Core Strand

Assignment One

This assignment assesses your competency in terms of the following unit standards:

31855 v1 Demonstrate and apply knowledge of financial services legislation, good conduct,
best practice, professionalism, and Six Step Process

By the end of this assignment, you will be able to:

- (LO1) demonstrate knowledge of the background to the financial services regulatory

environment and its framework;
- (LO2) demonstrate and apply knowledge of legislation and regulations and their impact in
a general financial services context;
- (LO3) apply good conduct and the principles of professionalism in a general financial
services context; and
- (LO4) demonstrate knowledge of the financial advice Six Step Process.

Instructions:
1. Answer all the questions in the space provided below.
2. Where applicable, you will be instructed on how many answers are required, e.g., minimum
of two (2).
3. For many questions, an example has been provided for you. This is to indicate the type of
answer and level of detail that is required.
4. Instances of academic dishonesty (e.g. plagiarism) will not be tolerated and will be subject to
disciplinary action.
5. Submit your assignment in Word format via your assignment portal on Radar. You have
already been emailed a user guide with step-by-step instructions on how to upload your
assignments.
6. Please contact support@strategi.ac.nz OR assessor@strategi.ac.nz should you require any
assistance.

Assessment schedule:

©Strategi Institute NZCFS Level 5 V2 Core Strand: Assignment One Page 1 of 20

 Assessment Tasks First attempt Second attempt Third attempt

Task 1 (LO1)

Task 2 (LO1)

Task 3.1 (LO2)

Task 3.2 (LO2)

Task 4.1 (LO3)

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 c

Task 4.2 (LO3)

Task 5 (LO4)

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 Task 1 (31855 1.1) (LO1)
New Zealand’s financial services regulatory environment today is quite different from that of twenty
years ago. Our environment today was the response to a number of key events, both national and
international.

The table below lists some of the events that resulted in today’s legislation, regulation and codes.
For each event, describe in your own words the impact it had on New Zealand’s financial services
regulatory environment, i.e., what changes/legislation were introduced.

The first event has been completed for you as an example.

Description of event Impact/influence on New Zealand’s regulatory environment

Finance company Resulted in the introduction of legislation/regulation within the
collapses between financial services industry e.g., FAA/FSPR/Code of Professional Conduct
2006 and 2012 for AFAs and growth of compliance requirements for advisers
a. Low levels of long- Govt introduced Savinving Working group in 2010. It helps the
term savings by government in making medium term saving stratergies & stimulate
NZers public discusiion on issue of nation saving. It helps NZ govt to borrow
less from offshore. Than Govt have introduced and designed work base
saving products for reteirement. Govt also introduced state sector
retirement savings scheme & New Zealand Superannuation fund.
b. Global Financial Global Financial Crisis , Govt have done legislative and regulatory
Crisis Changes. They include:
Financial advisers act 2008.
financial market conduct act 2013.
Reserve Bank of New Zealand also have done few changes to
strengthen country’s financial resilience. They are below :
Crown Retail Deposit Guarantee Scheme
Open Bank Resolution Policy
Prudential Liquidity Policy
The Reserve Bank initially set the minimum Core funding requirement
(CFR) to reduce the risk of Vulnerability of banking sector.
c. 9/11 Twin Towers Nz Joined Financial Action Task Force 1991. To stay with FATF New
attack Zealand introduced AML/CFT bill Parliament in 2009. It placed
obligations on all NZ financial institutes, financial companies, financial
advisers to detect and deter money laundering & terrorism financing
and later extended to all real estates, lawyers and accountant in 2018.
d. Formation of FMA By introducing FMA - It replaced the Securities Commission with the
through the FMA and empowered the authority to take legal action on behalf of
Financial Markets investors against directors, trustees and auditors to conduct market
Authority Act 2011 surveillance, prevent products being structured to avoid FMA
oversight, and warning powers on low-ball unsolicited offers.
e. New Zealand NZ joined FATF in 1991 & agreed to implement FATF polices. By Not
becoming member doing so can NZ can face blacklisted by FATF, this can effect NZ ability
of the Financial to obtain International financial services. To stay with FATF New
Action Task Force Zealand introduced AML/CFT bill Parliament in 2009. It placed
obligations on all NZ financial institutes, financial companies, financial
advisers to detect and deter money laundering & terrorism financing

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 and later extended to all real estates, lawyers and accountant
in 2018.

f. Basel Committee RBNZ is not a member of Basel Committee on Banking

on Banking Supervision but it does participate in the Basel Consultative
Supervision Group and provides submissions on proposals of the BCBS.
BASEL III has implemented in NZ on 1/1/2013 & more changes
took place on 31/03/2013. Now NZ registered banks are
required to disclose information on their Capital position in
their half yearly, and yearly disclosure statements. This also
implemented on NZ branches of overseas incorporated bank
and their banking group.

g. The Financial It brings the regulation of financial advice into the FMC Act.
Services These changes will significantly raise the bar for client advice
Legislation and process across the sector, requiring Financial advisor to
Amendment Act undertake additional training and organisations to review their
2019 amends the systems, policies, and procedures. One of the key legislative
Financial Markets change is the Financial Markets Conduct Act setting
Conduct Act 2013 governance, compliance and risk obligations for owners and
directors of licensed financial advice provider companies.

Task 2 (31855 1.2) (LO1)

New Zealand’s financial services regulatory framework is made up of a hierarchy of legislation,
regulations, codes (principles of professionalism), and good conduct expectations.

In your own words, describe each element of this hierarchy listed below and how the different
elements relate.

a. Legislation

Legislation is a law. When a proposed into Parliament, it is called a ‘bill’ and once it is passed by
Parliament and receives Royal Assent, then it becomes legislation and a law.
Ministry of business, innovation and employment (MBIE) drafts any legislation for financial
services industry.

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 b. Regulations

Regulation is a rules. Can address that by bylaws, proclamations, notices etc. It comes
in existence after law is made and provides in depth information about law and specify
how things need to be done. This can be amended quickly and do not require
Parliament approval to change.

c. Codes

Codes comes in existence after Legislations and Regulations. Codes apply when
legislations and regulations principals are put in place. These are easy and quick to
change and amend than legislation and Regulation

d. Good conduct expectations

Good conduct is truly about placing the interests of the client first, and acting with
integrity, while simultaneously generating a commercial return. Good conduct in
financial industry means good outcomes, being disciplined about meetings, compliance
obligations and disclosures. It also include setting clear expectations to the clients

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 Task 3.1 (31855 2.1, 2.3, 2.4) (LO2)
In your everyday work as a financial services provider, you are required to understand and comply with industry legislation. For the Acts listed below:

 Explain at least two (2) key requirements of each Act, that financial service providers need to follow.
 Describe at least two (2) compliance requirements - what you need to do to comply.
 Describe what systems and processes you have or will have in place (minimum of 3), to make sure you are complying with legislation and
regulations.
 Discuss at least two consequences of non-compliance - one formal (what the law states) and one informal.

An example has been completed for you.

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Key provisions
Legislation
(minimum of 2)
Example only:  Establishes the Code of
Financial Professional Conduct for
Advisers Act AFAs
2008 (repealed  Fundamental obligation
on 15 March to exercise care,
2021) diligence and skill
 Prescribes conduct and
disclosure obligations
 Specifies clients, products
and services advisers can
be involved with
depending on the type of
adviser
 Ensures that financial
advisers are held
accountable for the
services that they give to
retail clients and that
there are incentives for
financial advisers to
manage conflicts of
interest appropriately.
a. Financial 1. To make it
Service compulsory for all
©Strategi Institute
How can financial
services providers ensure Consequences of non-
Compliance requirements
compliance in their daily compliance (minimum of 1
(minimum of 2)
operations? (Minimum of formal and 1 informal)
3)
 Requires disclosure to  Checklists for client Formal
ensure clients can make interviews  Varying financial
informed decisions.  Refresher training penalties – e.g. providing
 Minimum competence plus ongoing CPD a financial adviser
requirements for advising  Templated service if not permitted
retail clients documents to do so, up to $10,000
 Must always place interests for an individual and up
of the client first to $50,000 for entity;
failure to meet
disclosure obligations up
to $100,00 for individual
or $300,000 for entity
 Censure by FMA
 Complaint to FADC
resulting in loss of
authorisation
Informal
 Poor customer service
leading to loss of
referrals
 Damage to reputation of
adviser and business
 Requirement to
undertake additional
training/work under
supervision
1. Be a part of approved 1. Keeping customer Formal
disputes resolution records by taking
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 How can financial
services providers ensure Consequences of non-
Key provisions Compliance requirements
Legislation compliance in their daily compliance (minimum of 1
(minimum of 2) (minimum of 2)
operations? (Minimum of formal and 1 informal)
3)
Providers financial servicer scheme either directly all precutions to Providing financial advice
(Registratio providers to register or through Qualified take care of without licence for an
n and in public available Financial Entity. clients privacy. individual prison up to 12
Dispute registers. Register is 2. Annual confirmation of 2. By Always months and fine up to
Resolution) publicly available. registration is required Providing $100,000 and for an entity
Act 2008 2. To promote the Appropirate fine up to $300,000
confident and disclosure
informed statements to the
participation of clients that clearly
businesses, describe the
investors, and dispute resolution Informal
consumers in the process. Loss of Reputation, Client
financial markets. 3. Always make sure and loss a confidence in you.
our disclosure
statement must
have clear details
of your dispute
resolution
scheme
b. Financial 1. It helps to avoid 1. FAP licence holder 1. Keep records of Formal
Markets unneccassary required to report any tracnsactons , A person who refuses or
Conduct Act complaints cost. changes when there is a records must bee fails, without reasonable
2013 2. It promote and change in the status of in English. excuse, to comply with an
facilitate the FAP insolvency and 2. Lodge the order made by the FMA
development of fair, bankruptcy. financials under this Act commits an
efficient and 2. Report when big statements and offence and is liable on
transparent financial transaction take place. auditors report on conviction to a fine not
markets. them with exceeding $300,000.

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 How can financial
services providers ensure Consequences of non-
Key provisions Compliance requirements
Legislation compliance in their daily compliance (minimum of 1
(minimum of 2) (minimum of 2)
operations? (Minimum of formal and 1 informal)
3)
companies office
within 4 months
after the balance
date.
3. Have their
financial Informal
statements Loose of Reputation and can
audited by loose licence
licensed auditior
or registered
audit firm.

c. Fair Trading 1. Should have proper 1. Keep records of 1. Advertise Formal

Act 1986 information & everything, what you carefully , make
products must be advertised. sure you back up A company can be fine
disclosed to 2. Don’t provide information with uptown to $600,000 and
consumers and helps misleading or wrong facts. individual can be up to
ensure products are information about any 2. Make sure $200,000 by commerce
safe. Don’t mislead product. customer commission
client while understand you
advertising any write like
product. keyfeatures and
2. Identity and stops benefits of
unfair conducts and product. Informal
promotes fair 3. Avertised only for
conduct and products Loss of Reputation, Lots of
practices in relation available. extra cost to reprit
to trade advertisement again.

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 How can financial
services providers ensure Consequences of non-
Key provisions Compliance requirements
Legislation compliance in their daily compliance (minimum of 1
(minimum of 2) (minimum of 2)
operations? (Minimum of formal and 1 informal)
3)

d. Consumer 1. Act protect 1. Financial advicer should 1. Inform the Formal

Guarantees consumer from poor make sure product customer before If the fauty service cause
Act 1993 quality goods & reccomended is fit for about the fees damage to consumer
services. service. and charges property than consumer can
2. The service will be 2. Make sure charge a about the claim compensation.
carried out with reasonable price for product.
reasonable care and service. 2. Recommend
skill product according
to customer need.
3. Always tell the Informal
customer about
time frame it will Loss of Reputation and good
take about the will.
agreed service.

e. Privacy Act 1. It specify how 1. Cannot pass 1. Get a concent Formal

2020 personal information information to others from customer to The Human Rights Review
can be collected, without customer share their Tribunal can enforce a
used, stored and consent. information to 3rd compliance notice by making
disclosed. 2. Don’t ask extra party. an order for an organisation
2. It also ensure the information which is 2. Update to comply with a compliance
information not needed for fact information notice, or to undertake a
collected will only be finding. periodically ,If specific course of action to
used to do agreed information is in remedy a breach. Failure to
purpose. digital form make comply with an order may

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 How can financial
services providers ensure Consequences of non-
Key provisions Compliance requirements
Legislation compliance in their daily compliance (minimum of 1
(minimum of 2) (minimum of 2)
operations? (Minimum of formal and 1 informal)
3)
sure computers attract a fine of up to
are password $10,000.00
protected.
3. If documents in Informal
paper form make
sure they are Loss of Reputation and good
looked in safes. will & advisor can loose
his/her licence.

f. AML/CFT 1. Detect and deter 1. Conduct thorough & 1. Do the due Formal
Act 2013 money laundering robust Customer Due diligence
and the financing of Diligence (CDD) properly, don’t attract a fine up to $300,000
terrorism. appropriate to the risk miss anything. and/or a term of
2. Helps contribute to a client presents. 2. Report suspicious imprisonment up to 2 years
public confidence in 2. Do not rely on third activities. for individuals, and a fine up
the financial system party customer due 3. Keeping the to $5 million for an entity.
diligence & identity AML/CFT
verification. programme up-
to-date. Informal
Loose of reputation

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 Task 3.2 (31855 2.2) (LO2)
The legislative and regulatory requirements listed below need to be followed in a financial services providers’ daily operations:

The Fair Trading Act 1986 c) Provision of service or product ‘reasonably fit for purpose’

a) Misleading and deceptive conduct Privacy Act 2020

b) False or misleading representations
a) Information privacy principles
Consumer Guarantees Act 1993
AML/CFT Act 2013
a) Reasonable care and skill in providing a service
a) Client ID and customer due diligence
b) Nature and quality of a service or product
b) Reporting of suspicious activities

Read carefully through the scenario below and complete the table at the end.

Scenario
Rui has just received a promotion at work and has decided he needs to sign up for KiwiSaver. At lunchtime he walks down Queen Street and sees a
financial adviser’s office advertising that they can offer the best rate of return for KiwiSaver.

Rui meets with one of the advisers (Steve). Rui tells Steve that in five years time, he wants to buy a property to live in. He tells Steve he already owns a
part share in a rental property with his brother. Steve tells him not to worry as he will be able to find a way for Rui to access his KiwiSaver Scheme to buy
the home .

Steve indicates that Rui can use his KiwiSaver Scheme to purchase his first-time home. He recommends Rui contributes 8 % of his salary and join an
aggressive fund. Rui signs up to the recommended KiwiSaver Scheme. Three (3) years later, Rui finds a home that he likes and puts an offer in to buy the
property.

Rui goes back to see Steve, but Steve has left the business to set up his own financial advice and IT company, and so he sees Benedict instead for help in

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 getting a mortgage to buy his first-time home. He has $150,000 deposit in cash made up from his savings and other business dealings.
Benedict is surprised at how much Rui has saved in 3 years as his income is only $60,000 p.a., but decides it is none of his business. Benedict
tells Rui he should have no problem in getting a loan for the remaining $650,000.

Rui approaches his KiwiSaver Scheme provider to request the withdrawal of his KiwiSaver Scheme savings so he can contribute that to the
house purchase. The provider advises Rui that he cannot access the funds as he already owns a part share in another property with his
brother.

Rui goes back to Benedict to complain. Benedict looks at Steve’s file notes, which make no mention of Rui advising he was a part-owner of a
rental property. Therefore, Benedict tells Rui that it is his own fault that he cannot access his KiwiSaver Scheme for his house. Benedict gives
Rui the contact details of IFSO and tells him to complain to them. Rui leaves the office and Benedict thinks no more of it.

The adviser Rui first saw, Steve, decides to expand his business interests and moves into developing IT systems for clients. He thinks this
venture will do well as he took a ready-made database from his existing clientele in the financial advisory business. He sends out newsletters
to all his old clients telling them of his new IT business venture, and that he has added mortgage advice to his advisory business.

Describe how each of the requirements listed below apply to the given scenario.

An example has been completed for you.

Legislation Explanation
Fair Trading Act 1986 a) Misleading and deceptive conduct
Advertising the ‘best rate of return’ is misleading

b) False or misleading representations

Steve states he will find a way for Rui to access his KiwiSaver scheme to purchase his future home. Benedict
indicates Rui will have no problem getting a loan for $650,000
a. Consumer Guarantees Act a) Reasonable care and skill in providing a service
1993 Steve did not write the key information regarding Rui psrt ownership with in his brother property & did not mention
how he can buy next property with Kiwisaver.

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 b) Nature and quality of a service or product
Steve reccomendations were not good enough, he did not consider that Rui want to buy property in 5 years
time and recommended him aggressive funds he should of provided enough comparison between
investment funds before recommending him aggressive type funds.

c) Provision of service or product ‘reasonably fit for purpose’

Rui wanted to buy property in 5 years time and Steve recommended him aggressive funds with 8 %
contribution was not fit for Rui’s needs.

b. Privacy Act 2020 a) Information privacy principles

Steve used database to send emails to clients from his previous job in his IT company without clients
concen, which breaches privacy act..

c. AML/CFT Act 2013 a) Client ID and Due Diligence

Bendict did not do any due diligence on Rui & did not check his ID etc. Even he was suspeicious about Rui’s
savings he did not do any due diligence who he saved that much money in very short period of time.

b) Reporting of suspicious activities

Even he was suspeicious about Rui’s savings he did not do any due diligence and did not report any
suspicious activity.

d. Complaints and DRS a) Complaints and DRS processes

processes Benedict gives Rui the contact details of IFSO and tells him to complain to them, as this not enough as the
advisor he should also told him how to complain & where to complain.
Task 4 (31855 3.1, 3.2) (LO3)
Read carefully through the scenario and complete the table below.

Scenario
Jian Huo has recently arrived in New Zealand to live and work. He has found work as an IT programmer. He wants to take out insurance in case he has an
accident or gets ill as he has a young family (wife and two children under five) and no support in New Zealand. He currently has no insurance of any kind.

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 Jian has brought all their possessions (including some valuable jade) and their life savings to New Zealand (NZD150,000). He wants to use their
savings towards buying a house in three years’ time so his elderly mother can come and live with them. In the meantime, he wants to invest
the money and get a good return.

Jian has undertaken no estate planning (i.e. no Will nor EPAs).

He thinks it is wise to see a financial adviser as he does not know much about investing or insurance and his English is not great.

He finds Min Ding, an insurance adviser, online and decides to make an appointment with her. He chose her based on her name and hopes
that as she appears to also be from China, she will understand him better.

On the day of the appointment, Min is hospitalised. When Jian turns up for the appointment, rather than make another time he agrees to
speak to another insurance adviser, you. You are a personal risk adviser (life, disability and health), and have agreements with Partners Life
and Asteron.

4.1 Using the table below, describe or explain how you would apply the good conduct elements and principles of professionalism listed, when providing
financial advice services to Jian. A minimum of two (2) ways to apply each element to the given scenario is required.

The first element has been completed for you as an example.

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 Elements of good conduct and principles of
How would you apply it to the scenario (minimum of 2)
professionalism
Adopting best practice processes
a. Maintaining confidentiality
b. Meeting duty of care
c. Adopting non-discriminatory practices
d. Full disclosure of remuneration
e. Full disclosure of other conflicts of interest that may
influence your recommendations
©Strategi Institute
 Ensure that I go beyond just legislative compliance and adopt actions,
behaviours, systems and processes that will mean Jian’s experience and
expectations are met and exceeded;
 I place his interests first, and act with integrity.
1. As advisor I will make sure the personal information of client will protected
and will not be shared with 3rd party without clients consent.
2. I will also explain him that I will share his information on with Partners life
and Aestron to get suitable product according to her needs.
1. I will make sure I only recommend him product according to his needs , I will
not try to upsell.
2. I will also explains the pro and cons of the product clearly, so he can make
sound decision.
1. I will not treat Jian unfairly on basis on his Sex, Gender, colour, Religion, race,
Nationality or age.
2. I will also understands English is not his first language, so I will make shore I
will explain everything to him clearly and in plain English. And make sure he
will not feel discriminated due to language..
1. I need to explain and disclose how I will get paid by Insurance company by
selling their products.
2. I will also make sure my disclosures are clear and in plain english, Client must
understand them. Disclosures should not be tricky or confusing to Jian
before he makes any decision.
1. I Recommend product which suits Juins needs and is not in my interest in any
way with my remuernation, position and my relationship with partners and
Asteron life insurance.
2. I will make sure that I explain. How I will get paid to Juian and my conflicts of
interest before he can make his decision.
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 f. Acting in good faith 1. I will make sure that I act for client for his good faith honestly.
2. I make sure and I will deal with Jian fairly on our agreed contract.

g. Remaining within field of competence
h. Managing client information to appropriate
standards
1. I will only advise client about insureances.
2. As I know he is new to Country and is also seeking an advice on buying a
property, I will make sure and only give him advice in life, disability and
health Insurance products , if he needs advice on anything else , I must
referred him to qualify person in that field.
1. I make sure that I inform Jian how , why I collect personal information and
how I will use this and where I will store this and will not be shared with 3 rd
party without his concent.
2. I will make sure his original documents will be saved in fireproff locked vault.

4.2 Describe in approximately 150-200 words how you would present your advice to Jian, considering:
 His cultural background
 His level of financial understanding
 The nature and scope of advice to be provided.

Answer:

Jian has recently moved to NZ. He has $150k of savings and he wants to invest that & wants to make good Returns on investment.
He wants to buy a house in 3 years as he moved to NZ with his family.
When I will give him financial advice I will consider his future goals before recommending him some thing. I will also make sure
he will understands me as English is not his first language and will provide him required disclosures statement in written aswell. I
will make sure I am advising him fair, clearly & should discriminate basis on his nationality, age and other factors etc. As I know
he is new to Country and is also seeking an advice on buying a property, I will make sure and only give him advice in life,
disability and health Insurance products , if he needs advice on anything else , I must referred him to qualify person in that field.

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 Task 5 (31855 4.1, 4.2) (LO4)
This task requires you to demonstrate your knowledge of the six step advice process.

For each of the steps listed below, in your own words:

 Describe the activities that take place in the step, and

 Explain why these activities are important and how they contribute to providing ‘fit-for-purpose’ client solutions?

Why these activities are important and how they contribute

Advice Process Steps
a. Establish and define
the relationship
b. Collect information and
determine goals
Description of the activities that take place in that step
to providing ‘fit-for-purpose’ client solutions?
Adviser must go through his disclosure statements with Advisor should clearly explain the scope of services provided
clients and scope of service document with clients.In by advisers, and their relevant experience, which will make
this step, Adviser must throughly explained the services sure adviser’s advise and recommendation will suit
they will provide and how this financial advice can help customer’s goals and needs.
customers to reach their goals.
Explained what financial advise/services could provide
my adviser. Also discussed about adviser’s registration,
relevant experience.
Identify the customer financials goals and needs. advise and recommendations provided by advisers must
Collecting and verify documents required before giving meet customer need and future goals.
any advise and recommendation.

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 c. Analyse and evaluate Analysing clients information thoroughly with in the
information scope of engagement to have good understand of
customer needs and financial goals. Priorities
customers needs and objective based on the their
strength and weakness of their current financial
goal.
d. Develop Advisor should provide one or more options that
recommendations suits clients needs and provide financial advice
and present to the backed up with the information provided to client.
client It is very important that the advisor also provide
advantages and disadvantages of the recommended
product and service , so client can make informed
decision.
e. Implement the In this process customer do take advisers
recommendations recommendations and advises and proceed with it.
Timeframes also need to be discussed, with the
client and advice them how long the process will
take & both parties agreed upon and documented
at this stage.
f. Monitor and review Mutual agreement between both parties (advisor &
the Client) about review clients financial situation after
recommendations certain time..
©Strategi Institute NZCFS Level 5 V2 Core Strand: Assignment One
FA must do proper and in depth research on include with
product disclosure, policy, T&C and underwriter product
and services which suits with customer needs and
financial goals, before recommending any advise.
Reccomendationn & advice is important to client so
he/she can make a sound decision based on
recommendations.
Providing all required disclosure to the customer by
advisers.
To back up advisers recommendations are suitable to
customer’s financial situation & needs.
If customer’s financial and material situation changes, it is
important for the client to meet the advisers, to get
advise based on current situation and future financial
needs client has.
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