NZFMA Dealer Accreditation flashcards

32 cards. Read the term and the definition here. The deck at the top of this page is optional.

FMA licence classes

Different market services licences cover dealing, derivatives issuing, and market operation; each class has specific eligibility criteria, conditions, and conduct obligations under the FMC Act.

Fit and propriety

Assessment of directors, senior managers, and controlling owners covering criminal history, insolvency, and regulatory action; failure can prevent licensing or trigger suspension.

Material change notification

Licensed dealers must tell the FMA about changes in control, senior personnel, or business scope within prescribed timeframes; failure is a breach of licence conditions.

Risk-based supervision

The FMA monitors licensees through thematic reviews, information requests, and enforcement tools, prioritising resources where risk of harm to investors is highest.

Misleading or deceptive conduct

Part 2 of the FMC Act prohibits conduct in trade that misleads or deceives, including omissions and implied representations that create a false overall impression.

Unsubstantiated representations

A representation about a financial product or service is prohibited unless the person has reasonable grounds for it at the time it is made; the burden rests on the representor.

Insider trading prohibition

Part 5 prohibits dealing in financial products while in possession of material non-public information, and prohibits tipping or encouraging others to trade on it.

Pecuniary penalties

Courts can impose civil pecuniary penalties for FMC Act contraventions, along with compensation orders and declarations of contravention; criminal liability applies to knowing breaches.

Know-your-client information

Standard KYC data includes full legal name, date of birth, address, source of funds and wealth, and the intended nature of the business relationship.

Beneficial ownership

For entity clients, identify individuals who ultimately own or control the entity; for trusts, identify trustees, settlors, beneficiaries, and controlling persons.

Suitability assessment

Evaluation of a client's risk tolerance, investment experience, financial capacity, and objectives against the nature and complexity of the proposed product or service.

Enhanced due diligence

Additional scrutiny applied to high-risk clients, politically exposed persons, and complex ownership structures, including deeper source-of-wealth and source-of-funds verification.

Suspicious activity report

A report filed with the Financial Intelligence Unit via goAML when a reporting entity suspects money laundering or terrorist financing; tipping off the subject is prohibited.

AML/CFT programme

A written programme including risk assessment, policies, procedures, training, and independent audit, mandatory for reporting entities under the AML/CFT Act 2009.

Record retention periods

AML/CFT records must be kept at least five years after the relationship ends; financial records under the FMC Act generally require at least seven years.

Fair client communications

Communications must be clear, fair, and not misleading; promotional material must be distinguishable from factual information and must not make unsubstantiated claims.

Timely disclosure

Clients must receive material information about fees, risks, and conflicts before or at the time of the transaction, not after the fact.

Best execution disclosure

Firms must explain how orders are executed, including venue selection and order handling arrangements, so clients understand execution quality and costs.

Confidential client information

Client data must be protected and used only for disclosed purposes, consistent with privacy obligations and internal data security policies.

Order priority rules

Client orders must not be disadvantaged by proprietary or employee orders; front-running and trading ahead of client orders are prohibited.

Order record content

Order records must capture time of receipt, time of execution, price, quantity, venue, and any client instructions to support audit and dispute resolution.

Trade reporting

Executed transactions must be reported to the relevant market operator or regulator within prescribed timeframes, with accurate price, quantity, and counterparty details.

Fair order allocation

Allocation of orders across clients must be fair, documented, and follow a disclosed policy, especially when orders are partially filled.

Client money segregation

Client funds must be held in separate trust or client accounts and reconciled regularly against internal ledgers and external statements.

Audit trail

A tamper-evident record capturing who did what, when, and from where, enabling reconstruction of transactions and detection of unauthorised access or alteration.

Reconciliation discrepancies

Differences between internal records and external statements must be investigated, escalated, and resolved promptly, with root-cause analysis documented.

Complaints process

A written, accessible, and free process that acknowledges complaints promptly, resolves them within defined timeframes, and informs complainants of escalation rights.

Breach reporting

Material breaches of licence conditions or the FMC Act must be reported to the FMA promptly, with internal escalation procedures documented and followed.

Dispute resolution schemes

Independent schemes provide accessible dispute resolution; firms must cooperate fully and comply with outcomes, including binding decisions where applicable.

Conflicts of interest

Firms must identify, disclose, and manage conflicts; personal account dealing by staff must be restricted or pre-approved to protect client interests.

Inducements

Benefits that could impair independence are prohibited; commissions and soft-dollar arrangements must be disclosed and justified to clients.

Confidentiality obligations

Confidentiality continues after the client relationship ends; insider information must not be misused and client data must be protected from unauthorised access.