Regulatory Framework and Market Conduct
The statutory map
Derivatives advice and dealing in New Zealand sit under the Financial Markets Conduct Act 2013 (FMC Act). Derivatives are financial products, so the FMA is the conduct regulator, while NZX operates the licensed derivatives market and NZX Clearing provides central clearing. The FMA licenses financial advice providers (FAPs); individual advisers give advice under a FAP licence and must comply with the Code of Professional Conduct for Financial Advice Services. NZX Participant Rules and the NZX Derivatives Market Rules govern anyone trading on-market, covering capital, client money, records and market conduct.
Conduct expectations
Market conduct rules prohibit misleading or deceptive conduct, require fair treatment of clients and demand management of conflicts. A participant must not trade ahead of a client order, must keep client property separate and must report accurately. The exam often tests who does what: the FMA does not run the market, and NZX does not replace the FMA as conduct regulator.
Worked example
A boutique firm wants to advise retail clients on NZX 10-year government stock futures and place orders. Advice requires a FAP licence or coverage by one, with advisers meeting the Code. Order placement requires NZX participant status or an arrangement with a participant. The firm cannot rely on its registration on the Companies Office as a licence. The reasoning is to separate the licensing question (advice) from the market-access question (trading).
Traps that cost marks
Assuming NZX is the conduct regulator; treating registration as a licence; confusing dealing with advising; and forgetting that conduct obligations continue after the sale, including record-keeping and complaints handling.