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FSP Laws & Regulations

The information on this page relates to some of the most important laws and how they typically apply to an FSP offering services either locally or to non New Zealand residents only. You can click on any of the law titles below to access our commentary as well as a link to the entire law.

 

Financial Service Provider (Dispute Resolution and Registration) Act 2008
Reserve Bank of New Zealand Act 1989
Securities Act 1978 (Gradually being replaced by the Financial Markets Conduct Act 2013)
Banking Act Repeal Act 1995
Financial Reporting Act 1993
Anti Money Laundering and Countering Financing of Terrorism Act 1996
Companies Act 1993

 

Click here to access all New Zealand Legislation

 

Financial Service Provider (Dispute Resolution and Registration) Act 2008
This law requires Financial Service Providers (FSPs) to be registered in the Financial Service Provider Register which finally went live in August 2010. This registration requirement applies to anyone offering services in or from New Zealand, regardless of where the clients of the FSP are located. FSPs offering services to retail customers are also required to join a government approved Dispute Resolution Scheme.

 

A Financial Service is defined as follows (Section 5a of the Act):

 

In this Act, financial service means any of the following financial services:


(a) a financial adviser service:
(ab) a broking service:
(b) acting as a deposit taker as defined in the Reserve Bank of New Zealand Act 1989:
(c) being a registered bank:
(d) keeping, investing, administering, or managing money, securities, or investment portfolios on behalf of other persons:
(e) providing credit under a credit contract:
(f) operating a money or value transfer service:
(g) issuing and managing means of payment (for example, credit and debit cards, cheques, travellers’ cheques, money orders, bankers’ drafts, and electronic money):
(h) giving financial guarantees:
(i) participating in an offer of securities to the public in either of the following capacities (within the meaning of those terms under section 2(1) of the Securities Act 1978):
(i) as an issuer of the securities:
(ii) as a promoter:
(ia) acting in any of the following capacities (within the meaning of those terms under section 2(1) of the Securities Act 1978) in respect of securities offered to the public:
(i) as a trustee:
(ii) as a unit trustee:
(iii) as a superannuation trustee:
(iv) as a manager:
(j) changing foreign currency:
(k) entering into derivative transactions, or trading in money market instruments, foreign exchange, interest rate and index instruments, transferable securities (including shares), and futures contracts on behalf of another person:
(l) providing forward foreign exchange contracts:
(m) acting as an insurer:
(n) providing any other financial service that is prescribed for the purposes of New Zealand complying with the FATF Recommendations, other recommendations by FATF, or other similar international obligations that are consistent with the purpose of this Act.

 

The entire Act can be accessed here:
Financial Service Provider (Dispute Resolution and Registration) Act 2008

 

Reserve Bank of New Zealand Act 2008
The Reserve Bank is the supervisory authority for Registered Banks in New Zealand. Only a Registered Bank can use the words Bank, Banker or Banking in its registered Company name or title (Section 64 of the Reserve Bank of New Zealand Act 1989). An entity is not required to be a Registered Bank under Reserve Bank supervision in order to legally offer banking services in/from New Zealand since the Banking Act 1982 was repealed in 1995 (Banking Act Repeal Act 1995) providing free entry to the business of banking. Any person or entity offering banking services, such as a Finance Company, Credit Union or other Financial Service Provider can legally and technically be considered a Bank but is not a Registered Bank under Reserve Bank supervision.

 

Entities which are not Registered Banks can legally use the restricted words Bank, Banker and Banking in marketing materials and advertisements required that the material contains a disclaimer stating that the entity is not a Registered Bank (Section 66B of the Reserve Bank of New Zealand Act 1989). This disclaimer should “be communicated in a manner that ensures, as far as is reasonably practicable, that the statement attracts the attention of the persons to whom the advertisement is directed”. For example a web page clearly advertising Banking Services should not have the required disclaimer hidden in the small print of a legal disclaimer page. A proper disclaimer for a FSP using the restricted words in its marketing could read as follows: “ABC Financial Services Ltd is offering services as a Finance Company and not as a Registered Bank. ABC Financial Services Ltd is registered as a Financial Services Provider in accordance with the Financial Service Providers (Dispute Resolution and Registration) Act 2008”.

 

The Reserve Bank also regulates Non Bank Deposit Takers (NBDTs). Entities considered Deposit Takers are subject to a number of requirements in regards to capital reserve ratio, credit rating, audited accounts, supervisory trustee etc. A Deposit Taker is defined as follows (Section 157C of the Reserve Bank of New Zealand Act 1989):

 

(1) For the purposes of this Part, deposit taker—
(a) means a person who—
(i) offers debt securities to the public in New Zealand; and
(ii) carries on the business of borrowing and lending money, or providing financial services, or both

 

Entities which do not offer services to residents of New Zealand are not considered Deposit Takers under the Reserve Bank regulations and thus not subject to the requirements mentioned above.

 

The entire Act can be accessed here:
Reserve Bank of New Zealand Act 1989e

 

Securities Act 1978
(This Act is gradually being replaced by the Financial Markets Conduct Act 2013)
This act regulates the financial industry in New Zealand and gives authority to the Securities Commission to act as regulatory body. An FSP offering services to the public in New Zealand is subject to requirements of supervisory trustee, registration of prospectus and investment statements. The requirements are set out in Part II of the Act. An FSP offering services to non NZ residents only is not subject to the requirements set out in Part II. The territorial scope is stated in part 7 of the Act:
7 Territorial Scope of Part 2:

 

(1) Part 2 applies to securities offered to the public in New Zealand, regardless of—
(a) where any resulting allotment occurs:
(b) where the issuer is resident, incorporated, or carries on business.

 

(2) For the purposes of this Act, a security is offered to a person in New Zealand if an offer of that security for subscription is received by a person in New Zealand, unless the issuer demonstrates that it took all reasonable steps to ensure that members of the public in New Zealand may not accept the offer.

 

Note that the activity of Deposit Taking would be considered offering of debt securities. FSPs offering debt securities (taking deposits) from non NZ residents only should consider including a disclaimer in marketing material etc stating that services are not available to NZ residents.

 

The entire Act can be accessed here:
Securities Act 1978
NOTE: This Act is gradually being replaced by the Financial Markets Conduct Act 2013

 

Banking Act Repeal Act 1995
New Zealand repealed its entire banking act in 1995. There are no formal capital requirements or qualification requirements stipulated in any law for the business of banking. Legislation passed in 2008 require Financial Service Providers to register in a new Register (FSPR) and the offering of financial services to the public in New Zealand is regulated through other laws, most notably the Securities Act 1978 and the Reserve Bank of New Zealand Act 1989. The Securities Act 1978 is gradually being replaced by the Financial Markets Conduct Act 2013. FSPs registered in New Zealand but only offering services to clients outside New Zealand operate outside the territorial scope of most regulatory requirements but are required to register as FSPs. Only Registered Banks under Reserve Bank supervision are allowed to use the restricted words Bank, Banker and Banking in a registered Company name.

 

Financial Reporting Act 1993
This Act regulates financial reporting requirements for New Zealand registered entities and overseas Companies operating in New Zealand. The most common Company form in New Zealand, the Limited Company (Ltd) is required to submit audited financial statements to the public Company register if the majority of shareholders are based outside New Zealand. This is one of the reasons we recommend the Limited Partnership (LP) as legal Company form. A Limited Partnership is not subject to this requirement even when structured with 100% ownership through offshore holding Companies.


The entire Financial Reporting Act 1993 can be accessed here:
Financial Reporting Act 1993

 

Anti-Money Laundering and Countering Financing of Terrorism Act 2009
This Act regulates obligations for financial institutions to verify the identity of its customers as well as the reporting requirements for suspicious transactions. Any Compliance Officer or other person involved with the AML and KYC procedures of an FSP should read this Act.

 

The entire Act can be accessed here:
Anti-Money Laundering and Countering of Financing of Terrorism Act 2009

 

Companies Act 1993
This Act regulates the incorporation and management of Limited Companies, the most common legal entity form in New Zealand. A Company can be formed with just one director and shareholder. Directors and shareholders can be of any nationality and resident anywhere.


The entire Act can be accessed here:
Companies Act 1993

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