Regulatory framework and FMA licensing regime
What this domain tests
The examiner checks whether you can place a dealer business inside New Zealand's regulatory architecture: who licenses it, what conditions attach, and what happens when obligations fail.
The regulator and the licence gateway
The Financial Markets Authority (FMA) is an independent Crown entity established under the Financial Markets Authority Act 2011. It administers the Financial Markets Conduct Act 2013 (FMC Act), monitors licensed market services, and supervises many reporting entities for AML/CFT. Registration on the Financial Service Providers Register is not a licence and does not authorise dealing; it is a separate registration and dispute-resolution membership regime.
A dealer generally needs a market services licence under Part 6 of the FMC Act, or must operate within another licence or exemption (for example as a derivatives issuer or under a licensed market's participant rules). The FMA assesses fitness and propriety, capability, governance, risk management, compliance, and capital or liquidity. Licence conditions can require honest and professional conduct, adequate systems and controls, custody arrangements for client money or property, record keeping, breach notification, and membership of an approved dispute resolution scheme.
FMA powers
The FMA can vary, suspend, or cancel a licence; issue warnings and infringement notices; seek pecuniary penalties and declarations in court; and impose conditions. It also conducts monitoring, thematic reviews, and investigations.
Worked example
A firm wants to offer leveraged derivatives to retail clients. The compliance officer says FSPR registration is enough. That is wrong: the activity requires a derivatives issuer licence or another applicable licence or exemption, with conditions on disclosure, client suitability, and reporting. FSPR registration only registers a financial service and requires dispute-scheme membership; it does not authorise regulated offers or dealing.
Traps
Assuming FSPR registration equals a licence. Treating licence conditions as guidance. Ignoring fit-and-proper issues of directors and senior managers. Forgetting that the FMA supervises AML/CFT for many dealers.