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Financial Markets Authority

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Requirements for Obtaining a License under the Financial Markets Authority (FMA)

To obtain a license from the Financial Markets Authority (FMA) in New Zealand, applicants, including financial institutions and brokers, must meet strict regulatory standards designed to ensure market integrity, investor protection, and compliance with financial laws. Below is a structured overview of the process, fees, and key conditions for obtaining a license, specifically for Derivatives Issuers.

1. License Fees

The costs associated with applying for various financial services licenses under the FMA include:

  • Derivatives Issuer License:
  • Application Fee: NZD 10,695
  • Evaluation Time: 70 hours
  • Fees Payable to FMA Board: NZD 16,100
  • Fees Payable to FMA Staff: NZD 12,477.50
  • Basic Application Fee:
  • NZD 1,024.93 (inclusive of GST) for general financial institution licenses.
  • Additional Charges: NZD 178.25 per hour for assessments exceeding 6.75 hours.
  • Authorized Body Fee:
  • NZD 614.95 per body included in the license.
  • Variation of License Conditions:
  • NZD 115, plus NZD 178.25 per hour for work carried out.

2. License Application Process

The licensing process consists of 8 key steps:

  1. Determine Your Need for a License:
  2. Confirm whether your organization requires an FMA license based on your financial activities.
  3. Review Application Questions:
  4. Familiarize yourself with FMA’s licensing guide and assess any gaps in your readiness.
  5. Prepare a Fair Conduct Programme (FCP):
  6. Develop a board-approved Fair Conduct Programme to ensure compliance with fair and transparent operations.
  7. Basic Administration:
  8. Register on the Financial Service Providers Register (FSPR) at least 24 hours before beginning your online application.
  9. Access the Application Portal:
  10. Log in to the FMA’s secure portal to start the process.
  11. Draft and Submit Application:
  12. Complete the application at your own pace and submit when ready.
  13. Seek Guidance if Needed:
  14. Contact the FMA or consult professional advisors for clarification or assistance.
  15. Submit Your Application:
  16. Finalize your submission, and the FMA will begin its review.

3. Key Requirements for Derivatives Issuer License

For a Derivatives Issuer License, foreign exchange brokers must meet the following conditions:

  1. Licensed Operations:
  • Prohibit trading with unlicensed financial institutions.
  1. Outsourcing Standards:
  • Any outsourced systems or partners must comply with FMA standards, and legal binding agreements must be in place.
  1. Record-Keeping:
  • Maintain comprehensive and auditable records of all operations.
  1. Regulatory Feedback:
  • Demonstrate the ability to continue operating the offered financial products.
  1. Compliance Systems:
  • Establish effective and appropriate systems, policies, and procedures that comply with FMA requirements.
  1. Supervisory Mechanisms:
  • Ensure compliance mechanisms align with or exceed FMA recommendations.
  1. Dispute Resolution:
  • Implement a stable and effective dispute resolution mechanism equivalent to or better than FMA standards.
  1. Cash Flow Reporting:
  • Provide detailed cash flow reports.
  1. Minimum Net Worth:
  • Maintain a tangible net worth of at least NZD 1,000,000 at all times.
  1. Risk Control Mechanism:
  • Develop a robust and well-documented risk management framework.
  1. Qualified Auditor Reports:
  • Appoint a qualified auditor to submit attestation reports and net worth assessments.
  1. Suitable Financial Products:
  • Offer appropriate and compliant financial products that meet customer needs.

4. Processing Time

The evaluation timeframe for licensing depends on the type of application:

  • Derivatives Issuer: 70 hours
  • Crowdfunding and Peer-to-Peer Lending: 40 hours
  • Discretionary Investment Management (DIMS) Provider: 15 hours
  • Manager of Registered Scheme: 25 hours

Conclusion

Meeting FMA’s licensing requirements demands thorough preparation, from robust risk management systems to sufficient capital reserves. Adhering to these criteria ensures financial service providers operate responsibly, protecting investors while fostering trust and stability within New Zealand’s financial markets.