FMA publishes record keeping information sheet for financial advice providers

In May 2022, the Financial Markets Authority (FMA) published an information sheet on record keeping for financial advice providers (FAPs). The information sheet outlines best practice for record keeping.

Quality record-keeping is a key standard of the financial advice regime (effective 15 March 2021) established under the Financial Services Legislation Amendment Act 2019. Standard Condition 1 of the new regime states: "You must create in a timely manner and maintain adequate records in relation to your financial advice service." The Financial Markets Conduct Act 2013 requires FAPs to comply with the Standard Conditions of their FAP licence. This applies to both transitional FAP licences and full FAP licences.

James Greig, FMA director supervision, said in the press release that monitoring of the previous financial advice regime had "consistently identified poor record keeping as an area of concern. This included insufficient records about the services provided to clients and incomplete information on whether key obligations had been fulfilled."

What records need to be kept?

Under the new regime, records include:

• all regulated financial advice given to retail clients (by you or on your behalf); and
• how you (and any person engaged by you) have complied with the financial advice duties.

Examples of records that must be kept include: client details, the financial advice given, the basis on which advice was given, the benefits and risks of following the advice, information demonstrating that the FAP took reasonable steps to ensure the client understood the advice, and any other information that demonstrates that the FAP is complying with its duties and obligations. 

What needs to be done with the records?

Under the regime, records must be:

• created in a timely manner;
• kept in a form (which may be electronic) and manner that ensures the integrity of the information and enables it to be conveniently inspected and reviewed by the FMA;
• available for inspection by the FMA at all reasonable times;
• readily available to you, and in any event within 10 working days or as otherwise agreed by the FMA when requested; and
• kept for a period of at least 7 years from the later of: 
  • the date the record is made; and
  • the date the financial advice to which the record relates is given; and
  • the date any later record is made that refers to or relies upon information in the record; and 
  • the date of the conclusion of the life of the financial advice product that the financial advice relates to.

Our view

We recommend that FAPs develop a record keeping process and review it regularly. The FMA has suggested that recording financial advice given to clients could be supported by a list of steps setting out the information that must be captured at the different stages of the advice process by persons giving advice on your behalf.  It could also take the form of a digital tool that helps guide your advice process and requires relevant records to be submitted before progressing to the next stage of the interaction.

FAPs should also consider their obligations under the Financial Advice Code. Code Standard 5 requires FAPs to take reasonable steps to protect client information against loss and unauthorised access, use, modification or disclosure.  FAPs should consider how they will secure their records so that they are protected from a cyber-attack or issues with a third-party storage provider. 

Authors:
Alasdair McBeth, Rachel Taylor, Tom Barnes and Boston Flanagan-Connors.