Source document: https://docs-lawep.s3.us-east-2.amazonaws.com/1698842842622.pdf (New Zealand)
Financial Service Providers (Registration and Dispute Resolution) Bill Government Bill Explanatory note General policy statement This Bill contributes to the aim of the Government’s review of ﬁ­ nancial products and providers, which is to promote conﬁdence and participation in ﬁnancial markets by investors and institutions, and to promote a sound and efﬁcient non­bank ﬁnancial sector.
The Bill sets up a registration system for ﬁnancial service providers that will— • • identify ﬁnancial service providers: allow more effective monitoring and evaluation of ﬁnancial service providers: provide easy access to information about ﬁnancial service providers: assist in meeting New Zealand’s anti­money­laundering obli­ gations under the Financial Action Task Force (FATF) Rec­ ommendations: ensure that the controlling owners, directors, and senior man­ agers of ﬁnancial service providers do not have certain crim­ inal convictions, are not bankrupt, and are not the subject of • • • 190—1 2 Financial Service Providers (Registration and Dispute Resolution) Bill Explanatory note a management ban under companies, securities, or consumer legislation.
The Bill requires providers of deﬁned ﬁnancial services and ﬁnan­ cial adviser services to be registered.
The Registrar of Financial Ser­ vice Providers will undertake enforcement functions in relation to breaches of the registration requirements, and will have the power to share information with the Securities Commission, the Reserve Bank of New Zealand, and other prescribed agencies that carry out supervisory and enforcement functions relating to money laundering or terrorist ﬁnancing (for example, the police).
The Bill also establishes a comprehensive, industry­based dispute resolution system to improve consumer access to redress in the ﬁ­ nancial sector.

Key features are that— • the relevant Minister may approve a dispute resolution scheme if the scheme meets the criteria of accessibility, independence, fairness, accountability, efﬁciency, and effectiveness; and membership of an approved dispute resolution scheme will be mandatory for ﬁnancial service providers who transact with consumers.
• It is anticipated that more than 1 scheme will be approved, and ﬁnan­ cial service providers will have the freedom to choose which scheme they join.

The reserve scheme will be the default scheme for ﬁnan­ cial service providers who are not members of an approved scheme.

The purpose of the dispute resolution system is to provide a simple and low­cost avenue for consumers to seek redress.
The dispute reso­ lution system will be fully funded by industry, except for the reserve scheme, which will be funded by a levy on members.

Government in­ volvement will be limited to approving schemes (including periodic renewal), receiving periodic reports, and having powers to request information.

Clause by clause analysis Clause 1 provides for the Title of the Act.

Clause 2 sets out the commencement of the Act.

The commence­ ment of Part 2 and clause 44 is by Order in Council.
This is to en­ able regulations to be prepared.

These regulations will prescribe the mechanics of implementing the Bill by providing the details of the requirements for registration and for dispute resolution schemes.
Explanatory note Financial Service Providers (Registration and Dispute Resolution) Bill 3 • Part 1 Preliminary provisions Part 1 contains preliminary provisions that give an overview of the Bill (clause 3), deﬁnes certain terms used in the Bill (clauses 4 and 5), and provides that the Bill binds the Crown (clause 7).
Key deﬁnitions are those of— • ﬁnancial adviser service, which has the meaning given by Advisersss BillBillBill; and Financial Adviser lause 555 ofofof thethethe Financial ccclause Adviser Financial lause ﬁnancial service, which means 1 of a list of services that are not provided in the context of a ﬁnancial adviser service.

Clause 6 sets out the application of the Bill.

The Bill applies to people who are in the business of providing a ﬁnancial service or a ﬁnancial adviser service.
It does not apply to any of the following people: • a lawyer in the course of that person’s professional practice as a lawyer: a chartered accountant in the course of that person’s profes­ sional practice as a chartered accountant: a prescribed Crown agency: an employee of the above persons: an employee of a ﬁnancial service provider.

• • • The Bill does not apply with respect to ﬁnancial services provided between related companies.

• Part 2 Registration Clause 8 sets out the purpose of Part 2.
This is to— • establish a compulsory public register of ﬁnancial service providers and ﬁnancial advisers to enable the public to access information about them, and to enable their regulation: prohibit certain people from being involved in the manage­ ment or direction of registered ﬁnancial service providers: conform with New Zealand’s obligations under the FATF Rec­ ommendations.

• • Clause 9 provides the meanings of registration and deregistration.
Registration under the Bill continues until the registered person is 4 Financial Service Providers (Registration and Dispute Resolution) Bill Explanatory note deregistered.

A person is deregistered when the Registrar enters on the register that the person is deregistered.
Subpart 1—No providing ﬁnancial service or licenced service or holding out that entitled to provide ﬁnancial service unless registered Clause 10(1) prohibits a person from providing a ﬁnancial service in the course of business unless that person is registered under Part 2.

Clause 10(2) prohibits a person from providing a licensed service in the course of business unless that person is registered under Part 2 as a licensed provider in relation to that particular service.
It is an offence to knowingly breach these 2 prohibitions.

The penalty is, in the case of an individual, imprisonment for a term not exceeding 2 years or a ﬁne not exceeding $100,000 (or both); and, in the case of a body corporate, a ﬁne not exceeding $300,000.

Clause 11 prohibits a person from holding out (whether directly or indirectly) in the course of business that the person is entitled to pro­ vide a ﬁnancial service unless that person is registered under Part 2.
It is an offence to knowingly breach this prohibition.

The penalty is, in the case of an individual, imprisonment for a term not exceeding 12 months or a ﬁne not exceeding $100,000 (or both); and, in the case of a body corporate, a ﬁne not exceeding $300,000.

Subpart 2—Registration of ﬁnancial service provider Clause 12 sets out the qualiﬁcations for registration as a ﬁnancial service provider.
A person is qualiﬁed to be registered as a ﬁnancial service provider if— • • the person is not disqualiﬁed under clause 13; and the person is a member of an approved dispute resolution scheme if required by clause 44; and the person has a licence to provide any licensed services the person provides or offers to provide.
• Clause 13 provides that a person is disqualiﬁed if the person is an individual who is disqualiﬁed under subclause (2), or if the person is not an individual and the person has a controlling owner, director, or senior manager who is disqualiﬁed under subclause (2).

Subclause Explanatory note Financial Service Providers (Registration and Dispute Resolution) Bill 5 (2) provides a list of the types of persons who are disqualiﬁed.
A member of a local authority must be treated as if he or she is not a disqualiﬁed person.

Application for registration as ﬁnancial service provider Clauses 14 and 15 set out what is required in an application to be registered as a ﬁnancial service provider, and what is to happen when the Registrar accepts an application.
Changes relating to ﬁnancial service provider Clause 16 creates a duty for the following persons to notify the Regis­ trar of the following relevant changes relating to a ﬁnancial service provider: • a ﬁnancial service provider, if the provider knows that the provider is no longer qualiﬁed for registration in accordance with clause 12: the licensing authority in relation to a licensed provider that has been licensed by that licensing authority, if the provider is no longer licensed: the person responsible for an approved dispute resolution scheme of which a ﬁnancial service provider was a member, if the person knows the provider is no longer a member of that scheme.
• • A ﬁnancial service provider who breaches the provider’s obligation commits an offence and is liable on summary conviction to a ﬁne not exceeding $10,000.

A person responsible for an approved dispute resolution scheme who breaches that person’s obligation commits an offence and is liable on summary conviction to a ﬁne not exceeding $10,000.

Deregistration of ﬁnancial service provider Clauses 17 to 20 deal with how and why the Registrar must deregister a ﬁnancial service provider.
The provider may object to the proposed deregistration.

6 Financial Service Providers (Registration and Dispute Resolution) Bill Explanatory note Clause 17(2) provides that the Registrar must deregister a ﬁnancial service provider if the provider so requests, with effect from the date requested by the provider.
Subpart 3—Registration of provider of ﬁnancial adviser service Clause 21 provides that if an approved professional body notiﬁes the 2007, Registrar, under ccclause Advisersss BillBillBill 20072007 Financial Adviser lause 515151 ofofof thethethe Financial Adviser Financial lause of the details of a provider of a ﬁnancial adviser service, the Registrar must register that provider.
Clause 22 provides that a provider of a ﬁnancial adviser service must be deregistered if that provider ceases to be a member of an approved professional body.

Subpart 4—Register of ﬁnancial service providers and ﬁnancial advisers Register established Clause 23 provides that the Registrar must establish and maintain a register of ﬁnancial service providers and ﬁnancial advisers.
Clause 24 provides for the operation of and access to the register, which may be kept electronically, or in any other manner that the Registrar thinks ﬁt.

Clause 25 sets out the purposes of the register.


These are— • to enable the public and any person to identify registered ﬁnan­ cial service providers and ﬁnancial advisers, and access infor­ mation about them: to assist any person in the exercise of the person’s powers or the performance of the person’s functions under this Bill or any other enactment: to conform with New Zealand’s obligations under the FATF Recommendations.
• • Clause 26 speciﬁes the information that the register must contain about each registered person.

Clause 27 provides that registered ﬁnancial service providers, and ap­ proved professional bodies (on behalf of their members), must sup­ ply to the Registrar each year an annual conﬁrmation of registered details.
If they do not, the Registrar may assume that the provider Explanatory note Financial Service Providers (Registration and Dispute Resolution) Bill 7 is no longer providing or offering to provide a ﬁnancial service, and clauses 17 to 19 apply.

Clause 28 provides that the Registrar must amend the register in cer­ tain circumstances.

Clause 29 allows the Registrar to refuse to accept documents that are not in the required form or do not comply with prescribed require­ ments.
Clauses 30, 31, and 32 provide for searches of the register.

Searches of register Information sharing Clause 33 provides that the Registrar may communicate certain in­ formation to any of the following agencies: • • • the Securities Commission: the Reserve Bank of New Zealand: a prescribed agency that carries out supervisory or enforce­ ment functions relating to money laundering or terrorist ﬁnan­ cing: a prescribed overseas agency that is the equivalent of the Registrar or 1 of the above bodies.
• The Registrar may use any information communicated to the Regis­ trar by any of these agencies.

Registrar of Financial Service Providers and Financial Advisers Clauses 34 and 35 provide for the appointment of the Registrar, and for the power of the Registrar to delegate.
Subpart 5—Registrar’s inspection powers Clause 36 sets out that the Registrar, or a person authorised by the Registrar, may require the production of documents and inspect and take copies of those documents for the purpose of ascertaining whether a person— • • is providing or has provided a ﬁnancial service; or is offering or has offered to provide a ﬁnancial service; or 8 • • Financial Service Providers (Registration and Dispute Resolution) Bill Explanatory note is holding out or has held out that the person provides or has provided a ﬁnancial service in breach of section 11; or is qualiﬁed or has been qualiﬁed to be registered in accordance with section 12.
It is an offence to obstruct or hinder this process (clause 36(7)).

A registered ﬁnancial service provider who does not comply with a requirement to produce information within 20 working days may be assumed to be no longer providing or offering to provide a ﬁnancial service, and clauses 17 to 19 apply (clause 36(5)).
Clauses 37 and 38 provide for the disclosure of information and re­ ports following an inspection under clause 36, and also provide for what should happen if there were an appeal or a judicial review about an inspection under clause 36.

Subpart 6—Miscellaneous Clause 39 provides that if any ﬁnancial service provider that is not an individual commits an offence against the Bill, every director also commits an offence if the director knowingly authorises or know­ ingly fails to prevent the offence.
Clause 40 creates an offence of making false or misleading represen­ tations in any document or information required by or for the pur­ poses of Part 2 or by regulations.

Clause 41 provides that a ﬁnancial service provider may appeal any of the following decisions of the Registrar to the High Court: • not registering an applicant as a ﬁnancial service provider under clause 15: a deregistration under clause 17: an act or decision of the Registrar or a person authorised by the Registrar under clause 36.
• • Clause 42 empowers the regulations that may be made under the Bill.

Part 3 Dispute resolution Clause 43 sets out the purpose of Part 3, which is to promote conﬁ­ dence in ﬁnancial service providers and ﬁnancial advisers by improv­ ing consumers’ access to redress from providers through the estab­ Explanatory note Financial Service Providers (Registration and Dispute Resolution) Bill 9 lishment of approved dispute resolution schemes.
The schemes are intended to be accessible, independent, fair, accountable, efﬁcient, and effective.

Subpart 1—Financial service provider must be member of approved dispute resolution scheme Clause 44 requires every ﬁnancial service provider to be a member of an approved dispute resolution scheme if the provider provides a ﬁ­ nancial service to consumers who are natural persons or to businesses that have no more than 19 full­time­equivalent employees.
However, this requirement only applies if there is a reserve scheme.

Subpart 2—Approval of dispute resolution schemes Clause 45(1) deﬁnes a dispute resolution scheme as an approved dis­ pute resolution scheme if it has been approved by the Minister under Part 3 and that approval has not expired or been withdrawn.

An ap­ proval expires 10 years after the date it was issued.
Clause 45(3) deﬁnes a member of an approved dispute resolution scheme as a ﬁ­ nancial service provider or a provider of a ﬁnancial adviser service who may be the subject of a complaint to that scheme.

Approval of dispute resolution schemes Clauses 46 to 50 deal with how an application for an approval of a dispute resolution scheme may be made to the Minister, and the mandatory considerations for the Minister when deciding whether to approve such an application.
Withdrawal of approval Clauses 51 to 56 deal with how and why the Minister may withdraw the approval of an approved dispute resolution scheme, and the ef­ fect on members of a scheme that loses its approval.

The person responsible for an approved dispute resolution scheme may object to an intended withdrawal of the scheme’s approval.
10 Financial Service Providers (Registration and Dispute Resolution) Bill Explanatory note List of members of approved dispute resolution scheme Clause 57 requires the person responsible for an approved dispute resolution scheme to maintain a list of the scheme’s current members.
Rules about approved dispute resolution scheme Clause 58 requires the person responsible for an approved dispute resolution scheme to issue rules about that scheme and indicates the matters that the rules must provide for or set out.

Clause 59 requires that the person responsible for an approved dis­ pute resolution scheme must make copies of the rules available for inspection by the public free of charge.

Any changes to the rules must be notiﬁed to the Minister within 10 working days (clause 60).
Clause 61 provides that a change in the rules may enable the Minister to withdraw approval for the scheme, although this must be done on notice and clauses 51 to 56 apply.

Annual reports and information requests by Minister Clauses 62 and 63 require a person responsible for an approved dis­ pute resolution scheme to supply the Minister with an annual report and any information the Minister requests about the information re­ quired by regulations to be in an annual report.
Clause 64 requires that this information and the annual report be publicly available.

Subpart 3—Reserve scheme The reserve scheme is an approved dispute resolution scheme that has been appointed by Order in Council under clause 66 (clause 65).

Appointment of reserve scheme Clause 66 sets out the appointment process for the reserve scheme.

Clauses 67 to 69 deal with the revocation of an appointment of a reserve scheme.
Explanatory note Financial Service Providers (Registration and Dispute Resolution) Bill 11 Levy to fund reserve scheme Clause 70 provides that the Governor­General may, by Order in Council made on the recommendation of the relevant Minister, make regulations about levies to fund the reserve scheme.
Subpart 4—Miscellaneous Appeals Clauses 71 to 73 provide that either the complainant or the member of an approved dispute resolution scheme may appeal to the District Court against the decision of an approved dispute resolution scheme on the grounds that the dispute resolution process was unfair to the person appealing and that unfairness prejudicially affected the deci­ sion.

Regulations Clause 74 empowers regulations that may be made for various pur­ poses relating to Part 3.
Clause 75 indicates a consequential amendment made in the Sched­ ule.

Regulatory impact statement (registration) Executive summary An effective and consistent regulatory framework for the ﬁnancial sector that promotes conﬁdent consumers and institutions requires that regulators and consumers are able to identify which entities are providing which ﬁnancial services.
New Zealand does not comply with the Financial Action Task Force’s (FATF) Recommendations on Anti­Money Laundering and Countering the Financing of Terrorism (AML/CFT) that there be an effective supervisory framework to en­ sure ﬁnancial sector compliance with AML/CFT requirements.
Cur­ rently there are registration requirements for some providers (such as banks, building societies, and credit unions) and products (such as prospectuses) under speciﬁc legislation, but this is not comprehen­ sive and does not identify what ﬁnancial services an entity provides.

The preferred option is for the Companies Ofﬁce to register deﬁned ﬁnancial service providers and undertake negative assurance checks.

Financial advisers will also be identiﬁed on the register.
The Com­ 12 Financial Service Providers (Registration and Dispute Resolution) Bill Explanatory note panies Ofﬁce would co­operate with other ﬁnancial sector regulators to ensure entities are meeting the relevant regulatory requirements.

Adequacy statement The Regulatory Impact Analysis Unit has reviewed this regulatory impact statement and considers it is adequate according to the ade­ quacy criteria.
Status quo and problem Currently, there is no comprehensive way of identifying or monitor­ ing providers of ﬁnancial services or ﬁnancial advisers.

Data identi­ fying all providers of ﬁnancial services is important to regulators for the purpose of identifying risks in the sector and people who are not complying with the statutory requirements.
Data is also necessary so that market participants (that is, business analysts, intermediar­ ies, and consumers) can access information on a ﬁnancial services provider.

Financial service providers with existing registration requirements are banks, superannuation schemes, building societies, industrial and provident societies, friendly societies, credit unions, and contribu­ tory mortgage brokers.
Financial products that require registration include prospectuses under the Securities Act 1978, and trust deeds in relation to unit trusts under the Unit Trusts Act 1960.
The Ministry of Economic Development (MED) estimates that vir­ tually all ﬁnancial service providers are companies or entities that are already required to register with, and provide information to, the Companies Ofﬁce under other legislation such as the Companies Act 1993, the Building Societies Act 1965, or the Friendly Societies and Credit Unions Act 1982.
However, the current requirements are not designed to identify what type of business an entity is and hence do not give any information about the ﬁnancial services an entity pro­ vides.

It is difﬁcult for consumers and market participants to ﬁnd information about ﬁnancial service providers and the services they provide, since there is not a single place where all the information can be accessed.

Consumers are not likely to be aware of where the information may be found.
Data identifying all providers of ﬁnancial services is important to regulators for the purpose of identifying risks Explanatory note Financial Service Providers (Registration and Dispute Resolution) Bill 13 in the sector and identifying people who are not complying with the statutory requirements.

The Financial Action Task Force is an international body that sets standards for anti­money laundering and countering the ﬁnancing of terrorism.
New Zealand is a member of the FATF and is committed in principle to compliance with its standards.

In terms of FATF Recommendation 23, countries should ensure that ﬁnancial institutions are subject to adequate regulation and supervi­ sion for anti­money­laundering purposes.

Under this recommenda­ tion, New Zealand is required to have a comprehensive supervisory framework for ﬁnancial institutions.
Cabinet agreed in principle in October 2004 that the ﬁnancial sector be monitored for anti­money­ laundering compliance in accordance with the FATF Recommenda­ tions.

The FATF Recommendations also require that the necessary regula­ tory measures be taken to prevent criminals from owning a signiﬁ­ cant or controlling interest, or holding a management function, in a ﬁnancial institution.
While there are general measures aimed at preventing criminals con­ trolling or acquiring companies in New Zealand, there are no speciﬁc measures to ensure that the directors and management of ﬁnancial sector entities meet negative assurance requirements (for example, that they have not been convicted of relevant ﬁnancial crimes) in ac­ cordance with the FATF Recommendations.

It is not known to what extent money laundering or terrorist ﬁnan­ cing occurs in New Zealand.
It is believed that the level of risk is low, particularly in relation to terrorist ﬁnancing; however, the cur­ rent regulatory regime for the ﬁnancial sector makes such beliefs difﬁcult to substantiate.

Failure to comply with the FATF standards may attract money launderers and terrorist ﬁnancers to New Zealand.

Non­compliance would also have a very negative impact on New Zealand’s reputation as an international citizen.
The risks associated with non­compliance include— • possible increased cost of borrowing overseas for both the Government and the private sector, as overseas lenders per­ ceive New Zealand as a greater ﬁnancial risk and demand a bigger margin to compensate: Financial Service Providers (Registration and Dispute Resolution) Bill Explanatory note 14 • • • • • • • difﬁculties (in the form of increased costs or lost business opportunities) for New Zealand companies in doing business overseas, as other countries may have laws that discriminate against non­compliant countries: overseas investment in New Zealand may be reduced because of investors’ perception of increased risks, or legal restrictions in the investors’ home jurisdictions: difﬁculties in trade negotiations at a government­to­govern­ ment level, as foreign governments may be reluctant to extend trading privileges to non­compliant countries: impacts on foreign relations as foreign governments discrim­ inate against non­compliant countries: potential loss of FATF membership.
• The current regulatory regime does not enable the Government or the public to identify all ﬁnancial sector providers or their services, does not comply with the FATF Recommendations, and does not meet the objectives set out below.

The information available on the range of ﬁnancial services an entity provides is not easily accessible to in­ vestors and is not comprehensive.

The system has led to negative comments on New Zealand’s level of compliance with international standards.
Therefore, it is not appropriate to maintain the status quo.
Objectives The objectives are— • to identify the entities providing deﬁned ﬁnancial services in the New Zealand market: to provide an easily accessible means for investors and poten­ tial investors, intermediaries, analysts, and other market par­ ticipants to ﬁnd information on ﬁnancial services providers and the range of services they provide: to ensure that the directors and management of ﬁnancial ser­ vices providers meet negative assurance criteria; that is, they have no record of relevant criminal activities or adverse regu­ latory judgments such as having been declared bankrupt, or having been the subject of a director or management ban: to comply with the relevant international principles and stan­ dards.
Explanatory note Financial Service Providers (Registration and Dispute Resolution) Bill 15 The criteria against which options to meet the objectives have been assessed are— • • • • • • effectiveness in meeting the objectives: level of compliance costs for business: avoidance of duplication: ﬁt with existing or proposed regulatory function: efﬁciency of use for regulatory authorities: efﬁciency of use for investors and the public.
Alternative options The range of types of ﬁnancial services and the entities that provide them is very varied.

Some parts of the sector do not have any self­ regulatory or other professional or industry organisation, while others do.

To meet the key objective of the review of ﬁnancial products and providers, which is an effective and consistent regulatory framework, and also to meet the FATF Recommendations, no feasible alternative option to a registration system was found.
Alternative registration systems—different agencies perform registration function for different ﬁnancial service providers This option involved the various ﬁnancial sector regulators each maintaining a register for the entities they supervise.
For example, the Reserve Bank of New Zealand (the Reserve Bank) would per­ form a registration function for banks and other entities for which it has prudential responsibilities and the Securities Commission would register entities such as collective investment scheme operators and trustees, and, potentially, the Companies Ofﬁce would register other issuers.

This option would meet the objective of identifying some entities but would not cover all the entities falling under the FATF deﬁnition.
It would mean duplication of registers, a low level of ﬁt with the existing regulatory functions of the Reserve Bank and the Securities Commission, greater compliance costs, and an inability to meet the objective of an easily accessible source of information for investors and market participants.
16 Financial Service Providers (Registration and Dispute Resolution) Bill Explanatory note Preferred option The preferred option is that the Companies Ofﬁce performs the regis­ tration function for all deﬁned ﬁnancial service providers.
The def­ inition will be based on the FATF deﬁnition of ﬁnancial institution and will include: banks, friendly societies, credit unions, building societies, industrial and provident societies, ﬁnance companies, is­ suers of equity and debt securities, issuers of collective investment schemes, trustees supervising these issuers, insurers, platform and portfolio service providers and custodians, investment brokers, deal­ ers in securities and futures contracts, lending businesses, ﬁnancial leasing businesses, money or value transfer services (for example, money remittance), money and currency changers.
The register will also provide a means of identifying ﬁnancial advisers.

This will involve the Registrar of Financial Service Providers and Financial Advisers (the Registrar) establishing and maintaining a register, receiving applications for registration, carrying out criminal checks with the police for controlling shareholders, directors, and se­ nior managers, and carrying out enforcement functions for breaches of registration requirements.
The Registrar will need to co­operate with other regulators such as the Reserve Bank and the Securities Commission, because for some ﬁnancial services there are additional regulatory requirements that must be met before an entity can be reg­ istered.
It is intended that from a ﬁnancial service provider’s perspective there will be a seamless register combining the information they provide to register as a company (or other form, such as a building society or friendly society) with a small amount of additional information.
Giving the Companies Ofﬁce the registration function would mean efﬁciencies could be gained and compliance costs minimised for businesses, since they would have to deal with only one registration body, and there would not be a duplication of requirements to provide registration information.
This option will have the advantage of reducing the time needed for entities to become familiar with the ﬁnancial service provider regis­ tration processes, since they will already be familiar with Compan­ ies Ofﬁce registration and ﬁling processes.

Any registration fees for providers will be in addition to their existing registration (for ex­ ample, company) fees, will be set by regulation, and will be cal­ culated using the same models as other business registry fees.
It is Explanatory note Financial Service Providers (Registration and Dispute Resolution) Bill 17 likely that there will be a fee for ﬁnancial service provider registra­ tion (to cover the police checks, the Companies Ofﬁce checks, and the provision of information to ﬁnancial service providers on the re­ quirements, a contact centre, and enforcement processes).
Poten­ tially there may be a fee for ﬁling an annual update (which may in part cover a contact centre, enforcement processes, and any checks that may be required).

However, there is no fee under the Companies Act 1993 for a company to ﬁle an online annual return, and this may also be the case for the annual update of information by a ﬁnancial service provider.

An estimate for a possible one­off registration fee for an entity (apart from a ﬁnancial adviser) would be in the region of $500 to $800.
This assumes that the costs are to be fully third­party funded and on the basis of approximately 2 000 registrations.

There are various ways fees could be charged and this will need to be worked through over the next couple of months as the legislation develops.

The Compan­ ies Ofﬁce will apply all the necessary Treasury guidelines and ap­ proved costing models in working through the funding and fee struc­ ture.

Cabinet approval will be sought for the regulations setting the fees.
While it is proposed that ﬁnancial advisers will be identiﬁed on the register, the approved professional body that the adviser belongs to will be responsible for providing the adviser’s details to the Registrar and covering the costs associated with this, including any checking of the adviser.

The costs for this will be determined by the costs incurred by the approved professional body and will not be the same as the indicated costs for registration of the ﬁnancial service providers.
(A ﬁnancial adviser is deﬁned as an entity that gives ﬁnancial advice on ﬁnancial products and investment and savings decisions to members of the public.)

For the entities outside the Review of Financial Products and Providers that will be required to be registered to meet the FATF Recommendations, consideration of the impacts on them and any measures to minimise compliance costs on them will be included in the FATF compliance review being led by the Ministry of Justice.
The preferred option results in a separation between the registration function and the regulatory or supervisory function.

For example, for providers supervised by the Reserve Bank, it separates registration from prudential and AML/CFT supervision, and for providers super­ 18 Financial Service Providers (Registration and Dispute Resolution) Bill Explanatory note vised by the Securities Commission, it separates registration from market conduct and AML/CFT supervision.
However, the costs of providers dealing with 2 regulatory agencies can be minimised by ensuring good information sharing and processes to ensure registra­ tion and any qualitative assessment carried out by the regulator work effectively, as well as by undertaking work to raise public awareness of where to ﬁnd information about ﬁnancial services providers, and of the respective roles of the Companies Ofﬁce and regulators.
Information­sharing processes between the Companies Ofﬁce, the Reserve Bank, and the Securities Commission already exist, but the volume of information sharing will increase with the implementa­ tion of these proposals.

The Reserve Bank and the Securities Com­ mission have done some work in estimating the overall cost of their additional regulatory functions, but have not separated out the infor­ mation­sharing processes.
Apart from the Companies Ofﬁce, no other agency currently has the equivalent existing systems, technology, and skills that are able to be so easily adapted for a new registration system for ﬁnancial service providers.

This option would therefore involve the lowest costs for government, as it could build on existing systems rather than creating a new registration system.

The registration role will also include a negative assurance check.
The Companies Ofﬁce will check that the directors, senior managers, and controlling shareholders are not on the list of undischarged bankrupts, or on the list of persons banned from being a director or concerned in the management of a company, and will carry out a police check for convictions for speciﬁc crimes.

The Companies Ofﬁce currently does this sort of check for motor vehicle traders.
Costs to the Companies Ofﬁce from this option include the cost of set­ ting up and maintaining the register (including carrying out the neces­ sary checks), an educational role to ensure ﬁnancial service providers are aware of the requirements, and an enforcement role for breaches of registration requirements.
The Companies Ofﬁce’s indicative es­ timates of the cost of carrying out these functions are— Explanatory note Financial Service Providers (Registration and Dispute Resolution) Bill 19 08/09 $m 09/10 $m 10/11 $m 11/12 $m Ongoing $m Vote Commerce Ministry of Economic Development—additional Companies Ofﬁce functions Associated capital expenditure 0.1–0.4 0.9–1.2 0.8–1.5 0.8–1.5 0.8–1.5 0.35–1.0 0.65–2.0 As noted above, these costs could be reduced if there is third­party funding, which will be considered when approval is sought for the detailed funding proposals, to be reported back to Cabinet by 30 November 2007.
From the consumer’s perspective, the registration system will pro­ vide a one­stop shop where they can access a range of information on an entity, such as the services it provides, copies of disclosure documents, and where to seek redress if they have a complaint.

It is not intended that there be any fee for a consumer to access informa­ tion on the register.

The preferred option will meet the public policy objectives set out above.
Implementation and review To implement the proposal, legislation will be required.

The neces­ sary provisions will be part of the Financial Service Providers (Regis­ tration and Dispute Resolution) Bill expected to be passed in 2008.

It is intended that the register be in place in 2010.

There will be a transitional period, intended to be 2 years, to allow those affected time to ensure compliance.
In addition, the Companies Ofﬁce will need to undertake the neces­ sary technical and operational work to include information on the new register and on existing registers (for example, registers under the Companies Act 1993, Building Societies Act 1965, and Securities Act 1978) to be available from a single online source.

The Compan­ ies Ofﬁce will be responsible for publicising the registration require­ ments so that entities providing ﬁnancial services are aware of the requirements.
A privacy impact assessment has been commissioned to ensure that areas such as information­sharing provisions, which are intended to 20 Financial Service Providers (Registration and Dispute Resolution) Bill Explanatory note minimise compliance costs, are consistent with information privacy principles.

Ofﬁcials will work with the Ofﬁce of the Privacy Com­ missioner to ensure consistency of the legislation with the Privacy Act 1993 during the drafting process.
Consultation The proposals were the subject of a discussion paper, which was re­ leased in August 2006, along with other discussion papers in the Re­ view of Financial Products and Providers (the RFPP).

One hundred and thirty­nine submissions were received on the RFPP papers, of which 22 contained comments on registration.

The submitters in­ cluded associations representing various parts of the ﬁnancial sector and individual businesses operating in the sector.
Submissions on the discussion document generally supported the proposal for a registration system.

Submitters noted that the Com­ panies Ofﬁce already has the infrastructure and expertise for the proposed registration system.
Submitters also indicated the need to clearly delineate the functions and powers of the regulators and ensure that it is clear to ﬁnancial services providers which regulator they need to deal with in a given situation, and that there is no duplication in the requirements between registration and licensing.

These concerns are being addressed through the information­sharing provisions and provisions for co­operation between regulators.
They will also be addressed in the implementation of the operational aspects of the registration system.
The following government agencies have been consulted on the pro­ posals in this paper: the Department of the Prime Minister and Cab­ inet, the Inland Revenue Department, the Department of Labour, the Department of Internal Affairs, the State Services Commission, the Retirement Commission, the Ministry of Social Development, the Ministry for the Environment, Te Puni Kōkiri, the New Zealand Customs Service, the Department of Building and Housing, the Of­ ﬁce of the Privacy Commissioner, the Ministry of Foreign Affairs and Trade, and the Commerce Commission.
No signiﬁcant concerns were raised.

Explanatory note Financial Service Providers (Registration and Dispute Resolution) Bill 21 Regulatory impact statement (dispute resolution) Executive summary There is currently a problem for some consumers in accessing appro­ priate dispute resolution and redress mechanisms in those parts of the ﬁnancial sector where voluntary, simple dispute resolution mechan­ isms do not exist.
Consumers experience problems because of lack of knowledge about where to go, and because of complicated and ex­ pensive dispute resolution processes that make it not worthwhile to pursue complaints.

Voluntary industry­based dispute resolution schemes currently cover most banks and insurance companies, as well as many managed funds.
The main gaps in the ﬁnancial sector where consumers do not have access to industry­based dispute resolution include ﬁnance companies, building societies, credit unions, ﬁnancial advisers, and some superannuation schemes.

In these areas, consumers must use the court system to seek redress.

The proposal is to require all ﬁnancial providers to join an indus­ try­based dispute resolution scheme that has been approved by the Minister of Commerce.
This option will ensure that, as an alternative to the courts, consumers have access to simple, low­cost dispute resolution.

Industry respon­ sibility for funding and operating the dispute resolution schemes will provide incentives for ﬁnancial providers to maintain appropriate customer service standards and ensure customers are treated fairly and reasonably.
Adequacy statement The Regulatory Impact Analysis Unit has reviewed this regulatory impact statement and considers it is adequate according to the ade­ quacy criteria.

Status quo and problem Under the status quo, there are 2 voluntary industry­based dispute resolution schemes—the Banking Ombudsman and the Insurance & Savings Ombudsman.
While these schemes work very well in pro­ viding a simple, low­cost dispute resolution service, access to these schemes is only available for consumers who are customers of these 22 Financial Service Providers (Registration and Dispute Resolution) Bill Explanatory note schemes’ member ﬁrms.

Other consumers must use the court system for dispute resolution and to obtain redress.

Banks, managed funds, and insurance companies make up a large proportion of the New Zealand ﬁnancial sector.
The majority of these ﬁnancial institutions are members of one of the existing schemes.

However, while these schemes are available to a large number of con­ sumers, dispute resolution is not available to consumers in all parts of the ﬁnancial sector.

The main gaps in the ﬁnancial sector where consumers do not have access to industry­based dispute resolution include ﬁnance companies, building societies, credit unions, ﬁnan­ cial advisers, and some superannuation schemes.
These sectors are more fragmented and lack the cohesion present in the banking and insurance sectors that facilitated the establishment of the voluntary schemes.

While the court system (including the Disputes Tribunal) generally works well for most types of consumer disputes, it does have some disadvantages in the case of ﬁnancial services.

For example, the time, cost, and complexity of initiating court action may dissuade some consumers from standing up for their rights.
The Disputes Tribunal addresses these issues of cost and complexity; however, the monetary limit of $7,500 (or $12,000 with the agreement of the parties) for Disputes Tribunal claims will exclude many ﬁnancial disputes.

Although the existing schemes have the capacity to take on new members, it is not expected that they will further extend their cover­ age without regulatory intervention.
Voluntary industry­based dis­ pute resolution provides a competitive advantage for member ﬁrms by enhancing their reputation and promoting consumer conﬁdence in those ﬁrms.

It is expected that there would be reluctance from those ﬁrms that are currently members of a voluntary scheme to extend coverage of the scheme to other parts of the ﬁnancial sector.
In August 2006, the Ministry of Economic Development released a discussion paper noting results from the National Consumer Sur­ vey on Awareness and Experience of Consumer Legislation (the Na­ tional Consumer Survey) (conducted by National Research Bureau Ltd on behalf of the Ministry of Consumer Affairs, October 2005) that showed that, while the level of consumer problems with mis­ leading or unfair treatment by ﬁnancial providers is relatively low, consumers experience problems in seeking and obtaining redress.
Common reasons given by consumers included “did not know who Explanatory note Financial Service Providers (Registration and Dispute Resolution) Bill 23 to complain to”, “did not think it would make a difference”, and “couldn’t be bothered”.

There are problems in relation to both consumer knowledge of, and ability to access, dispute resolution mechanisms.
For example, the National Consumer Survey found that 30% of respondents believed that there is a problem about taking a case to the Disputes Tribunal or about the way that the courts work.

Common comments by re­ spondents included “costs, direct or indirect, may be involved”, “time frame to get heard would be too long”, “time and effort required would not be worth it for such small amounts”, “not knowing where to start or how to go about it, or how to contact them”, and “intimi­ dating experience”.
Some submissions to the discussion paper expressed the view that there was not a problem in relation to consumers’ access to dispute resolution.

For example, one submission noted that consumer de­ cisions to borrow or invest are not made because of the existence, nature, or form of dispute resolution or redress procedures; decisions are made for more positive reasons often in ignorance of the exis­ tence of such procedures.
On the other hand, low ﬁnancial literacy means that New Zealand consumers have limited ability to properly compare competing op­ tions offered by ﬁnancial providers.

If consumers do not have ac­ cess to effective redress if things go wrong, this means that there are limited incentives for ﬁnancial providers to treat customers in a fair and reasonable manner.
On balance, submissions on the August 2006 discussion paper sup­ ported the view that there is sufﬁcient evidence of a problem to war­ rant further government action to improve access to redress in order to promote consumer conﬁdence in ﬁnancial markets.

Objectives A robust and efﬁcient ﬁnancial sector, where the public has a strong basis for being conﬁdent in the sector, is an essential prerequisite for a strong and dynamic economy.
In the context of consumer dispute resolution and redress, 3 further policy objectives support the overar­ 24 Financial Service Providers (Registration and Dispute Resolution) Bill Explanatory note ching aim of a robust and efﬁcient ﬁnancial sector.

These objectives are— • to promote consumer/investor conﬁdence in ﬁnancial markets.
Consumer conﬁdence relies on 3 elements— • consumers’ expectations of a transaction being met by suppliers: conﬁdence in market rules and institutions: consumers having effective access to redress: • • to reinforce market incentives, within a competitive environ­ ment, to encourage fair and reasonable behaviour by ﬁnancial providers towards their customers: to maintain resilience and stability of ﬁnancial markets.
• • Alternative options Consumer education and information This option would address the problem by building the capability of consumers to make informed choices so that consumers will avoid unsuitable products, thus reducing the number of disputes.

This op­ tion is seen as a long­term solution, rather than achieving immediate improvements in consumer conﬁdence.
This option would not ad­ dress problems that occur after a contract has been entered into, such as maladministration, or ﬁnancial providers not properly following their own policies, or misrepresentation by ﬁnancial providers prior to the transaction taking place.

The beneﬁts of improved consumer education will not be evenly dis­ tributed across all consumers.
Education and information will have a proportionately bigger beneﬁt for those consumers who have bet­ ter ability to make use of information in their ﬁnancial decisions, as well as those consumers who have access to a wide range of options in choosing ﬁnancial products or providers.

This option would be difﬁcult to implement.

For example, it would be difﬁcult to compel ﬁrms to provide effective generic education, rather than product­speciﬁc information.
The ﬁnancial sector con­ sists of a large number of providers offering a wide range of prod­ ucts.

If the obligation to provide consumer education falls on in­ dustry, ﬁrms will have an incentive to focus their education and in­ formation efforts on information speciﬁc to the products they offer.
Explanatory note Financial Service Providers (Registration and Dispute Resolution) Bill 25 This will not assist consumers in making choices between competing products and suppliers, or whether a product meets their return and risk needs.

Enhanced civil remedies and specialist courts and tribunals This option would involve adopting simpliﬁed court procedures (for example, through a specialist Disputes Tribunal) to improve con­ sumer access to courts to seek redress.
While the court system (in­ cluding the Disputes Tribunal) generally works well for most types of consumer disputes, it does have some disadvantages in the case of ﬁnancial services.

Cost and complexity may dissuade some con­ sumers from initiating court action.
These disadvantages were identi­ ﬁed by the Financial Intermediaries Task Force, and include eviden­ tial difﬁculties, particularly where advice or recommendations are given orally, and the factual background is complex; difﬁculties in establishing and quantifying loss, particularly where other factors, such as market ﬂuctuations, have contributed to loss; the fact that disputes often focus on a highly specialised area of knowledge; and limitation issues—it may take a signiﬁcant amount of time for prob­ lems with ﬁnancial advice and information to become evident, so that claims may fall outside limitation periods.
A specialist tribunal would allow the accumulation of specialist ex­ pertise, and allow for setting monetary limits appropriate for ﬁnancial disputes.

However, as it would still be part of the court system, a spe­ cialist tribunal would still face the same problems currently experi­ enced by courts, such as evidential difﬁculties and time limitations.
The main disadvantage of this option is that it would not encour­ age industry commitment, particularly because it would not lever­ age off the goodwill of the existing industry­based dispute resolution schemes.

This option would involve signiﬁcant costs to government in estab­ lishing a new branch of the Disputes Tribunal.
It is expected that this would increase the number of consumers taking court action and, while there would be a drop in the number of District Court cases be­ cause these claims could be heard in the new tribunal, there is likely to be a net increase in the costs for government in operating the court system.

26 Financial Service Providers (Registration and Dispute Resolution) Bill Explanatory note Under this option there would be no costs to industry in establishing the new tribunal.
It is expected that simplifying consumer access to a dispute resolution mechanism will result in an increase in consumers seeking redress, and this will mean increased costs for industry in defending complaints.

There will be some beneﬁts to consumers under this option as it will enable consumers to take disputes to the specialist Disputes Tribunal rather than the District Court, regardless of the amount in dispute.
This will make dispute resolution easier and probably increase the number of complaints made by consumers.

This option would retain existing Disputes Tribunal processes, such as a $50 ﬁling fee.

Single industry­based dispute resolution scheme This option would involve a single industry­based dispute resolution scheme that all ﬁnancial providers would be required to join.
The main advantage of this option is that a single scheme may be cheaper to operate due to efﬁciencies of scale, producing advantages for both ﬁnancial providers and consumers.

This is particularly signiﬁcant given the relatively small size of the New Zealand ﬁnancial industry and number of consumer complaints.

A single dispute resolution scheme would create a level playing ﬁeld in terms of regulatory treatment.

This would provide coverage across all sectors of the ﬁnancial industry.
This option would also address unnecessary barriers to entry that may hinder access for some ﬁrms to membership of a dispute resolution scheme.

However, a one­size­ ﬁts­all approach may lack specialisation or be too blunt to effectively deal with varying industry practices.

This scheme would require the greatest degree of government in­ volvement.
This could have implications for industry commitment to the success of the scheme, for example, if ﬁrms come to see them­ selves as regulated entities rather than members.

There is a wide range of types of ﬁnancial providers, from small busi­ nesses through to large banks and insurance companies.

It may be difﬁcult to achieve industry cohesion or a common understanding of the rules to be followed.
This suggests that this option would require a greater degree of government intervention than the other options.

Explanatory note Financial Service Providers (Registration and Dispute Resolution) Bill 27 Preferred option Multiple industry­based dispute resolution schemes Membership of an approved dispute resolution scheme will be mandatory for all ﬁnancial service providers that are required to be registered, and ﬁnancial advisers, who provide products or services to consumers.
However, they are free to join any scheme.

A class of consumers is deﬁned based on the characteristics of the customer, regardless of any particular characteristics of the product or provider.

The deﬁnition of consumer includes— • • natural persons; and small­ and medium­sized enterprises (SMEs), which are en­ terprises with 19 or fewer employees.
This approach recognises that natural persons and SMEs typically en­ ter into simple, low­value contracts with ﬁnancial service providers and, where disputes arise, redress is often not sought because of cost, complexity, or lack of knowledge.

The deﬁnition of consumer en­ sures that a simple, low­cost avenue to seek redress is available for claims that would not otherwise be taken to the courts and thus would not be resolved.
Providing a deﬁnition of consumer is necessary because the absence of a deﬁnition of consumer would mean that all customers, includ­ ing big businesses, would be able to make a complaint against a ﬁ­ nancial service provider through an industry­based dispute resolution scheme.

This would result in signiﬁcant costs for ﬁnancial service providers.
An approved dispute resolution scheme is one that has satisﬁed the Minister of Commerce (following consultation with the Minister of Consumer Affairs and the Minister of Finance) that it meets the criteria of accessibility, independence, fairness, accountability, efﬁ­ ciency, and effectiveness.
In deciding whether to approve a scheme, the Minister of Commerce must give regard to some mandatory considerations relating to the governance of the scheme, periodic reviews, the scheme’s funding, the cost to consumers, membership restrictions, the limits on liability of scheme members, evidence and processes, awareness, promotion and education, and reporting to stakeholders.
Government involvement will be limited to approving schemes (in­ cluding periodic renewal), receiving periodic reports, and powers of the scheme’s jurisdiction, 28 Financial Service Providers (Registration and Dispute Resolution) Bill Explanatory note inspection if necessary, rather than involvement in the day­to­day operation of a scheme.

Reapproval is to be obtained by schemes at 10­year intervals.
Periodic reporting is to be annual and is likely to include basic information about the activities of the scheme (for ex­ ample, the number and type of complaints considered, promotional activities undertaken, etc), as well as identiﬁcation of any systemic issues that the scheme considers require attention by government.
The scheme approval process will include appropriate checks and balances, including a requirement for the Minister of Commerce to be satisﬁed that the scheme has undertaken appropriate consultation, a time frame for decisions, the method of notifying approval, and other matters.

The Minister of Commerce may impose conditions on the approval of a scheme, or withdraw the approval of a scheme.
Conditions might cover issues such as the scheme’s governance arrangements, require­ ments for training, and other matters.

Under this option, the dispute resolution system is fully funded by industry.

By allowing the various sectors of the ﬁnancial industry to establish their own schemes, this option provides for the greatest degree of industry involvement and commitment, as well as taking advantage of the skills needed to address a particular part of the ﬁ­ nancial sector.
This option also provides that, in the event of no schemes meeting the approval criteria, or if there is not full coverage of the ﬁnancial indus­ try by those schemes that are approved, powers will allow the Minis­ ter of Commerce to appoint a person to operate a reserve scheme.
A reserve scheme would be based on the same principles as approved dispute resolution schemes and must comply with legislative require­ ments common to all approved dispute resolution schemes, such as binding decisions and appeals, and periodic reporting.

Regulations may require all ﬁnancial service providers who are members of the reserve scheme to pay a levy.
The regulations may deal with issues such as the amount of the levy, calculation of the levy, payment and collection of levies, exemptions, and penalties for non­payment.

A decision of a scheme will be binding on the member in relation to whom it is made, but will not preclude a consumer from rejecting the scheme’s decision and taking alternative court action against a ﬁnancial provider.
Explanatory note Financial Service Providers (Registration and Dispute Resolution) Bill 29 Risks of not implementing preferred option If this option is not implemented, there will continue to be many con­ sumers who are unable to access simpliﬁed dispute resolution mech­ anisms and must resort to the courts to seek redress.

This runs the risk of not achieving the key objective of promoting investor/con­ sumer conﬁdence in ﬁnancial markets.
It also would not establish any mechanisms for reinforcing market incentives to encourage fair and reasonable behaviour by ﬁnancial providers towards their customers.
The absence of a comprehensive industry­based dispute resolution system would also hamper the ability for government to monitor and obtain the necessary information (for example, information about levels of compliance with the law or increased complaints about a ﬁrm as an indicator of potential collapse) so as to maintain resilience and stability of ﬁnancial markets.
If a reserve scheme is not provided for, and no schemes meet the approval criteria, or if there is not full coverage of the ﬁnancial in­ dustry by those schemes that are approved, it is likely that some ﬁ­ nancial service providers will be unable to join an approved scheme.

This means that they would be unable to fulﬁl the precondition for registration and thus would be unable to operate their business as a ﬁnancial service provider without contravening the law.
Impacts on government There would be costs to government in approving schemes and moni­ toring the dispute resolution system.

However, these are not antici­ pated to be large.

The proposals will result in additional roles and functions for MED in providing advice to the Minister of Commerce on approval of dispute resolution schemes, as well as liaising with, and producing educational material for, dispute resolution schemes, industry participants, and consumers.
These costs are estimated at $0.3 million per annum for the ﬁrst 2 years and $0.1 million per an­ num thereafter.

If a reserve scheme is established, there would be higher costs to government than under a system of industry­based schemes.

These costs would arise because of the additional costs of appointing the reserve scheme operator, and the additional supervision that would be necessary as a result of greater involvement in the dispute resolution system.
However, these costs are likely to be small, because as a 30 Financial Service Providers (Registration and Dispute Resolution) Bill Explanatory note levy would be imposed that would allow for full cost recovery from ﬁnancial providers who become members of the reserve scheme.
Impacts on industry It is anticipated that ﬁnancial providers would incur 3 types of costs— • • costs for internal complaints handling: internal costs incurred in responding to complaints through the dispute resolution body: membership resolution by body—whether fees are levied on a per case basis or consist of a general membership levy.
dispute levied fees the • Costs might be incurred if a dispute resolution scheme requires, as a condition of membership, that its members establish inter­ nal complaint­handling procedures.

Note that not all ﬁnancial providers will incur these costs, as many will already have internal complaints­handling processes in place.
A study in the United Kingdom indicated that the cost of an internal complaints­handling system ranged between GBP50 and GBP1,700 per case, depend­ ing on the size of ﬁrm and the type and volume of business it does (Financial Ombudsman Service (UK), Complaints handling arrangements: feedback statement on CP33 and draft rules, May 2000, www.fsa.gov.uk/pubs/cp/cp49.pdf, page 51).

The August 2006 discussion paper requested comments (on a conﬁdential basis if requested) from ﬁnancial providers.
However, no submissions addressing this point were received.

The proposal does not impose additional costs for ﬁrms’ internal costs incurred in responding to complaints through the dispute reso­ lution body.

These costs would be incurred by the ﬁrm regardless of the form of dispute resolution.

For example, the ﬁrm would face similar (or possibly higher) costs in defending an action in the courts or the Disputes Tribunal.
Firms may experience increased costs if, as expected, this proposal results in an increase in complaints from consumers who would otherwise have been reluctant to complain through the courts or the Disputes Tribunal.

Improving ease of ac­ cess to dispute resolution will undoubtedly increase the number of consumers seeking redress.

This may be thought to also lead to an increase in frivolous or vexatious complaints.
However, the experi­ Explanatory note Financial Service Providers (Registration and Dispute Resolution) Bill 31 ence of existing schemes has generally been that these complaints can be weeded out quite easily.

The current Banking Ombudsman and Insurance & Savings Om­ budsman schemes operate on annual budgets of approximately $1.2 million and $1 million respectively.
They are funded through a combination of an annual levy on members (depending on the size of the ﬁrm) and a case levy for each complaint considered by the scheme.

The funding formulae adopted by the existing New Zealand schemes, as well as similar schemes in other countries, vary quite widely and are designed to reﬂect the particular nature of each scheme’s members.
Note that a case levy does not always represent the true marginal cost of additional cases, but must be set at such a level that it does not affect the incentives facing members in their decisions to either settle or ﬁght a complaint.
While it is difﬁcult to quantify the expected costs and beneﬁts of in­ dustry­based dispute resolution for ﬁnancial providers, the fact that the banking, insurance, and savings sectors have voluntarily estab­ lished dispute resolution schemes suggests that those sectors have found that the beneﬁts outweigh the costs.
Other sectors, such as ﬁ­ nancial advisers, have not voluntarily established such regimes; how­ ever, this may be because these sectors are more fragmented and in­ dustry­wide consensus is more difﬁcult to reach than in the banking or insurance sectors.

It is expected that the proposal would have beneﬁts for ﬁnancial providers through improved consumer/investor conﬁdence in ﬁnan­ cial markets.
This will promote more efﬁcient markets and encourage greater participation by consumers in ﬁnancial markets, with conse­ quent beneﬁts for ﬁnancial providers.

As the proposal is broadly similar to the regulatory regime in Aus­ tralia, this will make it easier for New Zealand ﬁrms to expand into Australia, as they will be familiar with the compliance requirements they would need to meet in Australia.
Alignment with Australian standards will also make it easier for dispute resolution schemes to build their capability, as they will be able to take advantage of ex­ perience from overseas.
32 Financial Service Providers (Registration and Dispute Resolution) Bill Explanatory note Impacts on consumers While the establishment of an industry­based dispute resolution mechanism would not impose any direct costs on consumers, it is likely that any additional costs to ﬁnancial providers would be passed through to consumers.

Virtually all existing industry­based dispute resolution schemes are free of charge to consumers.
Schemes also put very few formal ob­ stacles in the way of consumers seeking to use their services.

For example, most schemes allow consumers to make contact by tele­ phone or through the Internet.

This is especially beneﬁcial for less educated consumers.

The ease of access to current industry­based dispute resolution schemes can be contrasted with the court system, where consumers must pay a fee to lodge a claim.
The ofﬁcial forms for lodging claims can also be confusing and intimidating for some consumers.

Access to industry­based dispute resolution will provide consider­ able beneﬁts for consumers.

For example, a free complaints service would enable consumers to obtain redress for small­value claims, as they would otherwise put up with the problem rather than commence court action.

This is especially beneﬁcial to low­income consumers.
An informal dispute resolution style, in conjunction with an aware­ ness­raising campaign, would be especially beneﬁcial for less edu­ cated consumers.

It is difﬁcult to quantify the detriment currently suffered by consumers as a result of inability to access redress.

An increase in the number of consumer complaints would indicate an increasing degree of consumer sophistication.

This has ﬂow­on beneﬁts for ﬁnancial providers and the community in improving ser­ vice standards in the industry.
It may also ﬂow through to more con­ ﬁdent participation in ﬁnancial markets by consumers, including, for example, encouraging saving.

Deﬁning consumer in a way that excludes larger businesses from ac­ cess to industry­based dispute resolution schemes will require those businesses to use the court system, incurring costs for government and for larger businesses.

However, these businesses would be likely to use their expertise and resources and choose to use the courts any­ way.
Natural persons and SMEs will beneﬁt from being able to use simple, low­cost, industry­based dispute resolution schemes.

Explanatory note Financial Service Providers (Registration and Dispute Resolution) Bill 33 Steps taken to minimise compliance costs The existence of multiple dispute resolution schemes will allow ﬁrms to seek out the scheme that has the best ﬁt.

This will minimise costs for ﬁrms in complying with the scheme’s rules.
The criteria for approval of a scheme have been designed with a principles­based approach so as to give schemes ﬂexibility to meet the requirements in the best way for them, that is, the cheapest and most effective.

Impact on stock of regulation New legislation will be required to implement this proposal.

This proposal links with the proposed new registration regime for ﬁnancial institutions.

Implementation and review The proposal will be implemented with commencement in 2 stages.
Stage 1, which establishes the rules for approval of dispute resolution schemes, will commence immediately following enactment of the legislation (including any regulations, if necessary).

Stage 2, which will be the mandatory requirement for ﬁnancial institutions to join an approved dispute resolution scheme, will come into force at the same time as the requirement to register in 2012.
To assist affected parties in complying with the new regime, the Min­ istry of Economic Development will produce educational material for dispute resolution schemes to help them meet their obligations in order to obtain approval; for ﬁnancial institutions, to inform them of their obligation to join a dispute resolution scheme; and for con­ sumers, to inform them of the availability of new dispute resolution and redress mechanisms.
Compliance by ﬁrms with the requirement to join a dispute reso­ lution scheme will be enforced by the proposed Registrar of Financial Service Providers through the registration regime (as outlined in the paper Review of Financial Products and Providers: Registration of Financial Service Providers).
The effectiveness of the new dispute resolution regime in achieving its objectives will be monitored through the annual reports that ap­ proved dispute resolution schemes are required to submit to the Min­ ister of Commerce.

34 Financial Service Providers (Registration and Dispute Resolution) Bill Explanatory note There is a risk that no dispute resolution schemes will seek or ob­ tain approval; however, this has been managed by consultation with industry and potential schemes.
The level of support for industry­ based dispute resolution shown through consultation on the discus­ sion paper indicates that industry is committed to successfully imple­ menting the proposal.

Consultation Stakeholder consultation The proposals were the subject of a discussion paper that was re­ leased in August 2006, along with other discussion papers in the Re­ view of Financial Products and Providers (the RFPP).
One hundred and thirty­nine submissions were received on the RFPP papers, of which 42 contained comments on consumer dispute resolution.
Some key concerns raised by submitters include— • some submissions related to the existence of a problem and the ability of improved dispute resolution arrangements to solve the problem (for example, one submission noted that consumer decisions to borrow or invest are not made because of the exis­ tence, nature, or form of dispute resolution or redress proced­ ures; decisions are made for more positive reasons, often in ignorance of the existence of such procedures).
This has been addressed by noting that dispute resolution is only one compo­ nent of consumer conﬁdence, and further work on improving consumer ﬁnancial capability is also ongoing: concerns were expressed that government intervention might damage the existing goodwill and industry commitment to ex­ ternal dispute resolution.
This has been addressed by ensur­ ing that the approval criteria for dispute resolution schemes closely reﬂect current practices as much as possible: concerns were expressed that the proposal could result in in­ dustry funding the dispute resolution system, but without any say in its operation.
This has been addressed by limiting gov­ ernment involvement to approval of schemes, with a hands­off approach to the day­to­day governance and operation of dis­ pute resolution schemes: concerns were expressed about the potential scope of the pro­ posed dispute resolution system.
This has been addressed • • • Explanatory note Financial Service Providers (Registration and Dispute Resolution) Bill 35 through limiting access to consumers (note that MED will be undertaking further work on establishing appropriate deﬁni­ tions of consumer in particular sectors), and through requiring that the Minister of Commerce must have regard, when decid­ ing whether to approve a scheme, to matters such as the juris­ diction of the scheme and any monetary limit on the liability of scheme members.
Government departments/agencies consultation The following government agencies have been consulted on the pro­ posals in this paper: the Ministry of Consumer Affairs, the Reserve Bank of New Zealand, the Treasury, the Ministry of Justice, the Securities Commission, the Retirement Commission, and the Com­ merce Commission.

No signiﬁcant concerns have been raised.
Hon Lianne Dalziel Financial Service Providers (Registration and Dispute Resolution) Bill Government Bill Contents Title Commencement Part 1 Preliminary provisions Overview Interpretation Meaning of ﬁnancial service Application of Act Act binds the Crown Part 2 Registration Purpose of this Part Registration and deregistration Subpart 1—No providing ﬁnancial service or licensed service or holding out that entitled to provide ﬁnancial service unless registered 10 11 No providing ﬁnancial service or licensed service in course of business unless registered No holding out in course of business that entitled to provide ﬁnancial service unless registered 190—1 Page 5 5 5 6 8 9 10 10 10 11 11 1 Financial Service Providers (Registration and Dispute Resolution) Bill Subpart 2—Registration of ﬁnancial service provider Qualiﬁcations for registration as ﬁnancial service provider Disqualiﬁed person Application for registration as ﬁnancial service provider Application to be registered as ﬁnancial service provider Registration of ﬁnancial service provider Changes relating to ﬁnancial service provider Duty to notify changes relating to ﬁnancial service provider Deregistration of ﬁnancial service provider Deregistration of ﬁnancial service provider Notice of intention to deregister Objection to proposed deregistration of ﬁnancial service provider Notiﬁcation of deregistration of ﬁnancial service provider Subpart 3—Registration of provider of ﬁnancial adviser service Registration of provider of ﬁnancial adviser service Deregistration of provider of ﬁnancial adviser service Subpart 4—Register of ﬁnancial service providers and ﬁnancial advisers Register established Register of ﬁnancial service providers and ﬁnancial advisers Operation of and access to register Purposes of register Contents of register Annual conﬁrmation Registrar must amend register in certain circumstances Registrar may refuse to accept document Searches of register Searches of register Search purposes When search breaches information privacy
 principle 26 27 28 29 30 31 32 33 Sharing information with other agencies Information sharing 2 12 12 13 13 14 15 15 15 16 16 16 17 17 17 18 18 19 19 19 19 20 20 Financial Service Providers (Registration and Dispute Resolution) Bill Registrar of Financial Service Providers and Financial Advisers 34 35 36 37 38 39 40 41 42 Appointment of Registrar Power of Registrar to delegate Subpart 5—Registrar’s inspection powers Registrar’s inspection powers Disclosure of information and reports Exercise of powers under section 36 not affected by appeal Subpart 6—Miscellaneous Offence also committed by director Offence to make false or misleading representation Appeals from Registrar’s decisions Regulations under Part 1 and this Part Part 3 Dispute resolution 43 Purpose of this Part Subpart 1—Financial service provider must be member of approved dispute resolution scheme Financial service provider must be member of approved dispute resolution scheme Subpart 2—Approval of dispute resolution schemes Meaning of approved dispute resolution scheme and meaning of member of approved dispute resolution scheme Approval of dispute resolution schemes Application for approval Mandatory considerations for approval Minister must decide application for approval Notiﬁcation and publication of decision Reapplication by unsuccessful applicant Withdrawal of approval Withdrawal of approval Notice of intention to withdraw approval Objection to intended
 withdrawal of approval Approval is withdrawn from date person responsible for scheme is notiﬁed Financial Service Providers (Registration and Dispute Resolution) Bill 55 56 Notiﬁcation and publication of withdrawal of approval Effect of withdrawal of approval on members of dispute resolution scheme List of members of approved dispute resolution scheme 57 List of members 58 59 60 61 62 63 64 Rules about approved
 dispute resolution scheme Rules about approved dispute resolution scheme Obligation to publish rules Duty to notify change to rules Change to rules may lead to withdrawal of approval Annual reports and information requests by Minister Annual report Person responsible for approved dispute resolution scheme must supply further information on Minister’s request Annual report and information requested by Minister to be publicly available Subpart 3—Reserve scheme 65 Reserve scheme Appointment of reserve scheme 66 67 68 69 Appointment of reserve scheme Revocation of appointment as reserve scheme Notice of intention to recommend revocation of appointment as reserve scheme Objection to intended recommendation for revocation Levy to fund reserve scheme 70 Levy to fund reserve scheme Subpart 4—Miscellaneous Appeals Appeals Decision maker to ﬁle report Powers of District Court Judge on appeal Regulations Regulations under this Part Consequential amendments 71 72 73 74 75 4 32 33 33 33 34 35 35 35 35 36 36 36 37 38 38 38 39 41 41 41 42 Financial Service Providers (Registration and Dispute Resolution) Bill Part 1 cl 3 Schedule Consequential amendments to other enactments 43 The Parliament of New Zealand enacts as follows: 1 2 (1) (2) 3 (1) (2) (3) Title This Act is the Financial Service Providers (Registration and Dispute Resolution) Act 2007.
Commencement section 444444 come into force on a date to be ap­ PPParararttt 222 andandand section section pointed by the Governor­General by Order in Council, and 1 or more Orders in Council may be made appointing dif­ ferent dates in respect of different types of ﬁnancial service providers.

The rest of this Act comes into force on the day after the date on which it receives the Royal assent.

Part 1 Preliminary provisions 2007); or Overview This Act requires ﬁnancial service providers to be registered.
There are different requirements for registration depending on whether a provider provides— (a) a ﬁnancial adviser service (a term deﬁned in the Finan Finan­­­ Finan cialcialcial Adviser Advisersss ActActAct 20072007 Adviser a ﬁnancial service.

(b) In order to be registered, ﬁnancial service providers are required to be members of an approved dispute resolution scheme if they provide ﬁnancial services to certain people.

However, this requirement only applies if the reserve scheme 25 has been appointed.
The Act sets out how a dispute resolution scheme may be ap­ proved by the Minister, why the approval might be withdrawn, and how an approved dispute resolution scheme may be ap­ pointed as the reserve scheme.

30 5 10 15 20 5 Part 1 cl 4 Financial Service Providers (Registration and Dispute Resolution) Bill The Act provides that the reserve scheme is to act as the default dispute resolution scheme and is to be capable of resolving disputes relating to all types of ﬁnancial service providers.
This section is intended as a guide only.
5 Interpretation In this Act, unless the context otherwise requires,— annual conﬁrmation means the annual conﬁrmation relating to a registered provider supplied to the Registrar under secsecsec­­­ tiontiontion 272727 annual report means the annual report relating to an approved 10 dispute resolution scheme supplied to the Minister under secsecsec­­­ tiontiontion 626262 approved dispute resolution scheme has the meaning given by section section 454545 section approved professional body has the meaning given by sec­ 15 tion 35 of the Financial 2007 Advisersss ActActAct 20072007 Financial Adviser Adviser Financial trade, or undertaking, business includes any profession, whether or not carried on with the intention of making a pecuniary proﬁt chief executive means the chief executive of the department 20 of State that, with the authority of the Prime Minister, is for the time being responsible for the administration of this Act company means a company, or an overseas company, within the meaning of section 2(1) of the Companies Act 1993 controlling owner means, in relation to a ﬁnancial service 25 provider that is not an individual, any person who beneﬁcially owns 50% or more of that provider deposit has the meaning given by section 108(2) of the Friendly Societies and Credit Unions Act 1982 director has the meaning given by section 126 of the Com­ 30 panies Act 1993, but also includes, in relation to a body that is not a company, a person who occupies a position comparable to that of a director (such as a trustee
 or a partner) document means— (a) any material, whether or not it is signed or otherwise 35 authenticated, that bears symbols (including words and (4) (5) 4 6 Financial Service Providers (Registration and Dispute Resolution) Bill Part 1 cl 4 ﬁgures), images, or sounds, or from which symbols, images, or sounds can be derived, and includes— (i) a label, marking, or other writing that identiﬁes or describes a thing of which it forms a part, or to which it is attached: a book, map, plan, graph, or drawing: a
 photograph, ﬁlm, or negative; and (ii) (iii) information electronically recorded or stored, and infor­ mation derived from that information 5 (b) due date, in relation to an annual conﬁrmation, means the 10 date allocated to a registered provider by the Registrar under 21(b) 15(1)(b) ororor 21(b) section 15(1)(b) 21(b) 15(1)(b) section section FATF means the Financial Action Task Force on Money Laun­ dering established in Paris in 1989 FATF Recommendations means all of the following recom­ 15 mendations: (a) the 40 Recommendations adopted by FATF at its ple­ nary meeting on 20 June 2003: the Special Recommendations on Terrorist Financing adopted by FATF at its extraordinary plenary meeting 20 on 31 October 2001: Special Recommendation IX on Terrorist Financing adopted by FATF at its plenary meeting between 20 and 22 October 2004 (b) (c) ﬁnancial adviser has the meaning given by section section 777 ofofof thethethe 25 section 2007 Advisersss ActActAct 20072007 Financial Adviser Adviser Financial Financial ﬁnancial adviser service has the meaning given by section section section 555 ofofof thethethe Financial 2007 Advisersss ActActAct 20072007 Financial Adviser Adviser Financial ﬁnancial service has the meaning given by section section 555 section ﬁnancial service provider means a person who provides or 30 offers to provide a ﬁnancial service insurance has the meaning given by section 2 of the Insurance Companies’ Deposits Act 1953 lawyer has the meaning given by
 section 6 of the Lawyers and Conveyancers Act 2006 except that, before that section comes 35 into force, lawyer means a barrister or solicitor as deﬁned in section 2 of the Law Practitioners Act 1982 7 Part 1 cl 5 Financial Service Providers (Registration and Dispute Resolution) Bill licensed provider means a person who is licensed by a licens­ ing authority to provide a licensed service licensed service means a ﬁnancial service that is required by an enactment to be provided only by a licensed provider
 member, in relation to a dispute resolution scheme, has the 5 meaning given by section section 454545 section member of a local authority has the meaning given by sec­ tion 5(1) of the Local Government Act 2002 Minister means the Minister of the Crown who, under the au­ thority of any warrant or with the authority of the Prime Min­ 10 ister, is for the time being responsible for the administration of this Act Ministry means the department of State that, with the author­ ity of the Prime Minister, is for the time being responsible for the administration of this Act prescribed means prescribed by this Act or by any regulations made under this Act register means the register of ﬁnancial service providers and ﬁnancial advisers established and maintained under section section section 232323 Registrar means the Registrar of Financial Service Providers and Financial Advisers appointed under section section 343434 section related company has the meaning given by section 2(3) of the Companies Act 1993 reserve scheme has the meaning given by section section 656565 section senior manager means, in relation to a ﬁnancial service provider, a person who is not a director but occupies a pos­ ition that allows the person to exercise signiﬁcant inﬂuence over the management or administration of that provider (for example, a chief executive or a chief ﬁnancial ofﬁcer).
30 25 20 15 Meaning of ﬁnancial service In this Act, ﬁnancial service means any of the following ﬁnan­ cial services that is not provided in the context of a ﬁnancial adviser service: (a) (b) accepting deposits: keeping, investing, administering, or managing money or securities on behalf of other persons: 35 5 8 (c) (d) (e) (f) (g) (h) (i) (j) (k) (l) (m) (n) Financial Service Providers (Registration and Dispute Resolution) Bill Part 1 cl 6 10 lending money or securities and providing credit (for example, under a credit contract within the meaning of the Credit Contracts and Consumer Finance Act 2003): providing ﬁnancial leases, except under a contract that is not a consumer credit contract under section 15 of the 5 Credit Contracts and Consumer Finance Act 2003: operating a money or value transfer service: issuing and managing means of payment (for example, credit and debit cards, cheques, travellers’ cheques, money orders, bankers’ drafts, and electronic money): giving ﬁnancial guarantees: participating in securities issues as any of the following: an issuer, a contributory mortgage broker, a (i) trustee, a unit trustee, a superannuation trustee, a statutory supervisor, a promoter, or a manager 15 within the meaning of those terms in section 2(1) of the Securities Act 1978: a public issuer within the meaning of that term in section 2(1) of the Securities Markets Act 1988: a provider of lending facilities: (iii) changing foreign currency: entering into derivative transactions, or trading in money market
 instruments, foreign exchange, interest rate and index instruments, transferable securities (in­ cluding shares), and commodity futures on behalf of 25 another person: providing forward foreign exchange contracts: managing individual or collective investment port­ folios: underwriting and placing insurance: providing any other ﬁnancial service that is prescribed for the purposes of New Zealand complying with the FATF Recommendations or other similar international obligations.
(ii) 30 20 6 (1) (2) Application of Act This Act applies to people who are in the business of providing a ﬁnancial service or a ﬁnancial adviser service.
This Act does not apply to any of the following people: 35 9 Part 1 cl 7 Financial Service Providers (Registration and Dispute Resolution) Bill (3) 7 8 (a) (b) (c) (d) a lawyer in the course of that person’s professional prac­ tice as a lawyer: a chartered accountant in the course of that person’s professional practice as a chartered accountant: a prescribed Crown agency: an employee of a person listed in parparparaaagggrrraaaphphph (a), (b), (a), (b), (b), (a), ororor (c)(c)(c): an employee of a ﬁnancial service provider.
(e) This Act does not apply with respect to ﬁnancial services pro­ vided between related companies.

Act binds the Crown This Act binds the Crown.
Part 2 Registration Purpose of this Part The purpose of this Part is to— (a) (ii) establish a compulsory public register of ﬁnancial ser­ vice providers and ﬁnancial advisers to enable— (i) the public to access information about ﬁnancial service providers and ﬁnancial advisers; and the Registrar and other regulators to regulate ﬁ­ nancial service providers and ﬁnancial advisers: prohibit certain people from being involved in the management or direction of registered ﬁnancial service providers: conform with New Zealand’s obligations under the FATF Recommendations.
(b) (c) 9 (1) (2) Registration and deregistration Registration under this Act continues until the registered per­ son is deregistered.

Registration may not be transferred and may not vest by op­ eration of law in any person other than the person registered under this Act.

(3) A person is deregistered when the Registrar enters on the regis­ ter that the person is deregistered.
10 Financial Service Providers (Registration and Dispute Resolution) Bill Part 2 cl 11 Subpart 1—No providing ﬁnancial service or licensed service or holding out that entitled to provide ﬁnancial service unless registered No providing ﬁnancial service or licensed service in course of business unless registered 10 (1) A person to whom this Act applies must not provide a ﬁnan­ cial service in the course of business unless that person is reg­ istered under this Part.
(2) A person to whom this Act applies must not provide a licensed 5 (3) service in the course of business unless that person is regis­ 10 tered under this Part as a licensed provider in relation to that particular licensed service.
Every person who knowingly breaches subsection subsection (1)(1)(1) ororor (2)(2)(2) subsection commits an offence and is liable on summary conviction,— (a) in the case of an individual, to imprisonment for a 15 term not exceeding 2 years or to a ﬁne not exceeding $100,000, or to both; or in the case of a body corporate, to a ﬁne not exceeding $300,000.
(b) 11 No holding out in course of business that entitled to provide ﬁnancial service unless registered 20 (1) A person to whom this Act applies must not hold out (whether directly or indirectly) in the course of business that the person is registered, entitled, qualiﬁed, able, or willing to provide a ﬁ­ nancial service unless that person is registered under this Part.
25 Every person who knowingly breaches subsection subsection (1)(1)(1) com­ subsection mits an offence and is liable on summary conviction,— (a) (2) in the case of an individual, to imprisonment for a term not exceeding 12 months or to a ﬁne not exceeding $100,000, or to both; or in the case of a body corporate, to a ﬁne not exceeding $300,000.
30 (b) 11 Part 2 cl 12 Financial Service Providers (Registration and Dispute Resolution) Bill Subpart 2—Registration of ﬁnancial service provider 12 Qualiﬁcations for registration as ﬁnancial service provider A person is qualiﬁed to be registered as a ﬁnancial service provider if— (a) (b) the person is not disqualiﬁed under section section 131313; and section the person is a member of an approved dispute reso­ section 444444; and lution scheme if required by section section the person has a licence to provide any licensed services the person provides or offers to provide.
(c) 5 10 13 Disqualiﬁed person (1) A person is disqualiﬁed if,— (a) (b) in the case of an individual, the individual is disqualiﬁed subsection (2)(2)(2); or under subsection subsection in the case of a person who is not an individual, the per­ 15 son has a controlling owner, director, or senior manager subsection (2)(2)(2).
who is disqualiﬁed under subsection subsection (c) The following persons are disqualiﬁed: an undischarged bankrupt: (a) a person prohibited from being a director or promoter 20 (b) of, or concerned in the management of, an incorpor­ ated or unincorporated body under the Companies Act 1993, the Securities Act 1978, the Securities Markets Act 1988, or the Takeovers Act 1993: a person subject to a management banning order under 25 the Securities Act 1978, the Securities Markets Act 1988, the Takeovers Act 1993, or subject to an order under section 108 of the Credit Contracts and Con­ sumer Finance Act 2003: a person who has been convicted of an offence relating 30 to fraud or dishonesty within the past 5 years: a person who has been convicted of a money laundering offence or an offence relating to the ﬁnancing of terror­ ism: a person who is subject to a conﬁscation order under the 35 Proceeds of Crime Act 1991.
(d) (e) (f) (2) 12 Financial Service Providers (Registration and Dispute Resolution) Bill Part 2 cl 15 (3) A member of a local authority must be treated as if he or she is not disqualiﬁed.
Application for registration as ﬁnancial service provider Application to be registered as ﬁnancial service provider 14 (1) An application to be registered as a ﬁnancial service provider 5 must be made to the Registrar and— (a) contain the following (as relevant to the applicant): (i) (ii) the name and business address of the applicant: the name and business address of the approved 10 dispute resolution scheme of which the applicant is a member: (2) 15 (1) 15 20 25 (iii) whether the applicant is applying in relation to a licensed service, and if so, which particular li­ censed service; and (d) (b) (c) be in the form (if any) required by the Registrar; and conﬁrm that the applicant is not disqualiﬁed under secsecsec­­­ tiontiontion 131313; and contain, or be accompanied by, any other prescribed information or documents; and (e) be accompanied by the prescribed fee (if any).
If the application relates to a licensed service, it must be ac­ companied by any prescribed information required to obtain an appropriate licence.
Registration of ﬁnancial service provider If the Registrar accepts that an applicant is qualiﬁed to be reg­ istered as a ﬁnancial service provider, the Registrar must— (a) enter the following details on the register (as relevant to the provider): (i) (ii) the name and business address of the provider: the name and business address of the approved dispute resolution scheme of which the provider is a member: if the provider is a licensed provider in relation to a particular licensed service, that fact and the 35 name and business address of the licensing au­ thority that licensed that provider: (iii) 30 13 Part 2 cl 16 Financial Service Providers (Registration and Dispute Resolution) Bill (2) 16 (1) (b) (iv) any other information prescribed in regulations; and allocate a due date for the provider’s annual conﬁrm­ ation, notify the provider of that date, and notify that date on the register.
5 If the Registrar does not accept that an applicant is qualiﬁed to be registered as a ﬁnancial service provider, the Registrar must notify the applicant and any relevant licensing authority of the Registrar’s decision.
Changes relating to ﬁnancial service provider 10 Duty to notify changes relating to ﬁnancial service provider Each of the following persons must notify the Registrar about the following relevant changes relating to a ﬁnancial service provider: (a) a ﬁnancial service provider, if the provider knows that the provider is no longer qualiﬁed for registration in section 121212: accordance with section section the licensing authority in relation to a provider who is no longer licensed: the person responsible for an approved dispute reso­ lution scheme of which a ﬁnancial service provider was a member, if the person knows that the provider is no longer a member of that scheme.
(b) (c) 15 20 (2) The time within which a person must notify the Registrar 25 under subsection subsection (1)(1)(1) is 10 working days from the date the subsection person comes to know about the change.

(3) A ﬁnancial service provider who breaches subsection (1)(a) subsection (1)(a) (1)(a) subsection commits an offence and is liable on summary conviction to a ﬁne not exceeding $10,000.
30 (1)(c) commits an of­ (4) A person who breaches subsection subsection (1)(c) (1)(c) subsection fence and is liable on summary conviction to a ﬁne not ex­ ceeding $10,000.
14 17 (1) (2) (3) 18 (1) (2) Financial Service Providers (Registration and Dispute Resolution) Bill Part 2 cl 19 Deregistration of ﬁnancial service provider 5 Deregistration of ﬁnancial service provider The Registrar must deregister a ﬁnancial service provider after sections 181818 andandand 191919, if the a notice period in accordance with sections sections Registrar is satisﬁed that the provider is no longer— (a) qualiﬁed to be registered in accordance with section section section 121212; or providing or offering to provide a ﬁnancial service.
(b) The Registrar must deregister a ﬁnancial service provider if the provider so requests, with effect from the date requested by 10 the provider.

The Registrar must notify any relevant licensing authority of this deregistration.

For the purposes of this section and sections sections 181818 andandand 191919, sections notice period means 20 working days from the date of the section 181818.
Registrar’s notiﬁcation under section section 15 Notice of intention to deregister The Registrar must notify a ﬁnancial service provider and any relevant licensing authority of the Registrar’s intention to deregister the provider under section 17(1).
section 17(1) 17(1) section The Registrar’s notice must set out— (a) that the Registrar intends to deregister the provider under either section 17(1)(a) ororor (b)(b)(b) (stating whichever section 17(1)(a) 17(1)(a) section applies); and the reasons why the Registrar considers section section section 17(1)(a) ororor (b)(b)(b) applies; and 17(1)(a) 17(1)(a) that there is a notice period before deregistration occurs during which the provider may object, under section section section 191919, to the deregistration.
(b) (c) 20 25 19 Objection to proposed deregistration of ﬁnancial service provider 30 (1) During the notice period, the ﬁnancial service provider may object (with reasons) to the proposed deregistration under secsecsec­­­ 17(1).
tiontiontion 17(1) 17(1) If the Registrar receives an objection under subsection subsection (1)(1)(1) subsection within the notice period, the Registrar must consider the ob­ 35 jection and must not proceed with a deregistration under secsecsec­­­ (2) 15 Part 2 cl 20 Financial Service Providers (Registration and Dispute Resolution) Bill 17(1), unless the Registrar is satisﬁed that the ﬁnancial tiontiontion 17(1) 17(1) service provider is no longer— (a) qualiﬁed to be registered in accordance with section section section 121212; or providing or offering to provide a ﬁnancial service.
(b) 5 20 21 Notiﬁcation of deregistration of ﬁnancial service provider If the Registrar proceeds with deregistration, the Registrar must notify— (a) the ﬁnancial service provider of the deregistration and the provider’s right of appeal to the High Court against 10 the deregistration; and any relevant licensing authority of the deregistration.
(b) Subpart 3—Registration of provider of ﬁnancial adviser service Registration of provider of ﬁnancial adviser service If an approved professional body notiﬁes the Registrar, under Advisersss BillBillBill, of the details of Financial Adviser section 515151 ofofof thethethe Financial Adviser Financial section section a provider of a ﬁnancial adviser service, the Registrar must— (a) (b) enter those details on the register; and allocate a due date for the provider’s annual conﬁrm­ 20 ation to be sent under section section 272727, notify the approved section professional body of that date, and notify that date on the register.
15 22 Deregistration of provider of ﬁnancial adviser service The Registrar must deregister a provider of a ﬁnancial adviser 25 service who has ceased to be a member of an approved pro­ fessional body.
16 23 24 (1) (2) (3) 25 Financial Service Providers (Registration and Dispute Resolution) Bill Part 2 cl 25 Subpart 4—Register of ﬁnancial service providers and ﬁnancial advisers Register established Register of ﬁnancial service providers and ﬁnancial advisers The Registrar must establish and maintain a register of ﬁnan­ cial service providers and ﬁnancial advisers.

5 Operation of and access to register The register may be kept as an electronic register or in any other manner that the Registrar thinks ﬁt.
The register must be available for access and searching by the public at all times unless— (a) the Registrar suspends the operation of the register, in subsection (3)(3)(3); or whole or in part, in accordance with subsection subsection otherwise prescribed.

(b) The Registrar may refuse access to the register or otherwise suspend the operation of the register, in whole or in part, if the Registrar considers that it is not practical to provide access to the register.
Purposes of register The purposes of the register are— (a) to enable the public and any person referred to in parparparaaa­­­ gggrrraaaphphph (b)(b)(b) to— (i) identify registered ﬁnancial service providers and ﬁnancial advisers; and access information about— (A) (B) how to contact registered persons; and the approved dispute resolution scheme of which a registered person is a member (if section 444444); and required by section section (ii) (D) (C) whether a registered ﬁnancial service provider provides a licensed service; and in relation to a ﬁnancial adviser, the ap­ proved professional body of which the ﬁ­ nancial adviser is a member; and 17 10 15 20 25 30 35 Part 2 cl 26 Financial Service Providers (Registration and Dispute Resolution) Bill (b) (c) to assist any person in the exercise of the person’s powers or the performance of the person’s functions under this Act or any other enactment; and to conform with New Zealand’s obligations under the FATF Recommendations.
26 Contents of register The register must contain the following information about each registered person (to the extent that the information is relevant): (a) (b) whether the person is a ﬁnancial service provider or a the person’s name and business address: 5 10 ﬁnancial adviser: the name and business address of the approved dispute resolution scheme of which the person is a member: in relation to a licensed provider, the name and business 15 address of the licensing authority that has licensed that provider: in relation to a ﬁnancial adviser, the name and business address of the approved professional body of which that ﬁnancial adviser is a member: any other information prescribed in regulations.
20 (c) (d) (e) (f) 25 Annual conﬁrmation Each registered ﬁnancial service provider must supply to the Registrar each year by the due date an annual conﬁrmation of details relating to that provider.

Each approved professional body (on behalf of each registered member) must supply to the Registrar each year by the due date an annual conﬁrmation of details relating to that member.
The annual conﬁrmation must be in the form required by the Registrar (if any) and be accompanied by the prescribed fee 30 (if any).

If a registered ﬁnancial service provider does not comply with subsection (1)(1)(1) within 3 months of the due date, the Registrar subsection subsection may assume that the provider is no longer providing or offering sections 171717 tototo 191919 apply.
to provide a ﬁnancial service and sections sections 35 27 (1) (2) (3) (4) 18 28 29 30 31 Financial Service Providers (Registration and Dispute Resolution) Bill Part 2 cl 31 Registrar must amend register in certain circumstances The Registrar must amend the register if— (a) an annual conﬁrmation contains information that is dif­ ferent from the information entered on the register; or a ﬁnancial service provider or an approved professional 5 body (on behalf of a registered member) informs the Registrar of changes to the name and business address of the provider or to the approved dispute resolution scheme to which the provider belongs; or a licensing authority informs the Registrar that a regis­ 10 tered ﬁnancial service provider has become a licensed provider in relation to a particular licensed service; or the Registrar is satisﬁed at any time that the register con­ tains a typographical error, a mistake, or omits informa­ tion that was supplied to the Registrar.
15 (b) (c) (d) Registrar may refuse to accept document The Registrar may refuse to accept a document received by the Registrar under this Act if that document— is not in the required form (if any); or (a) does not comply with prescribed requirements.

(b) Searches of register Searches of register The register may be searched only by reference to criteria to be speciﬁed in the regulations.
Search purposes The register may be searched for the following purposes: (a) by an individual, or a person with the consent of the individual, for the purpose of searching for information about that individual in accordance with the Privacy Act 1993: by a person for a purpose referred to in section section 252525: section by a person for the purpose of advising another person in connection with any of the purposes referred to in this section.
(b) (c) 20 25 30 19 Part 2 cl 32 Financial Service Providers (Registration and Dispute Resolution) Bill 32 When search breaches information privacy principle A person who searches a public register for personal informa­ tion for a purpose that is not a purpose set out in section section 313131 section must be treated, for the purposes of Part 8 of the Privacy Act 1993, as if that person has breached an information privacy 5 principle under section 66(1)(a)(i) of that Act.
Compare: 2006 No 55 s 456 Information sharing 15 (b) Sharing information with other agencies The Registrar may communicate to any of the agencies re­ 10 ferred to in subsection subsection (4)(4)(4) any information that the Regis­ subsection trar— (a) holds (other than on the register) in relation to the exer­ cise of the Registrar’s powers or the performance of the Registrar’s functions and duties; and considers may assist the agency in the exercise of its powers or the performance of its functions and duties.
The Registrar may use any information communicated to the Registrar by an agency referred to in subsection subsection (4)(4)(4) in the subsection Registrar’s exercise of the Registrar’s powers or the perform­ 20 ance of the Registrar’s functions and duties.

This section applies despite anything to the contrary in any enactment, contract, deed, or document.
The agencies to which this section applies are— (a) (b) (c) the Securities Commission; and the Reserve Bank of New Zealand; and a prescribed agency that carries out supervisory or en­ forcement functions relating to money laundering or ter­ rorist ﬁnancing; and a prescribed overseas agency that is the equivalent of 30 the Registrar or of a body referred to in parparparaaagggrrraaaphsphsphs (a)(a)(a) tototo (c)(c)(c), but only where there is a written agreement be­ tween the overseas agency and the Minister about shar­ ing the information.
(d) 25 33 (1) (2) (3) (4) 20 Financial Service Providers (Registration and Dispute Resolution) Bill Part 2 cl 36 34 (1) (2) 35 (1) Registrar of Financial Service Providers and Financial Advisers Appointment of Registrar The chief executive must appoint a Registrar of Financial Ser­ vice Providers and Financial Advisers under the State Sector 5 Act 1988.
The person holding ofﬁce as Registrar of Companies under the Companies Act 1993, immediately before the commencement of this Act, is deemed to have been appointed as the ﬁrst Regis­ trar of Financial Service Providers and Financial Advisers in 10 accordance with this section.

Compare: 1999 No 126 s 136 Power of Registrar to delegate The Registrar may delegate to any person, either generally or particularly, any of the Registrar’s functions, duties, and 15 powers except the power of delegation.
(2) A delegation— (a) must be in writing; and (b) may be made subject to any restrictions and conditions (c) (d) the Registrar thinks ﬁt; and is revocable at any time, in writing; and does not prevent the performance or exercise of a func­ tion, duty, or power by the Registrar.

20 (3) A person to whom any functions, duties, or powers are dele­ gated may perform and exercise them in the same manner and 25 with the same effect as if they had been conferred directly by this Act and not by delegation.
(4) A person who appears to act under a delegation is presumed to be acting in accordance with its terms in the absence of evidence to the contrary.
Compare: 2003 No 12 s 62 30 Subpart 5—Registrar’s inspection powers 36 (1) Registrar’s inspection powers The Registrar, or a person authorised by the Registrar, may take any of the steps listed in subsection subsection (2)(2)(2) for the purpose 35 subsection of ascertaining whether a person— 21 Part 2 cl 36 Financial Service Providers (Registration and Dispute Resolution) Bill (c) (d) (a) (b) is providing or has provided a ﬁnancial service; or is offering or has offered to provide a ﬁnancial service; or is holding out or has held out that the person provides section 5 or has provided a ﬁnancial service in breach of section section 111111; or is qualiﬁed or has been qualiﬁed to be registered in ac­ section 121212. cordance with section section The steps referred to in subsection subsection (1)(1)(1) are the following: subsection (a) requiring a person to produce for inspection relevant 10 documents within that person’s possession or control: inspecting and taking copies of relevant documents: taking possession of relevant documents and retaining them for a reasonable time for the purpose of taking copies.
(b) (c) 15 (2) (3) Nothing in this section limits or affects the Tax Administration Act 1994 or the Statistics Act 1975.

(4) A person must not obstruct or hinder the exercise of a power (5) subsection (1)(1)(1).
conferred by subsection subsection If a registered ﬁnancial service provider does not comply with 20 a requirement under subsection (2)(a) within 20 working subsection (2)(a) (2)(a) subsection days from the date the requirement was notiﬁed to the provider, the Registrar may assume that the provider is no longer pro­ viding or offering to provide a ﬁnancial service and sections sections sections 171717 tototo 191919 apply.
25 (6) A person who knowingly fails to comply with a requirement under subsection subsection (2)(2)(2) commits an offence and is liable on subsection summary conviction,— (a) in the case of an individual, to a ﬁne not exceeding $30,000: in the case of a body corporate, to a ﬁne not exceeding $300,000.
(b) subsection (4)(4)(4) commits an offence (7) A person who breaches subsection subsection 30 and is liable on summary conviction,— (a) in the case of an individual, to a ﬁne not exceeding 35 $30,000: in the case of a body corporate, to a ﬁne not exceeding $300,000.
(b) 22 Financial Service Providers (Registration and Dispute Resolution) Bill Part 2 cl 37 (8) In this section, relevant document means a document that contains information relating to whether a person— (a) (b) is providing or has provided a ﬁnancial service; or is offering or has offered to provide a ﬁnancial service; or is holding out or has held out that the person provides or has provided a ﬁnancial service in breach of section section section 111111; or is qualiﬁed or has been qualiﬁed to be registered in ac­ section 121212. cordance with section section (c) (d) 5 10 Compare: 1993 No 105 s 365 Disclosure of information and reports 37 (1) A person authorised by the Registrar for the purposes of secsecsec­­­ tiontiontion 363636 who has obtained a document or information in the course of making an inspection under that section or prepared 15 a report in relation to an inspection under that section must, if directed to do so by the Registrar, give the document, infor­ mation, or report to— the Registrar; or (a) the Minister; or (b) the chief executive; or (c) any person authorised by the Registrar to receive the (d) document, information, or report for the purposes of this Act.
20 (2) A person authorised by the Registrar for the purposes of secsecsec­­­ 25 tiontiontion 363636 who has obtained a document or information in the course of making an inspection under that section or prepared a report in relation to an inspection under that section must not disclose that document, information, or report, except— (a) (b) in accordance with subsection subsection (1)(1)(1); or subsection subject to the approval of the Registrar, with the consent of the person to whom it relates; or subject to the approval of the Registrar, for the purposes of this Act; or to the extent that the information, or information con­ 35 tained in the document or report, is available under any Act or in a public document.
(c) (d) 30 23 Part 2 cl 38 Financial Service Providers (Registration and Dispute Resolution) Bill (3) A person who fails to comply with this section commits an offence and is liable on summary conviction to a ﬁne not ex­ ceeding $10,000.
Compare: 1993 No 105 s 366 Exercise of powers under section 36 not affected by appeal 5 38 (1) Despite any other provision of any Act or any rule of law, if a person appeals or applies to the High Court in relation to an act or decision of the Registrar or a person authorised by the Registrar under section section 363636, until a decision on the appeal or section application is given,— (a) (b) the Registrar, or that authorised person, may continue to exercise the powers under that section as if no such appeal or application had been made; and no person is excused from fulﬁlling an obligation under that section by reason of that appeal or application.
subsection (1)(1)(1).
Subsection (3)(3)(3) overrides subsection Subsection subsection Subsection If the appeal or application is allowed or granted,— (a) 10 15 the Registrar must ensure that, as soon as is reasonably practicable after the Court’s decision is delivered, any copy of a document taken or retained under section section 363636 20 section is destroyed; and section 363636 is admis­ no information acquired under section section sible in evidence in any proceedings unless the Court hearing the proceedings in which it is sought to adduce the evidence is satisﬁed it was not obtained unfairly.
25 (b) Compare: 1993 No 105 s 371 Subpart 6—Miscellaneous Offence also committed by director If any ﬁnancial service provider that is not an individual com­ mits an offence against this Act, every director of the provider 30 who knowingly authorises or knowingly fails to prevent the offence also commits an offence against this Act.
(2) (3) 39 24 Financial Service Providers (Registration and Dispute Resolution) Bill Part 2 cl 41 40 (1) Offence to make false or misleading representation Every person commits an offence who, in any document or information required by or for the purposes of this Part or by regulations,— (a) makes a representation knowing that it is false or mis­ 5 (b) leading in a material particular; or omits any matter knowing that the omission is false or misleading in a material particular.
(2) A person who is convicted of an offence under subsection subsection subsection (1)(1)(1) is liable on summary conviction,— (a) in the case of an individual, to imprisonment for a term not exceeding 2 years or to a ﬁne not exceeding $100,000, or to both; or in the case of a body corporate, to a ﬁne not exceeding $300,000.
(b) 10 15 Appeals from Registrar’s decisions 41 (1) A ﬁnancial service provider who is not satisﬁed with any of the following decisions of the Registrar may appeal to the High Court: (a) not registering an applicant as a ﬁnancial service 20 provider under section section 151515: section section 171717: a deregistration under section section an act or decision of the Registrar or a person authorised section 363636. by the Registrar under section section (b) (c) (2) subsection (1)(1)(1) may 25 The time within which an appeal under subsection subsection be made is 20 working days after the date of notiﬁcation of the decision, or within any further time that the Court allows.
(3) On appeal, the Court may do any of the following: (a) (b) (c) conﬁrm, modify, or reverse the act or decision or any part of it: exercise any of the powers that could have been exer­ cised by the Registrar in relation to the matter to which the appeal relates: refer the act or decision back to the Registrar with di­ rections to reconsider the whole or a speciﬁed part of 35 the act or decision.
30 25 Part 2 cl 42 Financial Service Providers (Registration and Dispute Resolution) Bill 42 (1) Regulations under Part 1 and this Part The Governor­General may, by Order in Council, make regu­ lations for all or any of the following purposes: (a) (b) (c) (d) (e) (f) (g) 5 10 specifying a ﬁnancial service for the purposes of secsecsec­­­ tiontiontion 5(n)5(n)5(n): prescribing the Crown agencies to whom this Act does not apply under section section 666: section specifying information or documents to be included in, or attached to, application forms, and requiring those forms to be signed by speciﬁed persons: prescribing procedures, requirements, and other mat­ ters, not inconsistent with this Part or with the purposes described in section section 252525, for the register, including mat­ section ters that relate to— (i) (ii) the operation of the register: the information or documents to be contained in the register: access to the register: search criteria for the register: fees that may be payable in order to search the 20 register: (iii) (iv) (v) 15 prescribing either of the following types of agency: (i) an agency that carries out supervisory or enforce­ ment functions relating to money laundering or terrorist ﬁnancing for the purposes of section section 25 section 33(4); or 33(4) 33(4) an overseas agency that is the equivalent of the Registrar or of a body referred to in section section section 33(4)(a) tototo (c)(c)(c) for the purposes of section section 33(4)(a) section 33(4)(a) 33(4): 33(4) 33(4) 30 (ii)
 prescribing fees payable to the Registrar in respect of any matter under this Part or the manner in which fees may be calculated: providing for any other matters contemplated by this Part, necessary for its administration, or necessary for 35 giving it full effect.
(1)(c), information or docu­ (2) Without limiting subsection subsection (1)(c) (1)(c) subsection ments may be prescribed under that subsection for the purpose of assisting any person with the person’s powers, functions, or 26 Financial Service Providers (Registration and Dispute Resolution) Bill Part 3 cl 44 duties as a licensing authority under any enactment providing for the licensing of licensed providers (regardless of whether or not that information or documentation is collected for the purposes of this Part).
The Registrar may refuse to perform a function or exercise a 5 power until the prescribed fee is paid.

(3) (a) (b) (1)(f) may— (4) Any Order in Council made under subsection subsection (1)(f) (1)(f) subsection prescribe the method of payment of a fee; and authorise the Registrar to refund or waive, in whole or in part and on any prescribed conditions, payment of a 10 fee in relation to any person or class of persons.
(5) Any fee or amount payable to the Registrar is recoverable by the Registrar in any court of competent jurisdiction as a debt due to the Registrar.

43 44 Part 3 Dispute resolution 15 Purpose of this Part The purpose of this Part is to promote conﬁdence in ﬁnan­ cial service providers and ﬁnancial advisers by improving con­ sumers’ access to redress from providers through the establish­ 20 ment of approved dispute resolution schemes.
The schemes are intended to be accessible, independent, fair, accountable, efﬁcient, and effective.
Subpart 1—Financial service provider must be member of approved dispute resolution scheme Financial service provider must be member of approved dispute resolution scheme Every ﬁnancial service provider must be a member of an ap­ proved dispute resolution scheme— (a) if the provider provides a ﬁnancial service to— (i) (ii) consumers who are natural persons; or businesses that have no more than 19 full­time­ equivalent employees; and 25 30 27 Part 3 cl 45 Financial Service Providers (Registration and Dispute Resolution) Bill (b) if the reserve scheme has been appointed under section section section 666666.
Subpart 2—Approval of dispute resolution schemes 45 Meaning of approved dispute resolution scheme and meaning of member of approved dispute resolution scheme 5 (1) A dispute resolution scheme is an approved dispute reso­ lution scheme if it has been approved by the Minister in ac­ cordance with this Part and that approval has not expired or 10 been withdrawn.

(2) An approval expires 10 years after the date it was issued.
(3) A member of an approved dispute resolution scheme is a ﬁnancial service provider or a provider of a ﬁnancial adviser service who may be the subject of a complaint to that scheme.

15 Approval of dispute resolution schemes 46 (1) (2) (3) Application for approval The person responsible for a dispute resolution scheme may apply to the Minister for approval of the scheme.
The applicant must submit the following with the application: 20 (a) (b) the rules about the scheme: any other information that is prescribed concerning the section 474747: considerations outlined in section section any annual reports relating to the scheme: any internal reviews of the scheme: the prescribed fee (if any).

(c) (d) (e) The Minister may request the applicant to supply further in­ formation or documentation relating to the matters referred to (2)(a) tototo (d)(d)(d).
in subsection subsection (2)(a) (2)(a) subsection 47 Mandatory considerations for approval section 464646, the Min­ (1) When considering an application under section section ister must have regard to the following considerations in light subsection (2)(2)(2): of the principles listed in subsection subsection (a) whether the scheme has an appropriate purpose: 28 25 30 Financial Service Providers (Registration and Dispute Resolution) Bill Part 3 cl 48 (c) (d) (b) whether the applicant has undertaken appropriate con­ sultation on the scheme with members or potential members of the scheme and representatives of the people referred to in section 44(a): section 44(a) 44(a) section whether the scheme’s proposed dispute resolution pro­ 5 cesses are timely and appropriate: the extent to which the applicant’s governance arrange­ ments ensure the independence and accountability of the scheme: whether the applicant has adequate funding to enable 10 it to operate the scheme according to the scheme’s pur­ pose and in accordance with the rules about the scheme: whether the applicant’s directors and senior managers are competent to manage a dispute resolution scheme: the cost, if any, to lodge a complaint with the scheme, 15 and whether that cost is reasonable and appropriate: (g) (e) (f) (i) (h) whether the scheme is capable of resolving disputes about the types of ﬁnancial services provided by the members or potential members of the scheme: the amounts of money that complaints lodged with the 20 scheme may be about, and whether those amounts are reasonable and appropriate: whether the rules about the scheme are adequate and subsection (2)(2)(2).
comply with the principles listed in subsection subsection (j) (2) The principles are— accessibility: (a) independence: (b) fairness: (c) accountability: (d) efﬁciency: (e) effectiveness.

(f) 25 30 48 Minister must decide application for approval (1) section 464646 by The Minister must decide an application under section section approving it (with or without conditions) or by rejecting it.
The Minister may only make a decision under subsection subsection (1)(1)(1) 35 subsection after consultation with— (a) (b) the Minister of Finance; and the Minister of Consumer Affairs.
(2) 29 Part 3 cl 49 Financial Service Providers (Registration and Dispute Resolution) Bill (3) 49 The Minister may impose conditions on the approval about any or all of the following matters: (a) (b) the applicant’s governance arrangements: training requirements for people employed or engaged in the operation of the scheme: other prescribed matters that relate to the principles 47(2).
listed in section section 47(2) 47(2) section (c) Notiﬁcation and publication of decision The Minister must, as soon as practicable after deciding the application,— (a) (b) notify the applicant in writing of the decision; and ensure that the decision is— (i) (ii) made available to the public by making copies published in the Gazette; and 5 10 of it available for inspection, free of charge, at 15 the head ofﬁce of the Ministry (during ordinary ofﬁce hours), and for a reasonable period of time on an Internet site in an electronic form that is publicly available (at all reasonable times).
50 Reapplication by unsuccessful applicant An applicant whose application has been rejected may at any section 464646. time reapply under section section 20 Withdrawal of approval 51 Withdrawal of approval (1) The Minister may withdraw the approval of an approved dis­ 25 pute resolution scheme after a notice period in accordance with sections 525252 andandand 535353 for any or all of the following reasons: sections sections (a) (b) (c) there has been a breach of a prescribed requirement: there has been a breach of a condition of approval: there has been a failure to comply with the rules about 30 the scheme: the person responsible for the scheme has not main­ section 575757: tained a list of members as required by section section (d) 30 Financial Service Providers (Registration and Dispute Resolution) Bill Part 3 cl 52 (e) (f) (g) (h) the person responsible for the scheme has not supplied the Minister with an annual report by 1 July as required by section section 626262: section the person responsible for the scheme has not supplied the Minister with any further information requested by 5 the Minister under section section 636363: section the person responsible for the scheme has not notiﬁed the Minister within 10 working days after the date of any change made to the rules about the scheme: the rules about the scheme have changed since the 10 scheme’s approval was given, and that change means the rules— (i) (ii) are no longer adequate; or do not comply with the principles listed in secsecsec­­­ 47(2): tiontiontion 47(2) 47(2) 15 (i) the scheme no longer satisﬁes the principles in section section section 47(2).
47(2) 47(2) (3) (2) When considering whether to withdraw an approval, the Min­ ister must have regard to the considerations referred to in secsecsec­­­ 47(2).

47(1) in light of the principles listed in section tiontiontion 47(1) section 47(2) 47(2) section 47(1) The Minister must withdraw the approval of an approved dispute resolution scheme if the person responsible for the scheme so requests, with effect from the date requested.
For the purposes of this section and sections sections 525252 andandand 535353, sections notice period means 20 working days from the date of the 25 52(1).

Minister’s notiﬁcation under section section 52(1) 52(1) section (4) 20 52 (1) (2) Notice of intention to withdraw approval The Minister must notify the person responsible for the ap­ proved dispute resolution scheme of the Minister’s intention to withdraw the scheme’s approval under section 51(1).
section 51(1) 51(1) section The Minister’s notice must set out— (a) that the Minister intends to withdraw the scheme’s ap­ proval for any or all of the grounds described in section section section 51(1) (stating which apply); and 51(1) 51(1) the reasons why the Minister considers any or all of the 35 51(1) apply; and grounds described in section section 51(1) 51(1) section that there is a notice period before the withdrawal of the scheme’s approval during which the person responsible (b) (c) 30 31 Part 3 cl 53 Financial Service Providers (Registration and Dispute Resolution) Bill section 535353, to the for the scheme may object, under section section intended withdrawal.
Objection to intended withdrawal of approval 53 (1) During the notice period, the person responsible for an ap­ proved dispute resolution scheme may object (with reasons) to 5 the intended withdrawal of the scheme’s approval under secsecsec­­­ 51(1).
tiontiontion 51(1) 51(1) If the Minister has received an objection under subsection subsection subsection (1)(1)(1) within the notice period, the Minister must consider it and must not proceed with a withdrawal under section 51(1) un­ 10 section 51(1) 51(1) section less the Minister is satisﬁed that any or all of the reasons set 51(1) apply.
out in section section 51(1) 51(1) section Approval is withdrawn from date person responsible for scheme is notiﬁed If the Minister withdraws a scheme’s approval, the scheme’s 15 approval is withdrawn from the date the person responsible for 55(a).
the scheme is notiﬁed under section section 55(a) 55(a) section (b) (c) Notiﬁcation and publication of withdrawal of approval The Minister must, as soon as practicable after withdrawing the approval of a dispute resolution scheme,— (a) 20 published in the Gazette; and notify the person responsible for the scheme in writing of the withdrawal of the scheme’s approval; and notify the Registrar of the withdrawal of the scheme’s approval; and ensure that the withdrawal is— (i) (ii) made available to the public by making copies of it available for inspection, free of charge, at the head ofﬁce of the Ministry (during ordinary ofﬁce hours), and for a reasonable period of time 30 on an Internet site in an electronic form that is publicly available (at all reasonable times).
25 (2) 54 55 32 56 57 58 Financial Service Providers (Registration and Dispute Resolution) Bill Part 3 cl 58 Effect of withdrawal of approval on members of dispute resolution scheme On the date that a dispute resolution scheme’s approval is with­ drawn, members of the scheme become a members of the re­ serve scheme (if any).
5 List of members of approved dispute resolution scheme List of members The person responsible for an approved dispute resolution scheme must maintain a list of the scheme’s current members.
10 Rules about approved dispute resolution scheme Rules about approved dispute resolution scheme The person responsible for an approved dispute resolution scheme must issue rules about that scheme, and those rules must provide for, or set out, the following: (a) 15 20 which ﬁnancial service providers and providers of a ﬁ­ nancial adviser service may be members of the scheme: how ﬁnancial service providers and providers of a ﬁ­ nancial adviser service become members of the scheme and how membership is terminated: how complaints about a member may be made to the scheme: that complaints about members must be investigated in a way that is consistent with the rules of natural justice: that complaints about members may be made relating 25 to any of the following things: breaches of contract by the member: (i) breaches of statutory obligations by the member: (ii) breaches of industry codes by the member: (iii) (iv) any other matters provided for in the rules: that any information may be considered in relation to a complaint and any inquiry made that is fair and reason­ able in the circumstances: the sanctions that can be imposed on a member of the scheme following a complaint (for example, a require­ 35 30 (b) (c) (d) (e) (f) (g) 33 Part 3 cl 59 Financial Service Providers (Registration and Dispute Resolution) Bill (h) (i) (j) (k) (l) (m) (n) (o) 10 ment to change systems) and the compensation that can be awarded to the complainant: how sanctions imposed and compensation awarded may be enforced against the scheme’s members: any provision for allocating the costs of resolving the 5 dispute between the member complained about and the complainant: that a decision made on a complaint about a member of the scheme is binding on the member concerned, subject to an appeal under section section 717171: section that a decision made on a complaint about a member of the scheme is binding on the complainant concerned, subject to an appeal under section section 717171, if the com­ section plainant accepts the decision: that the
 complainant may take alternative court action 15 against the member at any time, including if the com­ plainant rejects the decision: that an internal review of the scheme must occur at least once every 3 years after the date of the scheme’s ap­ proval: that the scheme must co­operate with other approved dispute resolution schemes if a complaint involves members of those other schemes: that the scheme’s members must inform the people re­ 25 ferred to in section 44(a) about the scheme to the section 44(a) 44(a) section extent that the members provide a ﬁnancial service to those people.
the person responsible for 20 Obligation to publish rules A person responsible for an approved dispute resolution 30 scheme must make copies of the rules about the scheme available for inspection by the public, free of charge,— (a) at the scheme’s head ofﬁce (during ordinary ofﬁce hours); and on an Internet site in an electronic form that is publicly 35 available (at all reasonable times).
(b) 59 34 60 61 (1) (2) 62 63 Financial Service Providers (Registration and Dispute Resolution) Bill Part 3 cl 63 Duty to notify change to rules A person responsible for an approved dispute resolution scheme must notify the Minister of a change made to the rules about the scheme within 10 working days after the date of the change.
Change to rules may lead to withdrawal of approval Following receipt of a notiﬁcation of a change of rules under section 606060, the Minister may notify the person responsible section section for a scheme that the Minister— (a) (b) approves the change; or intends to withdraw the scheme’s approval under secsecsec­­­ sections 515151 tototo 565656 apply.
51(1), and sections tiontiontion 51(1) sections 51(1) 5 10 If the Minister does not notify the person responsible for the subsection (1)(1)(1) within 45 working scheme in accordance with subsection subsection days of the notiﬁcation of the change of rules, the change is 15 treated as having been approved by the Minister.
Annual reports and information requests by Minister Annual report A person responsible for an approved dispute resolution 20 scheme must supply to the Minister, by 1 July each year, an annual report containing prescribed information about the scheme in relation to the 12 months ending on 31 March in that year.
Person responsible for approved dispute resolution scheme must supply further information on Minister’s request A person responsible for an approved dispute resolution scheme must supply to the Minister any further information requested by the Minister about the information that is re­ 30 quired by regulations to be in an annual report.
25 35 Part 3 cl 64 Financial Service Providers (Registration and Dispute Resolution) Bill Annual report and information requested by Minister to be publicly available A person responsible for an approved dispute resolution scheme must make copies of its annual report and any infor­ section 636363 available for inspection 5 mation requested under section section by the public, free of charge,— (a) at the scheme’s head ofﬁce (during ordinary ofﬁce hours); and on an Internet site in an electronic form that is publicly available (at all reasonable times).
(b) Subpart 3—Reserve scheme Reserve scheme The reserve scheme is an approved dispute resolution scheme that has been appointed by Order in Council under section section section 666666.

Appointment of reserve scheme Appointment of reserve scheme The Governor­General may, by Order in Council made on the recommendation of the Minister, appoint an approved dispute resolution scheme to be the reserve scheme (with or without 20 conditions) for a term not exceeding the term of the scheme’s approval.
The Minister may only make a recommendation if— (a) the person responsible for the scheme consents in writ­ ing to the scheme being the reserve scheme; and the scheme is capable of resolving disputes relating to all types of providers of all types of ﬁnancial services and ﬁnancial adviser services.
(b) The Minister may only make a recommendation after consult­ ation with— (a) (b) (c) the Minister of Finance; and the Minister of Consumer Affairs; and any persons the Minister considers are likely to be sub­ stantially affected by the recommendation.
10 15 25 30 64 65 66 (1) (2) (3) 36 Financial Service Providers (Registration and Dispute Resolution) Bill Part 3 cl 67 (3)(c) does not affect (4) A failure to comply with subsection subsection (3)(c) (3)(c) subsection the validity of an Order in Council made under subsection subsection subsection (1)(1)(1).
Conditions that may be imposed by an Order in Council may relate to any or all of the following: (a) (5) 5 the governance arrangements of the person responsible for the reserve scheme: training requirements for people employed or engaged in the operation of the reserve scheme: other prescribed matters that relate to the principles 10 47(2).
listed in section section 47(2) 47(2) section (b) (c) 67 (1) (2) (3) 15 (b) Revocation of appointment as reserve scheme The Governor­General may, by Order in Council made on the recommendation of the Minister, revoke the appointment of an approved dispute resolution scheme as the reserve scheme.
The Minister may only make a recommendation for any or all of the following reasons: (a) the reserve scheme’s approval as an approved dispute resolution scheme has been withdrawn: the Minister is no longer satisﬁed that the reserve 20 scheme is capable of resolving disputes relating to all types of providers of all types of ﬁnancial services and ﬁnancial adviser services: the person responsible for the reserve scheme requests that its appointment as the reserve scheme be revoked.
The Minister may only make a recommendation after consult­ ation with— (a) (b) (c) the Minister of Finance; and the Minister of Consumer Affairs; and any persons the Minister considers are likely to be sub­ 30 stantially affected by the recommendation.

(c) 25 (3)(c) does not affect (4) A failure to comply with subsection subsection (3)(c) (3)(c) subsection the validity of an Order in Council made under subsection subsection subsection (1)(1)(1).
37 Part 3 cl 68 Financial Service Providers (Registration and Dispute Resolution) Bill 68 (1) (2) Notice of intention to recommend revocation of appointment as reserve scheme The Minister must notify the person responsible for the reserve scheme that the Minister intends, under section 67(2)(b), to section 67(2)(b) 67(2)(b) section recommend a revocation of the reserve scheme’s appointment.
5 The Minister’s notice must set out— (a) that the Minister intends, under section 67(2)(b), to section 67(2)(b) 67(2)(b) section recommend a revocation of the reserve scheme’s ap­ pointment; and the reasons why the Minister considers that section section 10 section 67(2)(b) applies; and 67(2)(b) 67(2)(b) that there is a notice period during which the person responsible for the reserve scheme may object, under section 696969, to the intended recommendation.
section section (b) (c) (3) section 696969, notice period 15 For the purposes of this section and section section means 20 working days from the date of the Minister’s notiﬁ­ subsection (1)(1)(1).
cation under subsection subsection Objection to intended recommendation for revocation 69 (1) During the notice period, the person responsible for the reserve scheme may object (with reasons) to the Minster’s intention, 20 under section 67(2)(b), to recommend a revocation of the section 67(2)(b) 67(2)(b) section reserve scheme’s appointment.
If the Minister has received an objection under subsection subsection subsection (1)(1)(1) within the notice period, the Minister must consider the objection and must not proceed with a recommendation for a 25 revocation of the reserve scheme’s appointment under secsecsec­­­ 67(2)(b) unless the Minister is satisﬁed that section tiontiontion 67(2)(b) section section 67(2)(b) 67(2)(b) applies.
67(2)(b) 67(2)(b) Levy to fund reserve scheme Levy to fund reserve scheme The Governor­General may, by Order in Council made on the recommendation of the Minister, make regulations— (a) specifying that levies to fund the reserve scheme are payable by all members or by any class of members, and that different levies may apply to members who 35 provide— 30 (2) 70 (1) 38 Financial Service Providers (Registration and Dispute Resolution) Bill Part 3 cl 71 (b) (c) (d) (e) (f) (g) (h) (i) (j) different types of ﬁnancial adviser services; or different types of ﬁnancial service: (i) (ii) specifying the amounts of levies payable under this sec­ tion: providing for the method by which levies will be calcu­ 5 lated: specifying the criteria and other requirements by and against which levies will be set or reset: specifying the ﬁnancial year or part­ﬁnancial year to which levies apply: providing for the payment and collection of levies: exempting any member from paying levies: providing for waivers or refunds of the whole or any part of any levy paid by any member or class of mem­ bers: providing for interest to be paid if a member fails to pay levies by the due date speciﬁed in the regulations: enabling the reserve scheme to terminate the member­ ship of a member who has failed to pay levies by the due date speciﬁed in the regulations.
15 20 10 (2) (3) Regulations made under subsection subsection (1)(1)(1) must provide that no subsection other membership fee apart from the levies may be charged by the reserve scheme.

The Minister may only make a recommendation under subsubsub­­­ section (1)(1)(1) after consultation with any persons the Minister 25 section section considers are likely to be substantially affected by the regula­ tions.
subsection (3)(3)(3) does not affect the (4) A failure to comply with subsection subsection subsection (1)(1)(1).
validity of an Order in Council made under subsection subsection Subpart 4—Miscellaneous Appeals 30 71 (1) Appeals Either party may appeal to a District Court against a deci­ sion made in accordance with an approved dispute resolution scheme on a complaint about a member of the scheme on the 35 grounds that the dispute resolution process was unfair to the appellant and prejudicially affected the result of the decision.
39 Part 3 cl 71 Financial Service Providers (Registration and Dispute Resolution) Bill subsection (1)(1)(1), a deci­ (2) Without limiting the generality of subsection subsection sion maker is deemed to have conducted the dispute resolution process in a manner that was unfair to the appellant and preju­ dicially affected the result if— (a) the decision maker failed to have regard to either of the 5 following: (i) any provision of any enactment that was brought to the attention of the decision maker before the decision maker’s decision; or any rule about the scheme; and (ii) as a result of the failure referred to in parparparaaagggrrraaaphphph (a)(a)(a), the decision is unfair to the appellant.
10 (b) (3) An appeal may be brought by ﬁling a notice of appeal in the District Court within 28 days of the decision, or within any further time as a District Court Judge may, on application, al­ 15 low.

20 (5) (6) (4) As soon as practicable after a notice of appeal has been ﬁled, the appellant must serve a copy of the notice of appeal on the other party to the decision and on the person responsible for the scheme.
The District Court Registrar must ﬁx the time and place for the hearing of the appeal and must notify both parties.

The ﬁling of a notice of appeal against a decision operates as a stay of any process for the enforcement of that decision, but the District Court may at any time, on the application of either 25 party, order that any process may be resumed or commenced or, the process having been resumed or commenced, order that it be further stayed.
In this section,— appellant means the person who appeals the decision, and 30 may be the complainant or the member of the approved dis­ pute resolution scheme party means a person who was a party to the decision, whether the person is the complainant or the member of the approved dispute resolution scheme.
Compare: 1988 No 110 s 50 (7) 35 40 Financial Service Providers (Registration and Dispute Resolution) Bill Part 3 cl 74 Decision maker to ﬁle report 72 (1) Within 28 days after the notice of appeal is served on the per­ son responsible for an approved dispute resolution scheme under section 71(4), the decision maker must ﬁle with the section 71(4) 71(4) section District Court Registrar a report on the manner in which the 5 complaint was considered and the reasons for the decision on the complaint.
subsection (1)(1)(1), the deci­ (2) Apart from ﬁling the report under subsection subsection sion maker, and the person responsible for the approved dis­ pute resolution scheme (if different), may not be parties to the 10 District Court’s decision on the appeal (except in relation to the costs of preparing and ﬁling the report under subsection subsection subsection (1)(1)(1)).
The District Court Registrar must serve a copy of the report subsection (1)(1)(1) on both parties a reasonable period 15 ﬁled under subsection subsection of time before the hearing of the appeal.

Compare: 1988 No 110 s 51 (3) Powers of District Court Judge on appeal 73 (1) On the hearing of an appeal, a District Court Judge may— (a) quash the decision appealed from and order the com­ 20 plaint to be reheard on any terms the Judge thinks ﬁt; or dismiss the appeal.
(b) In ordering a rehearing under subsection (1)(a), the Judge subsection (1)(a) (1)(a) subsection may give any directions the Judge thinks ﬁt about the rehearing of the complaint.

(2) (3) An appeal under this section is to be heard by a District Court Judge in chambers, and the procedure at the hearing may be determined by the Judge.
Compare: 1988 No 110 s 53 Regulations 25 30 74 (1) Regulations under this Part The Governor­General may, by Order in Council, make regu­ lations for all or any of the following purposes: (a) prescribing the information or documents to be supplied to the Minister as part of an application under this Part: 35 41 Part 3 cl 75 Financial Service Providers (Registration and Dispute Resolution) Bill (b) (c) (d) (e) (f) prescribing processes for applications for the approval of dispute resolution schemes: prescribing rules for a class of approved dispute reso­ lution scheme or for all approved dispute resolution schemes in the event that approval of those schemes is 5 withdrawn: prescribing the information that must be included in every annual report, which must include— (i) information about any internal review that oc­ curred within the previous 12 months; and information about a scheme’s operation (includ­ ing complaints received): (ii) 10 prescribing fees payable in respect of any matter under this Part or the manner in which fees may be calculated: providing for any other matters contemplated by this 15 Part, necessary for its administration, or necessary for giving it full effect.
(2) The Minister may refuse to make a decision under this Part until the prescribed fee is paid.

subsection (1)(1)(1) may— (3) Any Order in Council made under subsection subsection 20 (a) (b) prescribe the method of payment of a fee; and authorise the Minister to refund or waive, in whole or in part and on any prescribed conditions, payment of a fee in relation to any person or class of persons.
(4) Any fee or amount payable under this Part is recoverable in 25 any court of competent jurisdiction as a debt due to the Crown.

75 Consequential amendments The enactment speciﬁed in the Schedule is amended in the manner indicated in that schedule.
42 Financial Service Providers (Registration and Dispute Resolution) Bill Schedule Consequential amendments to other enactments Schedule sss 757575 Privacy Act 1993 (1993 No 28) Part 1 of Schedule 2: insert the following item in its appropriate al­ 5 phabetical order: gistraaationtiontion vidersss (R(R(Reeegistr Financial SerSerServicevicevice PrPrProoovider gistr vider Financial Financial 2007 esolution) ActActAct 20072007 Dispute RRResolution) andandand Dispute esolution) Dispute Section 232323 Section Section 12 Wellington, New Zealand: Published under the authority of the New Zealand Government—2007 43