NZFMA Dealer Accreditation common mistakes
NZFMA Dealer Accreditation · Understand the traps and how to avoid them.
Treating the FMA licence as a single permission and answering questions as if holding a dealer licence automatically authorises every market service the firm performs, including discretionary managed investment scheme (MIS) activity and peer-to-peer lending.
Candidates learn 'dealer' as a headline status and skim the licensing classes in Part 6 of the Financial Markets Conduct Act 2013 (FMC Act), missing that the licence covers specified market services with conditions, and that MIS, DIMS, and crowdfunding/P2P each sit in different licence classes with separate eligibility and conduct obligations.
What to do instead
Build a one-page matrix of market services (dealing, advising, investment management/DIMS, MIS management, derivatives issuer, crowdfunding, P2P, qualifying financial entity status) against the licence class that authorises each, and note which are conditions on a dealer licence rather than separate licences. Practise classifying short scenarios into the correct licence class before answering conduct questions.
Answering fair dealing questions by quoting only the 'misleading or deceptive conduct' prohibition and ignoring the separate prohibitions on false or misleading representations, unsubstantiated representations, and the specific conduct rules for financial products.
The general 'misleading or deceptive conduct' phrase is memorable and candidates stop there, missing that Part 2 of the FMC Act contains distinct prohibitions (sections 19-23 area) that apply to different conduct, and that 'unsubstantiated representations' has its own test about reasonable grounds at the time the representation was made.
What to do instead
Memorise the fair dealing provisions as a numbered set, each with its own trigger and its own defence. For each, write one original example and identify which provision is breached. Note that 'no reasonable grounds' is judged at the time of the representation, not retrospectively.
Applying the wrong customer due-diligence tier: performing only simplified CDD on a customer who is actually a trust with complex ownership, or treating a PEP as standard risk because the customer was polite and well known to the adviser.
Candidates conflate 'known to the firm' with 'low risk' and treat simplified CDD as a shortcut available whenever the customer seems ordinary. They also forget that simplified CDD is never permitted where there is a suspicion of money laundering, and that trusts, nominee arrangements, and complex ownership structures require beneficial ownership identification regardless of the customer's apparent profile.
What to do instead
Learn the CDD tiers as decision rules: standard, simplified (only where low risk is documented and no suspicion exists), and enhanced (PEPs, high-risk jurisdictions, unusual structures). For each tier, list the exact identity elements required. Practise identifying the beneficial owner through a two-layer trust or company structure.
Confusing identity verification with customer due diligence and assuming that a verified driver licence or passport satisfies onboarding obligations, without addressing source of funds, source of wealth, purpose and intended nature of the relationship, or ongoing CDD.
The visible, tick-box part of onboarding (ID documents) dominates study attention, while the risk-based obligations that sit around it are abstract. Candidates then answer 'the customer is verified, so onboarding is complete' and miss the ongoing monitoring and periodic review obligations under the AML/CFT Act 2009.
What to do instead
Write the CDD obligation as a checklist with four limbs: identification and verification, beneficial ownership, purpose and intended nature, and ongoing monitoring. For each limb, name one document or action that satisfies it. Then practise questions where ID is verified but source of funds is unexplained, and identify what is still outstanding.
Treating disclosure as a one-off event at the point of sale, so the candidate says the product disclosure statement (PDS) is provided once and no further disclosure is needed unless the client asks.
Candidates picture disclosure as a document handed over at sign-up, missing the ongoing obligations: disclosing material changes and not misleading clients, providing periodic statements and confirmations, and the distinction between the PDS, the register entry, and the ongoing disclosure duties for financial products and for advisers.
What to do instead
Map disclosure obligations along the client lifecycle: pre-sale (PDS, disclosure of fees and conflicts), point of sale (terms, confirmations), and ongoing (periodic statements, material change disclosure, annual or event-driven updates). For each stage, name the document and the trigger.
Answering best-execution and order-handling questions by stating that the firm must always obtain the best price, rather than applying the actual standard of taking reasonable steps to obtain the best available outcome for the client, considering price, cost, speed, likelihood of execution, and settlement.
'Best execution' sounds like a single measurable outcome, so candidates reduce it to 'best price'. They miss that the standard is process-based, that it depends on the client's instructions, and that it can be met by a documented order-handling policy with appropriate execution venues rather than by a guaranteed price.
What to do instead
Learn the best-execution standard as a process obligation with named factors. Practise scenarios where client instruction overrides the firm's default routing, and where a cheaper venue is slower or less likely to fill, to test whether the candidate applies the multi-factor test rather than a price-only test.
Assuming that if a trade confirmation was sent to the client, the record-keeping and reconciliation obligations are satisfied, without checking that the confirmation reconciles to the order record, the execution record, and the client money or custody position.
Candidates treat records as documents to be filed rather than as a reconciled chain of evidence. They miss that the audit trail must be sufficient to reconstruct each order from instruction to settlement, and that client money and client assets require regular reconciliation with documented breaks and escalation.
What to do instead
Draw the audit trail as a chain: client instruction, order record with timestamp, execution record, allocation, confirmation, settlement, and cash or asset reconciliation. For each link, name the record and the retention period. Practise identifying which link is missing in a described scenario.
Routing a client complaint into the internal complaints process and stopping there, without considering whether the conduct also triggers a breach-reporting obligation to the FMA or a notification to the licensed insurer or supervisor, and without checking the dispute-resolution scheme pathway.
Candidates treat complaints and breach reporting as separate topics and answer whichever one the question's wording most resembles. They miss that a single event can require an internal response, a client remedy, membership of a dispute resolution scheme, and a report to the FMA within the required timeframe.
What to do instead
For each complaint scenario, run three questions: does this need a client remedy, does it need dispute-scheme referral, and does it meet the threshold for reporting to the FMA as a material or reportable breach? Build a short decision tree and apply it to original scenarios.
Managing a conflict of interest by disclosing it to the client and assuming disclosure alone resolves the conflict, even where the conflict is one that must be avoided or managed structurally.
Disclosure is the easiest conflict tool to remember and candidates default to it. They miss the hierarchy: avoid the conflict where possible, then manage it with structural controls, and only then rely on disclosure, which must be specific and understandable rather than buried in general terms.
What to do instead
Learn the conflict hierarchy as avoid, manage, disclose, and apply it to original scenarios such as adviser remuneration, soft dollar benefits, principal trading, and allocation of a hot issue. For each, state the control that ranks above disclosure.
Skipping the ethics and market-conduct scenarios because they 'feel like common sense', and answering with a general statement that the conduct was 'unethical' instead of identifying the specific obligation, the specific rule breached, and the specific action required.
Ethics questions look easy, so candidates answer quickly with a moral judgement and do not connect the scenario to the FMC Act market conduct provisions, the code of conduct standards, or the firm's own policies. They also miss the requirement to escalate and document, not just to refrain.
What to do instead
For every ethics scenario, write three lines before choosing an answer: the obligation engaged, the specific rule or standard breached, and the required action including escalation and record-keeping. Practise scenarios on insider information, front-running, client order precedence, and gifts, forcing each answer to name a rule rather than a feeling.