Regulatory framework and market conduct
This domain tests whether you can place any piece of advice inside the New Zealand licensing architecture - who may give advice, under whose licence, subject to which rules - and whether you can spot conduct that is prohibited in the market itself.
Who regulates what
The Financial Markets Conduct Act 2013 (FMC Act) is the backbone statute. The Financial Markets Authority (FMA) is the conduct regulator: it licenses financial advice providers (FAPs), managers and supervisors of managed investment schemes, and independent trustees, and it monitors conduct. NZX is a market operator licensed under the FMC Act, not a general conduct regulator; it enforces its own Participant Rules and Listing Rules against members and issuers.
Since 15 March 2021 the Financial Services Legislation Amendment Act 2019 regime has applied. Financial advice is given by a financial adviser or a nominated representative operating under a FAP licence. The FAP holds the licence; the individual is authorised under it. Every person giving advice must comply with the Code of Professional Conduct for Financial Advice Services, and the FAP must belong to an approved dispute resolution scheme.
Market conduct
Part 5 of the FMC Act prohibits insider trading, market manipulation, false or misleading statements, and misleading conduct in relation to financial products. Listed issuers additionally owe continuous disclosure obligations under the NZX Listing Rules, and the Takeovers Code governs control transactions.
Worked example
A nominated representative recommends a listed bond and will receive a trailing commission from the issuer. She records it in the FAP disclosure information before the advice is given, states the estimated annual dollar amount, and notes the conflict in the file. Omitted, the advice would breach the disclosure regulations and the Code's integrity and ethical behaviour standards - and the FAP, not only the adviser, would face FMA action.
Traps
Assuming individual registration equals authorisation. Forgetting disclosure must be given before, or as soon as practicable after, the advice. Treating NZX rules as commercial terms rather than enforceable obligations.