Competence, Knowledge, and Skills Standards
Table summarising major submission points raised on the second draft of the Code and the Committee's responses to those issues.
|Code Standard 13 (now CS 14) - Overarching competence requirement|
|No substantive issues were raised, other than queries as to how compliance with the obligation will be assessed.||The Code Committee was satisfied that no additional guidance was required in relation to this Code Standard.|
|Code Standard 14 (now CS 15) - Requirement to have an adequate knowledge of Code, Act, and laws|
|Is CS 14 necessary? If retained, shouldn't it just state a requirement to comply with Standard Set B?||Code Standard 15 was considered by the Committee to provide an important standalone knowledge standard. Whilst Standard Set B is the mechanism by which Code Standard 15 is satisfied, the overarching principle is what is primarily of concern. Expressed in this manner, the Code Standard provides a convenient option for the Securities Commission to grant exemptions from Code Standard 16 in appropriate circumstances, knowing that the AFA will still need to comply with the requirement to know the Code and relevant consumer protection laws.|
|Is CS 14 appropriate, given that no other profession requires its members to prove knowledge of the laws that govern their practice and they will need to comply with the law regardless?||Given the requirement under the Act to specify minimum standards of competence, knowledge and skills, the Committee was satisfied that insisting on a knowledge of the Code and relevant legal obligations was appropriate.|
|Should CS 14 and CS 15 be combined?||The Committee considered that it was desirable for knowledge of the Code and relevant legal obligations to be expressed as a standalone standard.|
|Code Standard 15 (now CS 16) - National Certificate in Financial Services (Financial Advice) (Level 5) requirement and alternative qualifications|
|Should an AFA also be required to prove that they have achieved a minimum CPD requirement over the 12 month professional body membership period set out in CS 15?||The requirement for CPD has been revised so as to remove reference to belonging to a professional body. The Committee understands that when individuals are applying for authorisation to the Securities Commission and the applicant is relying on a designation previously attained that has not been retained at the time, evidence of completion of CPD in the previous 12 months will be sought.|
|Should the requirement for an AFA to have been a member of a professional body for a continuous period of 12 months to fall within the exception set out in CS 15 be removed, or reduced to say 6 months? It was suggested that it was unfair to impose such a requirement less than 12 months prior to it needing to be observed.||See previous response - reference to membership of a professional body has been removed. The focus is on applicants having retained an ongoing involvement in the industry, and having kept their knowledge up to date. The Committee considered this would be adequately demonstrated through a requirement to have completed at least 20 hours of CPD in the 12 months preceding their application.|
|By failing to recognise experience, is CS 15 inconsistent with the purpose of the Act of encouraging public confidence in professionalism? It was suggested that common sense and fairness dictate that full relief should be given to all CFP's, irrespective of diploma qualifications.||The fundamental difficulty in recognising experience is that it cannot be assumed that all experience is good experience, or that a blemish-free record necessarily implies that the person is competent to an appropriate minimum level. Recognition of the quality of the professional programmes undertaken by those holding a CFP, CLU, CFA, CA or ACA designation has been provided by granting holders of those designations full relief against Standard Set C, as well as recognition against Standard Set A. The Committee did not consider that recognition of experience alone could be justified.|
|Should the Code specify a non-exhaustive list of existing bodies that are deemed to fall within the definition of 'professional body' in order to provide greater certainty? If so, one submitter noted they would like SIFA to be included on that list.||Consistent with the approach taken elsewhere in the Code, no list has been provided. Any organisation that satisfies the definition stated in the definitions scheme will qualify by virtue of that definition, i.e. it is a membership organisation, where ongoing membership requires compliance with continuing professional development or training requirements specified by that organisation. In particular, note that whilst it would not be regarded as a 'professional body' in ordinary parlance, NZX will fall within the concept of a professional body for the purposes of the Code.|
|Should CS 15 be reworked so that category 1 advisers who have completed any of the Diplomas set out in Standard Set D are not permitted to act in relation to category 2 without an additional formal relevant qualification?||Code Standard 14 provides an appropriate level of assurance that an AFA who is not competent in matters covered by any of the units in Standard Set E is prevented from advising on such matters, as doing so would result in a breach of Code Standard 14. Whilst attaining Standard Set D will be sufficient to enable a person to apply for authorisation (provided Standard Sets A, B and C have been satisfied or the person has other qualifications or designations that are able to be recognised in their place), all AFAs must still restrict their financial adviser services to matters in respect of which they are able to demonstrate that they have a reasonable basis for believing they have the level of competence, knowledge, and skills required. Attaining relevant units in Standard Set E will provide AFAs with something of a safe harbour if challenged on their competence to advise on matters covered by those units.|
|Should NZX advisors be granted relief from CS 15?||The NZX Advisor designation is recognised as an alternative to Standard Set A and Standard Set C. In addition, those with an NZSE or NZX diploma get recognition against Standard Set D. In the absence of the diploma, the Committee did not consider that relief against Standard Set D was warranted by virtue of NZX advisor designation alone. No relief is provided against Standard Set B.|
|Should CS 15 be extended to include express reference to relief for those granted exemptions by the Securities Commission?||The Committee did not consider it would be appropriate to include express reference to exemptions granted by the Securities Commission in the Code itself. Exemptions are operative as a matter of law, irrespective of what may be included in the Code.|
|Should ETITO or any other such body authorised by the Commissioner be able to specify an alternative qualification or designation as being equivalent to the National Certificate in Financial Services on a case-by-case basis?||The Committee received advice to the effect that it would be outside of their powers to effectively delegate their functions to a third party to recognise alternative qualifications. The Committee's only statutory power is to prescribe minimum standards. Where such recognition leads to an award of a qualification or unit standard, the Committee understand the education system possesses mechanisms for recognition on a case-by-case basis where there is sufficient evidence that the individual meets all of the requirements of the relevant unit standards.
These mechanisms place an onus on the individual to demonstrate how such qualifications or designations meet the required standards. The Code itself cannot describe how such an assessment will occur.
|The eligibility sunset mechanism is still causing confusion, despite attempts to clarify the meaning in the latest draft.||The eligibility sunset mechanism has again been clarified. The meaning of the term has now been spelled out as a final bullet point to Code Standard 16 and cross referenced in the heading to the Competence Alternatives Schedule. The overall impact of the eligibility sunset mechanism has not changed over the course of the various drafts of the Code. On each occasion, the mechanism has required the qualification, paper or designation in question to have been fully attained at the time the person seeks authorisation, although the Committee notes that a number of submitters still misinterpret the mechanism as contemplated in the first draft of the Code. To provide further clarity, in the final draft of the Code, the sunset date has been specified as 1 January 2014 in the body of the Code itself, as opposed to referring to an unspecified date three years in the future.