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A Description of Financial Services Laws in New Zealand

New Zealand has a highly developed financial services regulatory regime, with comprehensive licensing requirements. It is favourably regarded for its "ease of doing business" compared to many other countries. For those businesses contemplating offering banking services, broking, managing investments, providing financial advice, providing insurance, taking deposits or offering other financial services to, from or for persons resident in New Zealand, following is a brief summary of the legal landscape for financial service providers in New Zealand laws.

Overview of licensing, registration and compliance requirements

Licensing is required for registered banks, insurers, non-bank deposit-takers, fund managers and derivatives issuers (in respect of products offered to retail investors), certain supervisor trustees, discretionary investment management service (DIMS) providers who offer retail services on a class basis, providers of crowd funding and peer-to-peer lending services, operators of financial product markets (such as a stock exchange) and auditors.

Financial service providers must register on the Financial Service Providers Register. Those who provide retail services need to engage a dispute resolution service.

Financial advisers and DIMS providers who provide personalised services to retail clients in relation to more complex products (not, for example, bank deposits) must be authorised.

Fund managers and other financial product providers, financial advisers, DIMS providers, derivatives issuers, supervisor trustees, brokers and custodians must also comply with a range of money handling, financial reporting and other conduct obligations.

Foreign financial service providers who provide financial services solely to wholesale clients (such as investment businesses, fund managers, large companies, government entities and certain eligible investors) are relieved from registration requirements.

A financial institution which is engaged in certain financial activities in New Zealand must comply with the requirements of New Zealand's anti-money laundering and countering financing of terrorism legislation.

Bank registration

Any financial institution that carries on any activity directly or indirectly in New Zealand with a name or title that includes "Bank", "Banker" or "Banking" must be authorised to use that name in New Zealand by the Reserve Bank. Overseas banks may be able to obtain limited relief for certain activities where the restricted words can be used without being a registered bank.

Registered banks are subject to the full regulatory oversight (including prudential supervision) of the Reserve Bank. Only financial institutions that can demonstrate an ability to carry on their business in a prudent manner, and which have appropriate standing and repute in the financial markets, are permitted to be registered as banks in New Zealand. The Reserve Bank takes into account both qualitative (the applicant's financial standing and ability to manage its business prudently) and quantitative criteria (key prudential requirements).

Overseas banks must have the approval of and comply with the prudential requirements of their home supervisor to conduct banking business in New Zealand.

Overseas banks which are not registered banks in New Zealand need to comply with certain conditions and file their financial statements with the New Zealand Companies Office, if they operate bank accounts or offer debt securities to retail investors in New Zealand.

Non-bank deposit takers

Anyone who takes deposits or offers debt securities to retail investors and carries on the business of borrowing and lending money must be licensed as a non-bank deposit taker by the Reserve Bank. Relief can be obtained for overseas banks in some circumstances.

Non-bank deposit takers must comply with a range of prudential obligations under the applicable legislation.


All insurers and reinsurers carrying on insurance business in New Zealand must be licensed by the Reserve Bank. Licence obligations include:

  • maintaining solvency and filing solvency statements, in accordance with standards prescribed by the Reserve Bank
  • having an appointed actuary
  • obtaining, publishing and disclosing to New Zealand policy holders and the Reserve Bank current financial strength ratings (i.e. a credit rating) from an approved rating agency, and
  • establishing and complying with "fit and proper" policies for directors and senior officers.

Life insurers must maintain at least one statutory fund that relates solely to the insurer's life insurance business and is available to meet life insurance liabilities.

Generally, an overseas entity carrying on business in New Zealand will not be able to use a name or title including the words "insurance", "assurance", "underwriter" or "reinsurance" (or similar words), without an exemption from the Reserve Bank.

Offering investments in New Zealand

Various obligations apply to how financial products are created, promoted and sold to both retail and wholesale investors in New Zealand. These include:

  • disclosure requirements when making a regulated offer of financial products to investors in New Zealand (refer to the Investing in New Zealand's capital markets section)
  • fair dealing rules which prohibit disclosure in New Zealand that is likely to mislead or deceive the public in relation to financial products or services. The fair dealing rules apply to conduct in New Zealand in relation to financial products whether related to retail or wholesale offers
  • registration and governance requirements for managed investment schemes, debt securities, KiwiSaver and superannuation schemes
  • financial reporting obligations for issuers, fund managers, registered banks, insurers and other licensed entities. Each reporting entity must prepare audited financial statements (or group financial statements, if it has any subsidiaries) and register these with the New Zealand Companies Office, and
  • investor money handling rules for offers of derivatives to both retail and wholesale investors.

Offering investments in New Zealand

If a managed investment scheme is offered to retail investors in New Zealand, it will need to be registered in New Zealand under New Zealand law. Registered managed investment schemes are highly regulated and must comply with specific registration, disclosure and governance requirements. The manager of the scheme must be licensed and an independent licensed supervisor (trustee) must be appointed.

If the scheme is marketed solely to wholesale investors in New Zealand, it will not need to be registered.

The Trans-Tasman mutual recognition regime allows Australian offerors to use their Product Disclosure Statement (PDS) and prospectuses in New Zealand, without requiring the manager to be licensed.

Financial Service Providers Register

Anyone who carries out certain financial services in New Zealand must be registered as a financial service provider on the Financial Service Providers Register. This includes financial advisers, banks, securities issuers, fund managers, custodians, money managers, credit contract providers, credit card providers, travellers cheque providers, currency exchanges, insurers, trustees, listed companies, issuers of derivatives to the public and foreign exchange dealers.

Foreign financial service providers who reside outside New Zealand and provide financial services in New Zealand will generally not need to register (provided they are not offering financial advice in New Zealand).

Registration as a financial service provider on the Financial Service Providers Register is not a licence or an endorsement by the Financial Markets Authority.

Depending on the nature of the financial services offered by the registered entity in New Zealand, it may also need to be authorised or obtain a market services licence.

If financial services are provided to retail clients, the financial service provider must also join an approved dispute resolution scheme.

Registered providers can be deregistered if their registration is likely to be misleading as to the extent financial services are provided in New Zealand or from a place of business in New Zealand, the provider is regulated by New Zealand law or the registration would damage the integrity or reputation of New Zealand financial markets.

Financial advisers and discretionary investment managers

Any person who advises on financial products or provides an investment planning service is subject to certain disclosure requirements and conduct obligations.

The requirements apply to financial service providers resident overseas, if the service is provided in New Zealand.

Persons providing services on a personalised basis relating to more complex products will generally also have to become authorised by the Financial Markets Authority and meet certain standards. This will require them to:

  • meet certain authorisation criteria and have certain prescribed qualifications (which generally are available only in New Zealand)
  • provide certain prescribed disclosures to their clients
  • meet certain conduct obligations relating to ethical, client care, competence, knowledge, skills and continuous training standards, and
  • be party to an approved dispute resolution service.

Any person who makes investment management decisions on behalf of another person under an authority is subject to certain conduct disclosure obligations, and needs to be licensed if the services are non-personalised.

Reduced requirements apply in relation to services provided to wholesale clients (such as investment businesses, fund managers, large companies, government entities and certain eligible investors) or only on a class basis.

Brokers and custodians

Brokers and custodians who carry on the business of receiving and holding, paying or transferring client money or client property must comply with certain disclosure and conduct obligations.

These obligations apply whether or not the business is the provider's only business or the provider's principal business and regardless of whether the service is provided from overseas or in New Zealand.

Fewer conduct obligations apply to brokers providing broking services only to certain wholesale clients than to those providing services to retail clients.

Foreign exchange market

There are no restrictions on the buying and selling of foreign currencies. The New Zealand banking system offers a full range of foreign exchange services including spot, forwards, futures, options and the more sophisticated derivative products.

New Zealand operates a very open regime. Borrowers may raise finance on and off-shore and in the currency of choice. Banks are actively engaged in the provision of short and medium-to-long term debt to the consumer, commercial and corporate sectors. Market forces determine the level of interest rates.

Repatriation of funds

There is no restriction on the repatriation of capital or earnings of a New Zealand business to overseas investors. This includes the remitting of dividends, profits, interest, royalties, management fees, etc. In many cases, however, non-resident withholding tax will be required to be deducted from the amount of those payments.

Anti-money laundering legislation

The New Zealand anti-money laundering and countering financing of terrorism (AML/CFT) regime requires overseas entities engaged in certain financial activities in the ordinary course of business in New Zealand to:

  • carry out various levels of customer monitoring and due diligence, identity verification and suspicious transaction reporting in accordance with the AML/CFT legislation
  • undertake and prepare a written risk assessment of the risk of money laundering and the financing of terrorism that it may reasonably expect to face in the course of its business, and
  • establish, implement and maintain an AML/CFT compliance programme under the administration of a dedicated compliance officer.

Other regulations

New Zealand also has rules regarding:

  • registration as an overseas company when a foreign company is carrying on business in New Zealand
  • compliance with Foreign Account Tax Compliance Act (FATCA), automatic exchange of information (AEOI) and Common Reporting Standard (CRS), and
  • registration and establishment of limited partnerships.

This summary is necessarily generalised. There may be exceptions depending on your particular circumstances. It is suggested you seek advice before proceeding with any proposal.