.

New FMA rule

FMA has been shown they are not satisfied about the way the FSPs are conducting their business in NZ. In their view, just having an administrative office in NZ, it is not sufficient by a large measure. An existing FSP or an application for one must show clearly how the FSP is conducting their business from NZ for both overseas and NZ based clients. FMA expects that a current or prospective FSP must show clearly how they are conducting the business from NZ, in order to justify having a New Zealand FSP registration. In this regard, and once the registration has been obtained, the FSP has three months to get the FSP business up and running; in case this requirement is not satisfied, any time extensions will not be granted.

All this not entirely unexpected and goes back to earlier years when both foreign and NZ clients were badly ripped off by unscrupulous operators. Therefore, concrete proof that the applicant has set up an office with local employee(s) or legal physical representative(s), has its website fully compliant with the financial activities it has been granted for, trading platform set up, marketing strategies ready to go, and, subject to getting his FSP registration, is ready, willing and able to commence business from NZ without delay.

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Disclaimer: While TBA & Associates strives to make the information on this website as timely and accurate as possible, the information itself is for reference purposes only. You should not substitute the information provided in this article for competent legal advice. Feel free to contact TBA Customer Services for advice on your specific cases.

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