FINANCIAL SERVICE PROVIDERS (REGISTRATION) REGULATIONS

Transcription

1 1 OFFICE OF THE MINISTER OF COMMERCE The Chair CABINET ECONOMIC GROWTH AND INFRASTRUCTURE COMMITTEE FINANCIAL SERVICE PROVIDERS (REGISTRATION) REGULATIONS PROPOSAL 1 This paper seeks Cabinet approval for regulations to be made pursuant to the Financial Service Providers (Registration and Dispute Resolution) Act The proposed regulations prescribe various requirements and procedures for effecting and amending registrations made under the Act, searching the register established by the Act and other matters contemplated by or necessary for the administration of the register. EXECUTIVE SUMMARY 2 The Financial Service Providers (Registration and Dispute Resolution) Act 2008 ( the Act ) was passed on 29 September The Act introduces a new legislative framework governing the providers of financial services. A significant feature of the Act is the new registration regime for persons and entities in the business of providing a financial service. The Register of Financial Service Providers ( the FSPR ) will be predominantly electronic and will enable registration via the Internet by applicants wishing to carry on business as financial service providers. The register will allow any person with a legitimate purpose to search at no cost to confirm that a financial service provider is registered. 3 The provisions in the Act relating to registration will come into force on a date to be confirmed (likely to be during the fourth quarter of 2010). 4 The key matters proposed to be included in the Regulations relate to access to the register, requirements and procedures for effecting registrations, searching the register and various other matters incidental to or necessary for the operation of the Act. BACKGROUND 5 The Act was passed on 29 September 2008 although Part 2 relating to registration is not yet in force. 6 The Act reforms the law relating to financial service providers and sets up a registration system that will: identify persons and entities in the business of providing or offering to provide a financial service in New Zealand;

2 2 provide easy public access to information about financial service providers; assist New Zealand to meet its anti-money-laundering obligations under the Financial Action Task Force (FATF) Recommendations. 7 The Act also establishes a comprehensive, industry-based dispute resolution system to improve consumer access to redress in the financial sector. Section 48 requires every financial service provider to be a member of either an approved dispute resolution scheme or the Government reserve scheme if they provide financial services to the public. 8 The Act requires all persons carrying on a business of providing or offering to provide a financial service (whether or not the business is the provider s only business or the provider s principal business) to be registered. These persons include (amongst others) registered banks finance companies building societies financial advisers insurers foreign currency exchange dealers credit providers 9 A person to whom the Act applies will be prevented from continuing in the business of providing a financial service if they are not registered on the FSPR when the registration requirement comes into force. 10 The Act requires that the FSPR be operated and maintained by the Registrar of Financial Service Providers ( the Registrar ). The FSPR will be one of several business registries operated by the Companies Office, part of the Business Services Branch of the Ministry of Economic Development. The person holding office as the Registrar of Companies under the Companies Act 1993 will be the first Registrar of Financial Service Providers ( the Registrar ). 11 The FSPR will be an electronic register which will enable financial service providers to register via the Internet. Persons searching the register (to determine if a financial service provider is registered) will not be required to have an igovt login or be a registered user. There will be several options available to any person without a computer or Internet access. These options include using computers at public libraries and other public facilities offering Internet services, or employing a search agent. COMMENT Regulations under the Financial Services Providers (Registration and Dispute Resolution) Act Section 44 of the Act provides that the Governor-General may, by Order in Council, make regulations for all or any purposes listed in that section and for

3 3 such other matters contemplated necessary for the Act s administration or necessary for giving it full effect. 13 The purposes for which regulations may be made include: specifying information or documents to be included in, or provided with, applications; prescribing procedures, requirements and other matters relating to the operation of the register, information or documents to be contained in the register, access to the register and the register search criteria; prescribing agencies that carry out supervisory or enforcement functions relating to money laundering or terrorist financing with which the Registrar can share information; and providing for any other matters contemplated by Part 1 (Preliminary provisions) or Part 2 (Registration) of the Act, necessary for its administration or necessary for giving it full effect. 14 The Regulations proposed in this paper relate to requirements and procedures necessary for the operation of the register and its associated functions. 15 Some of the key matters and procedures recommended for inclusion in the Regulations are set out below. Application for Registration 16 In order to be registered, an application for registration must be completed online. Once the requested data has been submitted for registration, the prescribed fee has been paid and the Registrar is satisfied that the applicant is not disqualified (and there are no grounds for refusing registration) the registration becomes effective. 17 The information supplied will depend on the nature of the applicant, whether they are an individual, an entity registered in New Zealand (such as a limited liability company or building society) or an overseas entity registered in another jurisdiction. 18 Section 13 of the Act sets out the qualification criteria for persons who wish to register on the FSPR. They must not be disqualified under section 14, they must be a member of an approved dispute resolution scheme (or the reserve scheme) if required, and they must be a licensed provider if they provide a licensed service. 19 A person is disqualified under section 14 if (amongst other things) they have been convicted of a crime involving dishonesty in the last five (5) years, or have at any time been convicted of a money laundering or terrorism financing offence. Such convictions will not only disqualify individuals who apply, but also an entity if any of its current directors, senior managers or its controlling owner have such a criminal history.

4 4 20 A licensed service is defined in section 4 of the Act as a financial service that is only to be provided by a person who is licensed, registered, authorised or otherwise approved by a licensing authority. The following are licensed providers: Licensed provider Registered banks (under the Reserve Bank of New Zealand Act 1989) Authorised Financial Advisers Qualifying Financial Entities (under the Financial Advisers Act 2008) Licensing authority Reserve Bank Securities Commission 21 Section 15 of the Act sets out the minimum information to be provided by applicants in an application for registration. Such details include the applicant s name and business address, and the contact details of the dispute resolution scheme of which the applicant is a member. Section 16 of the Act obliges the Registrar to register an applicant as a financial service provider if he accepts that the applicant is qualified to be so registered. To satisfy himself in that regard, it is proposed that the Registrar be empowered to check against the Ministry of Justice Clean Slate Database that the applicant is not disqualified by reason of a criminal conviction of the kind prohibited in section 14. To enable such checks to be undertaken, it is proposed that Regulations be prescribed so that the following further details must also be provided in an application for registration: Individual Full legal name as shown on passport or birth certificate (including middle name); Current residential address; Other names also or formerly known as (if any); Date of birth; Gender; Entity The full legal name, gender, date of birth and residential address (or name and registered office address if an entity) of its: (i) (ii) Directors; Senior managers;

5 5 (iii) Controlling Owner. 22 Date of birth and residential address information will be collected solely to enable the Registrar to check each applicant s criminal history and that information will not be available for view by the public using the FSPR. 23 As it is anticipated that the searching public will look for the trade name of the financial service provider on the FSPR (rather than its correct legal name) and would like to search by financial service offered. It is therefore proposed that applicants be required to supply the following information in their application for registration: (a) (b) its trading name (if any); and details as to which of the financial services set out in the Act it provides. 24 It is also proposed that overseas entities wishing to register on the FSPR be required to provide details their country of origin, and any identifier number given upon incorporation or registration in its home jurisdiction (such as its company registration number or equivalent). Similarly, if any applicant s director or its controlling owner is an overseas entity, it is proposed that the details of its country of origin, any identifier number given to it upon incorporation or registration in its home jurisdiction and the address of its registered office also be provided. 25 To enable the Registrar to contact the applicant during the application process (if need be), and in future, it is also proposed that the applicant be required to supply a postal and address for communication. 26 Section 46 of the Act makes it clear that the Act applies to the provision in New Zealand of a financial service by a person who is in New Zealand. It is therefore proposed that, regardless of the fact the applicant may legitimately carry on business in other countries as well, the business address to be provided to the Registrar in an application for registration must be a physical New Zealand address. Notifying changes to registered information 27 To maintain the integrity of information held on the FSPR, it is proposed that if a registered financial service provider is an entity, it should be required to notify the Registrar of any change to: It s legal name; The details of directors, senior managers or controlling owners - and in that case, to advise the Registrar of the full legal name, residential address (or name and registered office address if an entity) of any new: (i) (ii) Director/s; Senior manager/s;

6 6 (iii) Controlling Owner. 28 As well as maintaining the accuracy of information held by the Registrar for each registered financial service provider, such notification also enables the Registrar to undertake the relevant disqualification checks on those individuals appointed as directors, senior managers and any new controlling owner. Annual Confirmation 29 The Act requires that all registered financial service providers must file an annual confirmation every twelve (12) months with the Registrar. This is to ensure that information on the FSPR is up to date, and supplements the notification by registered financial service providers to the Registrar of information changes as they occur during the year. It is proposed that registered financial service providers be required to confirm or update (if necessary) the following information every year using the FSPR annual confirmation: Individual Full legal name as shown on passport or birth certificate (including middle name) and residential address; Other names also or formerly known as (if any); Trading name/s (if any); Business address in New Zealand; Financial services provided; Name and business address of the approved dispute resolution scheme of which the financial service provider is a member (if appropriate); Postal and addresses for communication. Entity Name and business address (in New Zealand); Trading name/s (if any); Financial services provided; Name and business address of the approved dispute resolution scheme of which the financial service provider is a member (if appropriate); The full legal name, residential address (or name and registered office address if an entity) of its: (i) (ii) Director/s; Senior manager/s;

7 7 (iii) Controlling Owner. In the event that either the applicant s director or its controlling owner is an overseas entity, the name of its country of origin, any identifier number given to it upon incorporation or registration in its home jurisdiction (such as its company registration number) and the address of its registered office. Postal and addresses for communication. Content of register 30 If the Registrar accepts that an applicant is qualified to be registered as a financial service provider, sections 16 and 27 of the Act oblige the Registrar to enter certain information on the FSPR for public view. That information includes the name and business address of the provider, the name and address of the approved dispute resolution scheme of which the provider is a member and details of any licensed service provided (if relevant). It is proposed that the following further details be entered on the FSPR for each registered financial service provider: Financial services provided; Other names also or formerly known as (if any); Trading name/s (if any); If an overseas entity, details of its country of origin; If the registered financial service provider is a licensed provider, the date from which any licence for a licensed service takes effect, the expiry date of the licence, the current status of the licence (i.e current or suspended), whether any terms and/or conditions have been imposed on the licence by the Licensing Authority and, if appropriate, the details of those terms and conditions (but only when requested by a Licensing Authority that these details be made available for public view on the FSPR). Amending register 31 The Registrar is empowered by section 29 of the Act to amend the register in a number of limited circumstances (for example if the contact details of a registered financial service provider change, or they become a licensed provider). It is proposed that the Registrar also be able to amend the register in the event a Licensing Authority informs the Registrar that: a registered financial service provider is no longer a licensed provider; the licence held by a registered financial service provider for a licenced service has been suspended by the Licensing Authority.

8 8 Search criteria 32 The main requirements for searching the FSPR are contained in the Act. In addition to the basic search criteria set out in section 31 of the Act (such as being able to search the name of a financial service provider and/or its business address), it is proposed that people searching the FSPR will also be able to search against the following additional criteria: FSPR registration number; Type of financial service (where necessary limited to a particular geographical location in order to keep results to a meaningful and useful minimum); Other names the financial service provider is also or formerly known as (if any); and Trading name/s (if any). Operation of and access to register 33 The Act places the Registrar under a duty to maintain a register of financial service providers and to allow this to be available for public search. There may be circumstances where this is not possible, for example if there is a failure of technology. It is proposed that the Registrar should be able to refuse access to the FSPR: for the maintenance of the register; or in response to technical difficulties in the operation of the register; or to ensure the security or integrity of the register. Information sharing 34 Section 34 of the Act allows the Registrar to share information he has collected in the exercise of his powers, or in the performance of his statutory duties, with other agencies in New Zealand and overseas (if prescribed). The information could include any of the information referred to above in this paper which has been provided by an applicant for the purposes of registration as a financial service provider. 35 The purpose of the FSPR is to assist New Zealand confirm with its obligations under the Recommendations of the Financial Action Task Force ( FATF ) on anti-money laundering and the countering of financing of terrorism. The Anti- Money Laundering and Countering Financing of Terrorism Act 2009 was passed on 15 October 2009 as part of a legislative package that will implement the first tranche of reforms of New Zealand s anti-money laundering and countering financing of terrorism regulatory regime. The Reserve Bank, the Securities Commission and the Department of Internal Affairs (DIA) were appointed as supervisors under the new law in respect of the following:

9 9 Reserve Bank Securities Commission Banks, life insurers and non-bank deposit takers. Issuers of securities, trustee companies, futures dealers, collective investment schemes, brokers and financial advisers. DIA Casinos, non- deposit-taking lenders, money changes and reporting entities not covered by the other supervisors. 36 I propose that the Reserve Bank, the Securities Commission and the Department of Internal Affairs be prescribed as agencies carrying out supervisory or enforcement functions relating to money laundering or terrorist financing with which the Registrar can share information under section 34. CONSULTATION 37 The Ministry of Justice, the Ministry of Consumer Affairs, the Securities Commission, the Reserve Bank, the Department of Internal Affairs, the Office of the Privacy Commissioner and Treasury were consulted during the preparation of this paper. The Department of the Prime Minister and Cabinet has been informed. FISCAL IMPLICATIONS 38 There are no fiscal implications arising from the proposed regulations. HUMAN RIGHTS 39 The proposals of this Cabinet paper are consistent with the New Zealand Bill of Rights Act LEGISLATIVE IMPLICATIONS 40 The proposals in this paper will require the drafting of regulations. The regulations will need to come into force before 1 June 2010, six (6) months prior to the proposed commencement date of compulsory registration under the Act. REGULATORY IMPACT ANALYSIS Regulatory Impact Analysis Requirements 41 The regulatory impact analysis requirements apply to this proposal as it is a policy initiative that will result in the creation of delegated legislation that is a regulation for the purposes of the Regulations (Disallowance) Act A Regulatory Impact Statement has been prepared and is attached to the Cabinet paper. Quality of the Impact Analysis 42 The Deputy Secretary, Economic Strategy Branch, Ministry of Economic Development and the Regulatory Impact Analysis Review Panel have reviewed

10 10 the Regulatory Impact Statement (RIS) prepared by the Ministry of Economic Development and associated supporting material, and considers that the information and analysis summarised in the RIS is sufficiently comprehensive and robust, and effectively communicated to enable Ministers to fairly compare the available policy options and take informed decisions on the proposals in this paper. Consistency with Government Statement on Regulation 43 I have considered the analysis and advice of my officials, as summarised in the attached Regulatory Impact Statement and I am satisfied that, aside from any risks, uncertainties and caveats already noted in this Cabinet paper, the regulatory proposals recommended in this paper: Are required in the public interest Will deliver the highest net benefits of the practical options available, and Are consistent with our commitments in the Government Statement on Regulation. PUBLICITY 44 The proposals in this paper will be included in broader publicity about the commencement of Part 2 (Registration) of the Act. RECOMMENDATIONS 45 It is recommended that the Committee 1 Note that the Financial Service Providers (Registration and Dispute Resolution) Act 2008 was passed on 29 September Note that the Financial Service Providers (Registration and Dispute Resolution) Act 2008 contains provisions for the making of regulations covering (amongst other things): 2.1 specifying information or documents to be included in, or provided with applications; 2.2 prescribing procedures, requirements and other matters relating to the operation of the register, information or documents to be contained in the register, access to the register and the search criteria; 2.3 prescribing agencies that carry out supervisory or enforcement functions relating to money laundering or terrorist financing with which the Registrar of Financial Service Providers can share information; and 2.4 providing for any other matters contemplated by Part 1 (Preliminary provisions) or Part 2 (Registration) of the Act, necessary for its administration or necessary for giving it full effect.

11 11 3 Agree that the regulations provide that an application for registration as a financial service provider must contain the following additional information: 3.1 Full legal name (as shown on passport or birth certificate, including middle name, if an individual); 3.2 Trading name (if any); 3.3 Financial services provided; 3.4 Postal and address for communication; 3.5 Physical business address in New Zealand. 4 Agree that the regulations provide that an application for registration as a financial service provider must contain the following additional information if the applicant is an individual: 4.1 Current residential address; 4.2 Other names also or formerly known as (if any); 4.3 Date of birth; 4.4 Gender. 5 Agree that the regulations provide that an application for registration as a financial service provider must contain the following additional information if the applicant is an entity: 5.1 The full legal name, gender, date of birth and residential address (or name and registered office address if an entity) of its: (i) (ii) (iii) Directors; Senior managers; Controlling Owner (all as defined in the Act). 5.2 If an overseas entity, details of its country of origin and any identifier number given to it upon incorporation or registration in its home jurisdiction (such as its company registration number or equivalent); 5.3 In the event that either the applicant s director or its controlling owner is an overseas entity, details of its country of origin, any identifier number given to it upon incorporation or registration in its home jurisdiction and the address of its registered office; 6 Agree that the regulations provide that the following information must be provided by each registered financial service provider with the annual confirmation:

12 Full legal name (as shown on passport or birth certificate, including middle name, if an individual) 6.2 Trading name/s (if any); 6.3 Physical business address in New Zealand; 6.4 Financial services provided; 6.5 Name and business address of the approved dispute resolution scheme of which the financial service provider is a member (if appropriate); 6.6 Postal and addresses for communication. 7 Agree that the regulations provide that the following information must be provided with the annual confirmation if the registered financial service provider is an individual: 7.1 Current residential address; 7.2 Other names also or formerly known as (if any); 8 Agree that the regulations provide that the following information must be provided with the annual confirmation if the registered service provider is an entity: 8.1 The full legal name, residential address (or name and registered office address if an entity) of its: (i) (ii) (iii) Director/s; Senior manager/s; Controlling Owner. 8.2 In the event that either the applicant s director or its controlling owner is an overseas entity, the name of its country of origin, any identifier number given to it upon incorporation or registration in its home jurisdiction (such as its company registration number) and the address of its registered office. 9 Agree that the regulations provide that if the registered financial service provider is an entity and there is a change in information relating to the details of directors, senior managers or controlling owners of that entity, the following information must be notified to the Registrar of Financial Service Providers: 9.1 Name of the registered financial service provider; 9.2 The full legal name, residential address (or name and registered office address if an entity) of any new:

13 13 (i) (ii) (iii) Director/s; Senior manager/s; Controlling Owner. 10 Agree that the regulations provide that the following information will be entered on the Register of Financial Service Providers for each registered financial service provider: 10.1 Financial services provided; 10.2 Trading name/s (if any); 10.3 Other names also or formerly known as (if any); 10.4 If an overseas entity, details of its country of origin; 10.5 If the registered financial service provider is a licensed provider, the date from which any licence for a licensed service takes effect, the expiry date of the licence, the current status of the licence, whether any terms and/or conditions have been imposed on the licence by the Licensing Authority and, if appropriate, the details of those terms and conditions (but only when requested by a Licensing Authority that these details be made available for public view on the FSPR). 11 Agree that the regulations permit the Registrar of Financial Service Providers to amend the Register of Financial Service Providers in the event that a Licensing Authority informs the Registrar that: 11.1 a registered financial service provider is no longer a licensed provider; 11.2 the licence held by a registered financial service provider for a licenced service has been suspended by the Licensing Authority. 12 Agree that the regulations provide that the Register of Financial Service Providers will be able to be searched against the following search criteria: 12.1 Registration number; 12.2 Type of financial service (where necessary limited to a particular geographical location in order to keep results to a meaningful and useful minimum); 12.3 Other names the financial service provider is also or formerly known as (if any); 12.4 Trading name/s (if any);

14 14 13 Agree that the regulations permit the Registrar of Financial Service Providers to refuse access to the register for maintenance reasons, in response to technical difficulties in its operation, or to ensure the integrity of the register s security. 14 Agree that the Registrar of Financial Service Providers may check with the appropriate authorities that any individual named in an application for registration (including being named as a director, senior manager or controlling owner of an applicant entity), and named at any time thereafter in an Annual Confirmation or voluntary notification to the Registrar, is not disqualified by reason of a criminal conviction of the kind prohibited in section 14 of the Act. 15 Agree that the regulations permit the Registrar of Financial Service Providers to share information with the following agencies carrying out supervisory or enforcement functions relating to money laundering or terrorist financing: 15.1 The Reserve Bank; 15.2 The Securities Commission; 15.3 The Department of Internal Affairs. 16 Invite the Minister of Commerce to instruct Parliamentary Counsel to draft regulations pursuant to section 44 of the Financial Service Providers (Registration and Dispute Resolution) Act 2008 prescribing the matters referred to in this paper and such other matters that may be necessary for or incidental for the administration and implementation of the above recommendations. 17 Agree to the release of this paper including the RIS on the Ministry of Economic Development website. Hon Simon Power Minister of Commerce Date signed:

15 15 Regulatory Impact Statement Financial Service Providers (Registration and Dispute Resolution) Act 2008: Registration Regulations Agency Disclosure Statement This Regulatory Impact Statement has been prepared by the Ministry of Economic Development. It provides an analysis of options for setting requirements contemplated by and necessary for the administration of the Register of Financial Service Providers established under the Financial Service Providers (Registration and Dispute Resolution) Act No key gaps, assumptions, dependencies, significant constraints, caveats or uncertainties in our analysis have been identified. The proposals in this paper do not impair private property rights, market competition, or the incentives on businesses to innovate and invest or override fundamental common law principles. Liz Thomson, Group Manager Legal Services, Business Services Branch, Ministry of Economic Development Signature Date

16 16 Status quo and problem definition The Financial Service Providers (Registration and Dispute Resolution) Act 2008 ( the Act ) was passed in September 2008 as part of a broader review of financial products and providers. There is currently no comprehensive way of identifying and monitoring providers of financial services. In addition, consumers and investors are not given any assurance that financial service providers have not been convicted for financial crimes or other misconduct. This increases the risk of unfair, fraudulent or negligent misconduct on the part of providers in the industry. Further, New Zealand is also not compliant with Recommendation 23 of the Financial Action Taskforce s (FATF) 40 Recommendations on Money Laundering, which requires the implementation of measures to prevent criminals from controlling or managing financial institutions. The Act was passed to enable the public to access information about financial service providers, to assist regulators supervise the industry as a whole and to assist New Zealand to conform with its obligations under the FATF Recommendations. The Act requires the Ministry of Economic Development (through the Companies Office) to establish and administer a new Register of Financial Service Providers ( the FSPR ). Part 2 of the Act requires all financial service providers to provide the Registrar of Financial Services Providers ( the Registrar ) with the following information which will be available for public view: Their name and business address; The name and business address of the consumer dispute resolution scheme of which they are a member; and Details of any licensed service they provide. Before Part 2 of the Act can come into force, regulations are required to prescribe various matters contemplated by or necessary for the operation of the Act. In particular, registration, searching requirements and processes relating to the FSPR need to be prescribed by regulation. The minimum requirements for an application for registration and for maintenance of information on the FSPR are already set out in the Act. Those requirements and the information required by sections 15, 16, 27, 28 and 29 are however insufficient on their own to enable the Registrar to: Be satisfied that the applicant is not disqualified from registration by reason of a criminal conviction of the kind prohibited in section 14 of the Act; Be satisfied that the information on the FSPR for each registered financial service provider is accurate and up-to-date; Collect and show the trading name of the financial service provider (which in many cases is different to its legal name) and basic details of the financial

17 17 services it provides for which members of the public trying to locate a provider on the FSPR can usefully search against; Amend the FSPR if a Licensing Authority advises that the licence granted to a registered financial service provider has been suspended or cancelled; Refuse access to the on-line FSPR if vital maintenance work needs to be carried out and such a step needs to be taken to protect its electronic security or integrity. In addition section 34 of the Act empowers the Registrar to communicate any information he holds for registration purposes to agencies in New Zealand which carry out supervisory functions for the prevention of money laundering and the financing of terrorism ( AML supervisors ). The names of these agencies need to be prescribed by regulation otherwise the Registrar will not be able share information with them and the purpose of the Act (to enable regulators to supervise the industry) will be defeated. There will be significant implications for the searching public, the financial services industry itself, Government agencies regulating the industry and AML supervisors if: the information on the FSPR is not as accurate and up to date as possible (such as in relation to the financial services a registered financial service provider offers to the public or its trading name); the Registrar does not ask for sufficient information from applicants for registration to allow criminal history checks to be undertaken with the Ministry of Justice; and the anti-money laundering agencies with which the Registrar needs to be able to share information are not prescribed as required. The integrity of the FSPR (and the information contained within it) could easily be called into question, criminals could mislead the Registrar and be registered as financial service providers (or remain in the management) when they should not be. The Registrar would be unable to assist the AML supervisors with their enquiries into alleged money laundering and terrorist financing matters. If requirements for the provision of accurate information and regular updates to the Registrar are not prescribed in regulations, such details could only be requested on a voluntary basis and without any enforcement mechanisms to support any form of useful compliance. The Ministry of Justice has advised that it needs (as a minimum) a date of birth and residential address for each applicant in order for effective and efficient criminal history checks to be carried out for the Registrar. In order for results of the criminal history checks to be meaningful in any real way, provision of that supporting information needs to be compulsory. The Companies Office has a long history of providing registers for public use. Members of the public treat information on a register as true and correct and the Registrar must take all precautions possible to ensure registered information remains up to date and to protect the register s integrity. If registered financial service providers are not periodically asked to update details on the register, the FSPR will

18 18 quickly become inaccurate, ineffectual and, more worryingly, misleading. In addition, if the Registrar does not double-check the criminal history of the applicants, there is a high chance that people with white collar criminal convictions will be registered on the FSPR, and will continue to work in the financial services industry, despite the provisions of the Act that disqualify them from doing so. Objectives The regulations must be consistent with the purposes of the Act. The objective of the regulations is to ensure that all matters necessary for the effective administration of the FSPR, and to give full effect to the Act (and its purposes), are attended to and in particular: To ensure the publicly available information on the FSPR is as accurate and accessible as it can be at all times; To ensure the publicly available information on the FSPR is as up-to-date as it can be at all times; To allow the Registrar to satisfy himself that applicants and registered providers on the FSPR are not disqualified from registration by reason of having certain criminal convictions; To ensure the purpose of the Act (to assist NZ conform with its international anti-money laundering obligations) is met. Regulatory impact analysis No practical non-regulatory measures exist that would be capable of achieving the objectives stated above. The Act contemplates the making of regulations to achieve the objectives above and the outcomes set out below. The preferred option is to promulgate regulations accordingly. The regulations will apply to all financial service providers as defined in section 5 of the Act. Outcomes To ensure the publicly available information on the FSPR is as accurate and accessible as it can be at all times. Option to achieve outcomes Require all applicants for registration on the FSPR to provide the Registrar with details of their full legal name, their trading name, details of the financial services they provide, their business address in New Zealand and contact details for communication purposes; Require all overseas entity applicants to provide the Registrar with details of its country of origin and the identifier number given to it upon incorporation or registration in its home jurisdiction; In the case of overseas entity applicants, if either the applicant s director or its controlling owner is an overseas

19 19 entity, require them to provide to the Registrar details of its country of origin and the identifier number given to it upon incorporation or registration in its home jurisdiction; Allow the Registrar to enter information about the financial services provided by a registered financial service provider, its trading name/s and relevant details of its licence (if it is a licensed provider) on the FSPR for public view; Allow the FSPR to be searched against registration number, type of financial service and other names the financial service provider may be known by; Permit the Registrar to refuse access to the register for maintenance reasons or to ensure the integrity of the register s security. To ensure the publicly available information on the FSPR is as up-todate as it can be at all times. To ensure the Registrar can satisfy himself that applicants and registered providers on the FSPR are not disqualified from registration by reason of having certain criminal convictions. Require registered financial service providers to confirm or update their registered details on an annual basis on the FSPR; Permit the Registrar to update the FSPR if a Licensing Authority informs him that a registered financial service provider is no longer a licensed provider or the licence has been suspended. Require all individual applicants to provide the Registrar with details of their current residential address, other names they are otherwise known as, their date of birth and gender. Require all entity applicants to provide the Registrar with details of the full legal name, gender, date of birth and residential address (or name and registered office address if an entity) of its directors, senior managers and controlling owner; Empower the Registrar to check with the appropriate authorities that any individual involved with a financial service provider is not disqualified from registration by reason of a criminal conviction of the kind prohibited in the Act. To ensure the purpose of the Act (to assist NZ conform with its international anti-money laundering obligations) is met. Allow the Registrar to share information with the Reserve Bank, the Securities Commission and the Department of Internal Affairs in their capacities as agencies carrying out supervisory or enforcement functions relating to money laundering or terrorist financing.

20 20 Our best estimates of the number of financial service providers in New Zealand that will have to register on the FSPR are: Registered Banks 18 Other Financial Institutions 2,900 (incl. Building Societies, Unit Trusts, Intermediaries, Issuers) Insurance companies (General, Life) 175 Superannuation Scheme Individual Trustees 680 Financial Advisers 7,500 Estimated total (approx) 11,273 The cost to the Government in setting up the FSPR is likely to be in the region of $3 million. Cabinet agreed in December 2007 that the cost of providing and maintaining the FSPR would be fully third-party funded (EDC Min (07) 29/20) to ensure the fiscal impact of the new registration system is minimised. Applicants to the FSPR will be asked to pay to the Registrar a one-off application fee of $350 and, once registered, an on-going annual fee of $60 when they confirm (or update) their registered details. Financial service providers will also be asked to pay any fees incurred by the Registrar in checking they are not disqualified from registration by reason of having specific criminal convictions prohibited by the Act (currently $35 per person per check). These fees have been developed in accordance with Treasury s Guidelines for Setting Charges in the Public Sector and the Auditor General s Guidelines on Costing and Charging for Public Sector Goods and Services. In establishing the registration and annual confirmation fees, regard has been had to minimising compliance cost through having an electronic on-line register, a simple fees regime and not charging a fee for voluntary periodic updates to the register. Applicants will face a minor time cost for entering and maintaining the required information on the register. Those most likely to be affected by the proposed regulations are businesses in the financial services industry, consumers of financial services, and AML Supervisors. There is little compliance imposition on those impacted, particularly the applicants and those that have successfully registered on the FSPR, as they will have the required information readily available. Most financial service providers with legitimate business in New Zealand will most likely already have a presence in this country and there will only be a minor compliance cost for those that do not to establish a business address here. Consultation The Ministry of Justice, the Ministry of Consumer Affairs, the Securities Commission, the Reserve Bank, the Department of Internal Affairs, the Office of the Privacy Commissioner and Treasury were consulted during the preparation of this paper. The Department of the Prime Minister and Cabinet has been informed. No substantive public consultation has been undertaken on the contents of the regulations, although officials have informally discussed issues relating to the publicly viewable content of the FSPR with industry association representatives.