The Financial Markets Authority (FMA) has released a consultation paper proposing to consolidate and streamline the standard conditions it imposes on market services licences under Part 6 of the Financial Markets Conduct Act (FMC Act) 2013

The FMA is also proposing, for the first time, to impose standard conditions on consumer credit providers, and to extend the internal complaints process and ongoing requirements conditions to several licence categories that are not currently subject to them.

What could change:

Currently, the FMA imposes a separate set of standard conditions for each type of licensed market service, creating overlap and complexity for licensees holding more than one licence. The FMA is proposing to consolidate all standard conditions into a single document and to streamline the drafting of conditions that currently have slightly different wording for different services. The FMA has designed a matrix and colour-coding for each standard condition showing which conditions apply to which licence types. These proposals amount to a welcome change that would remove the need to cross-check multiple sets of conditions.

Beyond this consolidation, the FMA’s main proposals are to:

·         Remove five standard conditions: the compliance condition (requiring adequate systems, policies, processes and controls), the governance arrangements condition (requiring governance and compliance arrangements to be maintained and material changes notified), the notification of material changes condition, the professional indemnity insurance notification condition for independent trustees, and the skills and expertise condition.

·         Impose six new standard conditions on creditors under consumer credit contracts: business continuity and technology systems, internal complaints process, ongoing requirements, outsourcing, record keeping, and regulatory returns. This is the first time standard conditions would apply to consumer credit provider licences, though most licensees already operating under other prudential or financial services regulation are likely to be meeting many of the proposed conditions’ substantive requirements already.

·         Extend the internal complaints process condition to seven licence categories not currently subject to it: including consumer credit providers, crowd funding intermediaries, derivatives issuers, providers of a discretionary investment management service, financial institutions, managers of registered schemes, and peer-to-peer lenders. This reflects a cross-sector FMA priority of ensuring customers are treated fairly when things go wrong, so expect closer attention to this area regardless of your licence type.

·         Extend the ongoing requirements condition to eight further licence categories: this would require those licensees to continue satisfying the FMC Act’s licensing criteria on an ongoing basis and, where applicable, would replace the compliance and governance arrangements conditions proposed to be removed.

·         Remove two notification requirements for independent trustees: as well as removing the professional indemnity insurance notification condition, the requirement to provide the FMA annually with a professional development plan and details of training undertaken would become an on-request requirement.

·         Derivatives issuers: the sector would continue to be the one subject to the most conditions, but some conditions would be clarified and the FMA has indicated it is open to tailoring the standard conditions if an issuer can show that retail investors would not be materially affected. The condition relating to suitability of products for investors would be carried forward unchanged, as the FMA is still considering the feedback received on changes to this condition following its 2024 consultation.

The FMA has also confirmed that some overlap with the Reserve Bank of New Zealand (RBNZ) will remain for dual-regulated licensees, since the FMA can only enforce conditions it has imposed itself, even where an equivalent RBNZ requirement already applies (for example, reporting material operational resilience incidents). The FMA says it will keep working with the RBNZ to reduce this duplication over time, but if you are dual-regulated, plan for continued overlap and duplicate reporting obligations in some areas, as these are not going away in this round of changes.

The proposals also suggest the FMA is moving towards a more consistent cross-sector licensing framework. While the licensing of different market services will continue to involve sector-specific considerations, the FMA appears increasingly focused on establishing a common baseline of governance, operational resilience, complaints handling and oversight requirements across licensed financial services businesses. This should reduce complexity for multi-licensed entities by making the core expectations of licensees more consistent across the regime.

Get in touch:

We are happy to help you assess how these proposals would affect your licence conditions, and to assist with preparing a submission.