NZDX Adviser cheat sheet

Equity: residual ownership claim; return = (P1 - P0 + dividends) / P0.

Bond price and yield move inversely; price = sum of coupon/(1+y)^t plus face/(1+y)^n.

Duration approximates percentage price change per 1% yield move; modified duration = Macaulay duration / (1 + y/m).

Money market instruments (T-bills, commercial paper, CDs) mature in one year or less and are quoted on a discount or add-on yield basis.

Derivatives: futures are exchange-traded and standardised; forwards are OTC and bespoke; options confer a right, not an obligation.

FX quoted as base/quote; a rising rate means the base currency appreciates against the quote currency.

Managed funds issue units priced at net asset value = (total assets - liabilities) / units on issue.

KiwiSaver and NZ wholesale funds are governed by the FMC Act 2013; retail offers require a product disclosure statement.

Financial Markets Conduct Act 2013 governs offers of financial products, disclosure, licensing and fair dealing.

Financial Advice and Financial Markets Conduct Amendment legislation (2021) removed the AFA/RFA split; financial advice providers must hold or operate under an FMA transitional or full licence.

Code of Professional Conduct for Financial Advice Services sets standards on client care, competence and ethical behaviour.

AML/CFT Act 2009 requires customer due diligence, enhanced due diligence for PEPs, and suspicious activity reports to the FIU.

FMA is the market conduct regulator; RBNZ supervises banks and insurers for prudential soundness.

Disclosure of conflicts of interest, fees and remuneration must be made to clients in a clear, concise and effective manner.

Record keeping: advice files and client records must be retained for at least seven years.

Know-your-client data: identity, financial situation, goals, risk tolerance, time horizon and existing holdings.

Risk tolerance is a client attribute; risk capacity is the ability to absorb loss - they are assessed separately.

Suitability requires matching product risk and liquidity to the client profile before any recommendation.

AML customer due diligence: verify identity using reliable, independent documents before establishing a business relationship.

Politically exposed persons require senior management approval and source-of-wealth verification.

Product disclosure statements and disclosure of fees must be provided before the client commits.

Review triggers include material change in client circumstances, product change, or scheduled periodic review.

NZ equity trades settle on a T+2 basis through the NZX settlement system (NZX Clearing).

Settlement risk is the risk one leg of a trade delivers but the other does not; delivery-versus-payment reduces it.

Custody arrangements: nominee holdings, segregated client assets, and reconciliation controls protect client property.

Order types: market, limit, stop, and stop-limit; limit orders cap price but not execution certainty.

Best execution requires taking reasonable steps to obtain the best available outcome for the client.

Corporate actions (dividends, splits, rights issues) require timely notification and correct entitlement processing.

FX settlement risk (Herstatt risk) arises from time-zone mismatch between currency legs.

Risk categories: market, credit, liquidity, operational, conduct and concentration risk.

Value at Risk estimates maximum expected loss over a horizon at a confidence level but does not capture tail events.

Diversification reduces idiosyncratic risk but not systematic (market) risk.

Liquidity risk: inability to exit a position at or near fair value; assessed via bid-ask spread and market depth.

Conduct risk arises from inappropriate behaviour, mis-selling, or conflicts of interest not managed.

Stress testing models adverse scenarios; scenario analysis uses plausible but severe conditions.

Insurance and hedging transfer risk; capital buffers absorb residual risk.

Fiduciary duty: act in the client's best interests, ahead of the adviser's own interests.

Conflicts of interest must be identified, disclosed and managed; avoid them where possible.

Client confidentiality: personal and financial information must be protected; disclosure only with consent or legal requirement.

Competence: advisers must maintain knowledge and skills relevant to the products and services they provide.

Fair dealing: no misleading or deceptive conduct; communications must be clear, accurate and not omit material information.

Client money must be held in trust or segregated accounts, never commingled with the firm's own funds.

Complaints handling: acknowledge promptly, investigate fairly, and provide a clear response within reasonable timeframes.