FEATURE
HERE’S WHAT AN EXTERNAL DISPUTES RESOLUTION SCHEME CAN TELL YOU ABOUT LICENSING FSCL’s Susan Taylor offers insights into what lies ahead for brokers.
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ransitional licensing for financial advisers and brokers opened on November 25. The FMA has indicated that there will be two standard conditions on financial advice provider transitional licences: • You must maintain adequate written records in relation to your financial advice service • You must have an internal process for resolving client complaints in relation to your financial advice service. GOOD RECORD-KEEPING Brokers are going to have to maintain adequate written records showing how they, and any persons engaged by them to give regulated financial advice to retail clients, have complied with the Financial Markets Conduct Act, Regulations and the new code. Brokers are going to have to ensure the records are kept for at least seven years. Adequate written records include information about any financial advice given to clients, copies of written information and documents, and all file notes and diary entries. At a recent roadshow, the FMA observed that it has seen: • Incomplete record-keeping • Files not easily accessible • Handwritten notes not legible • Files that are not safely stored • Reliance on free cloud-based storage which is not fit for purpose. Good record-keeping is often found lacking in cases that come to FSCL for investigation and resolution. We not infrequently receive a broker’s file which has no file notes or diary entries to record important meetings or calls with a client. In a "he said/she said" situation, we may be more likely to prefer the evidence of the client, where the broker has no file notes as evidence of a meeting or call with a client. As the professional in the relationship, brokers and advisers will be expected to keep good
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records and, if their records are lacking, this will reflect on the broker or adviser’s credibility. Fortunately for the broker, in some cases the lack of records has not been the cause of the loss the client is claiming. However, had proper records been kept, it is more probable than not that the complaint would never have ended up at FSCL. The case below is an example of this.
CASE STUDY WHERE DID MY INSURANCE GO? In December Sanjay arranged insurance for his taxi through an insurance broker. He intended paying for the insurance through an instalment service offered by the broker, but the payments were dishonoured with the notation "account closed".The broker wrote to Sanjay twice, and sent a new direct debit form, but the form was not completed and returned, so the policy was cancelled. The following May, Sanjay purchased another taxi, and went through the same process again. While Sanjay thought he was arranging insurance for his new taxi, all the broker’s records referred to insurance for the first taxi that was intended to be effective from 1 August. Again, the broker arranged payment for the insurance through its instalment service. On 10 July the taxi was involved in an accident. The first payment for the insurance was due on 10 August.The payment was dishonoured, again with the notation "account closed".The broker wrote to Sanjay twice, and then the policy was cancelled. Two years later Sanjay contacted the broker because the insurer of the other car involved in the accident was pursuing him for the cost to repair the damage. Sanjay considered the broker should be responsible for the loss because he had asked it to arrange cover and it had not done so. The broker responded by saying that it had no record of ever arranging
