NZFMA Dealer Accreditation cheat sheet

FMA administers the Financial Markets Conduct Act 2013 (FMC Act); dealers in derivatives and other market participants require a market services licence under Part 6.

Licence classes relevant to dealing include derivatives issuer licence and licensed market participant status; each class carries its own conditions, scope, and prescribed eligibility criteria.

Core licence obligations: meet minimum standards of fitness and propriety, maintain adequate financial resources, and operate effective risk, compliance, and governance frameworks.

FMA may impose conditions, vary, suspend, or cancel a licence; failure to comply with licence conditions is a breach and may trigger enforcement or civil liability.

Fit and propriety assessment covers directors, senior managers, and controlling owners; criminal history, insolvency, and regulatory action are relevant factors.

Licensed dealers must notify the FMA of material changes, including changes in control, senior personnel, or business scope, within prescribed timeframes.

FMA uses a risk-based supervisory model: monitoring, thematic reviews, information requests, and enforcement tools such as infringement notices, civil proceedings, and referrals for prosecution.

Anti-money laundering supervision of reporting entities is split: FMA supervises financial institutions, while the Department of Internal Affairs supervises other reporting entities.

Fair dealing provisions (Part 2) prohibit misleading or deceptive conduct, false or misleading representations, unsubstantiated representations, and misleading conduct about financial products or services.

Unsubstantiated representations are prohibited unless the person has reasonable grounds for the representation at the time it is made; the burden of proof rests on the representor.

Part 3 governs disclosure: product disclosure statements, offer documents, and ongoing disclosure obligations for regulated offers of financial products.

Part 5 covers dealing in financial products and prohibits insider trading, market manipulation, and front-running; information is material if it would affect a reasonable investor's decision.

Part 6 regulates market services, including licensing of dealers, advisers, and other service providers; conduct obligations attach to those providing the services.

Civil liability for contraventions can include pecuniary penalties, compensation orders, and declarations of contravention; criminal liability applies to knowing or reckless breaches.

Misleading conduct includes omissions and implied representations; a statement literally true but creating a false overall impression can still breach the fair dealing provisions.

Records and advertising must be accurate and not create unrealistic expectations about returns, risk, or performance.

Client onboarding requires collecting identity information, understanding the client's financial situation and objectives, and assessing suitability for products and services offered.

Know-your-client (KYC) information includes full legal name, date of birth, address, source of funds, source of wealth, and intended nature of the business relationship.

Client due diligence is risk-based: enhanced due diligence applies to high-risk clients, politically exposed persons (PEPs), and complex or unusual ownership structures.

Suitability assessment must consider the client's risk tolerance, investment experience, financial capacity, and the nature and complexity of the product.

Client agreements and terms of business should clearly set out fees, execution arrangements, conflicts, and complaint handling.

Beneficial ownership must be identified for entity clients; for trusts, identify trustees, settlors, beneficiaries, and any controlling persons.

Ongoing monitoring obligations require periodic review of client information and updating records when circumstances change.

Consent and privacy requirements apply to collecting and using client information under the Privacy Act 2020.

The Anti-Money Laundering and Countering Financing of Terrorism Act 2009 (AML/CFT Act) requires reporting entities to conduct customer due diligence (CDD) before establishing a business relationship.

Standard CDD requires verifying identity, address, beneficial ownership, and the purpose and intended nature of the relationship.

Enhanced CDD applies to PEPs, high-risk jurisdictions, and unusual transactions; simplified CDD may apply to low-risk situations but is never automatic.

Identity verification must use reliable, independent documents, data, or information; a copy of a document alone is not sufficient without verification of authenticity.

Reporting entities must monitor transactions and report suspicious activities (SARs) and prescribed transactions to the Financial Intelligence Unit (FIU) via goAML.

Suspicious activity reports must be filed promptly; tipping off the subject of a report is prohibited.

Record-keeping obligations require retaining CDD and transaction records for at least five years after the relationship ends or the transaction is completed.

A written AML/CFT programme, including risk assessment, policies, procedures, and training, is mandatory and must be independently audited periodically.

Client communications must be clear, fair, and not misleading; promotional material must be distinguishable from factual information.

Disclosure must be timely: clients must receive material information about fees, risks, and conflicts before or at the time of the transaction.

Best execution disclosure should explain how orders are executed, including venue selection and order handling arrangements.

Marketing communications must not include unsubstantiated claims about performance, safety, or returns; past performance must not imply future results.

Confidential client information must be protected; communications should comply with privacy obligations and internal data security policies.

Record-keeping of client communications, including emails, calls, and instructions, supports audit and dispute resolution.

Fair dealing applies to all communications, including social media and digital channels, not just formal disclosure documents.

Client orders must be executed promptly and on the best available terms, considering price, cost, speed, likelihood of execution, and settlement.

Order priority rules: client orders should not be disadvantaged by proprietary or employee orders; front-running and trading ahead are prohibited.

Order records must capture time of receipt, time of execution, price, quantity, venue, and any client instructions.

Trade reporting obligations require reporting executed transactions to the relevant market operator or regulator within prescribed timeframes.

Allocation of orders across clients must be fair and documented; partial fills should follow a disclosed allocation policy.

Errors and cancellations must be documented, investigated, and where material, reported to the FMA and affected clients.

Best execution arrangements should be reviewed periodically and adjusted when market conditions or venues change.

Records must be complete, accurate, and retrievable; retention periods generally require at least seven years for financial records under the FMC Act and five years under the AML/CFT Act.

Reconciliation should be performed regularly, comparing client funds and assets against internal ledgers and external statements.

Client money must be held in separate trust or client accounts and reconciled daily or at prescribed intervals.

Audit trails must be tamper-evident and capture who did what, when, and from where, supporting reconstruction of transactions.

Records must be retained in a form that can be provided to the FMA on request within required timeframes.

System access controls and change logs are part of the audit trail; unauthorised access or alteration must be detectable.

Reconciliation discrepancies must be investigated, escalated, and resolved promptly, with root-cause analysis and remediation documented.

Independent audits and assurance reviews should be conducted periodically and findings reported to governance bodies.

A written complaints process must be accessible, fair, and free; complaints should be acknowledged promptly and resolved within defined timeframes.

Complainants must be informed of their right to escalate to an independent dispute resolution scheme if unresolved.

Breach reporting: material breaches of licence conditions or the FMC Act must be reported to the FMA promptly; internal escalation procedures should be documented.

Serious misconduct or breaches may require reporting to other agencies, including the police or FIU, depending on the nature of the conduct.

Complaint records should capture the nature, resolution, and outcome; trends should be analysed to identify systemic issues.

Dispute resolution schemes provide binding decisions in some cases; firms must cooperate fully and comply with outcomes.

Root-cause analysis of complaints and breaches should feed into remediation and process improvement.

Whistleblower protections apply to employees reporting breaches; retaliation is prohibited.

Firms must identify, disclose, and manage conflicts of interest; personal account dealing by staff must be restricted or pre-approved.

Gifts and entertainment policies should set thresholds and require disclosure of benefits that could influence conduct.

Inducements that impair independence are prohibited; commissions and soft-dollar arrangements must be disclosed and justified.

Client interests must take precedence over the firm's or employee's interests; front-running client orders or using client information for personal gain is prohibited.

Confidentiality obligations continue after the client relationship ends; insider information must not be misused.

Ethical conduct includes honesty, integrity, and fair treatment of clients, including vulnerable customers.

Conflicts arising from ownership structures, related-party transactions, or remuneration incentives must be disclosed and managed.

Training and attestation programs support ethical culture; breaches should be reported through appropriate channels.

A written complaints process must be accessible, fair, and free; complaints should be acknowledged promptly and resolved within defined timeframes.

Complainants must be informed of their right to escalate to an independent dispute resolution scheme if unresolved.

Breach reporting: material breaches of licence conditions or the FMC Act must be reported to the FMA promptly; internal escalation procedures should be documented.

Serious misconduct or breaches may require reporting to other agencies, including the police or FIU, depending on the nature of the conduct.

Complaint records should capture the nature, resolution, and outcome; trends should be analysed to identify systemic issues.

Dispute resolution schemes provide binding decisions in some cases; firms must cooperate fully and comply with outcomes.

Root-cause analysis of complaints and breaches should feed into remediation and process improvement.

Whistleblower protections apply to employees reporting breaches; retaliation is prohibited.