New Zealand's Financial Advisors' Disciplinary Committee has published its decision regarding a case initiated by the Financial Markets Authority which relates to alleged breaches of the Code of Professional Conduct for Authorised Financial Advisors by an unnamed advisor.

The FADC argued that the advisor breached standards 12 and 15 of the code, which respectively pertain to keeping information about personalised services for retail clients and her obligation to know enough about the code, the Financial Markets Act 2011 and various laws.

In Financial Markets Authority v W, the committee said that the respondent/advisor breached standards 12 and 15 of the code in respect of three clients, whose identities it has suppressed permanently. She failed to write down adequate information about a personalised service that a retail client was receiving and also failed to show the regulator that she knew enough about her relevant legislative obligations which result from the term ‘personalised service.’

The committee is at pains to point out that the case casts no aspersions on the advisor's character. There is no suggestion that she has benefited improperly at the expense of her clients, or that she has placed any client at a disadvantage.

The FMA complained to the committee about respondent/advisor in a letter of 4 March 2020; it alleged that she broke parts of the code. The accusations related to services that she performed for six named clients in four client files. On 11 March a panel of the committee found that a hearing was necessary and resolved that a Notice of Complaint should be served. Subsequent telephone conferences led to the matter being timetabled. Due to Covid-19 and some personal difficulties that the parties were having, the matter was delayed. The parties were unable to narrow the scope of the alleged breaches or agree to a summary of facts, but they eventually submitted an agreed list of issues to be tested at a hearing, although even this was modified and revised on the day of the hearing. Statements came from several witnesses including the advisor, two of her customers, a senior investigator in the FMA’s Evidence and Investigations Team and two senior advisors in its Supervision Team.

During the hearing it became evident that the advisor thought that she was not providing financial advice by a personalised service unless and until she had received and written down the entire circumstances of the client in question, including his existing financial position, and appreciated his goals and aspirations. The FMA argued successfully that the code does not create such an approach and that it is not true that any advice that an advisor gives someone preliminary to that is never a personalised service. The advisor was registered on the Financial Service Provider Register in 2011 and is authorised to provide financial advice and investment-planning services.

Code standard 12 states that an Authorised Financial Advisor must record in writing adequate information about any personalised services that he or she provides to a retail client. This must include copies of all documents provided to, or received from, the client in writing in connection with the advisor’s personalised services. Code standard 15 states that an advisor must have a knowledge of the Financial Markets Act, the code and other legal obligations relevant to the operation of his or her practice as a financial advisor (including relevant consumer-protection laws) in an adequate manner.

The committee believed that the advisor took an idiosyncratic approach to recordkeeping and did not understand either the concept of personalised service or the concept of the client, although it does believe that she understood the concept of financial advice. It might divulge her identity to the public in due course.