Regulatory framework and conduct obligations
Domain 1 - Regulatory framework and conduct obligations
This domain tests how residential lending is licensed, supervised and conducted in New Zealand. Expect questions on the Credit Contracts and Consumer Finance Act 2003 (CCCFA), the Financial Markets Conduct Act 2013 financial advice regime, the Code of Professional Conduct for Financial Advice Services, and privacy and consumer protections.
Core rules
- A financial advice provider (FAP) must hold or operate under an FMA licence; individual advisers must meet competence, diligence and client-care standards in the Code.
- Lenders must comply with CCCFA lender responsibility principles, disclosure and hardship rules.
- Conduct standards require suitable advice, clear disclosure of fees, conflicts and commissions, and records that evidence the advice.
- Privacy Act 2020 governs collection, use and disclosure of borrower information; credit reporting is regulated.
Worked example
An adviser recommends a refinance because the new lender pays a 0.55% upfront commission. The advice may still be suitable, but the adviser must disclose the commission and any lender ownership or conflict, compare the refinance against retaining the existing loan (including break fees), and record why the client's objectives are met. If the adviser cannot show that comparison, the conduct breach is not cured by the client signing an authority.
Traps
- Assuming the lender is responsible for an adviser's suitability analysis; both can have separate duties.
- Treating a signed disclosure statement as proof of suitability.
- Ignoring commission or soft-dollar conflicts.
- Mixing up FMA advice licensing with RBNZ prudential supervision.