On 12 July 2023, the Financial Markets Authority (FMA) released a consultation paper proposing an additional business continuity and technology systems standard licence condition for certain market service licences (the Consultation Paper). The FMA is seeking responses to the Consultation Paper by 1 September 2023, at 5pm.
Under Part 6 of the Financial Markets Conduct Act 2014 (FMCA), certain providers of market services need to hold the corresponding market service licence. There are six types of market service licences, including:
- Managers of registered (but not restricted) schemes
- Financial advice providers
- Providers of discretionary investment management services
- Providers of prescribed intermediary services
- Derivatives issuers in respect of a regulated offer of derivatives
- Financial institutions (noting that this requirement does not come into force until 31 March 2025).
A market service licence is subject to a range of standard conditions, which are imposed by the FMA. Each type of market service licence can have a different set of standard conditions.
What has happened?
The Consultation Paper proposes a new business continuity and technology systems standard condition for holders of certain market service licences, listed below.
This standard condition will require the licence holder to:
- Prepare and maintain a business continuity plan (BCP)
- Ensure operational resilience of any technology systems, which if disrupted, would materially alter the provision of the relevant market service
- Notify the FMA as soon as possible (and no later than 72 hours) after discovering any event that materially impacts the operational resilience of those technology systems, and provide details of the event and impact on the market service and recipients of the service.
The proposed business continuity and technology systems condition is substantially the same as the business continuity and technology systems condition for the financial institution market service licence and for the full financial advice provider market service licence.
Who does this effect?
The Consultation Paper is relevant for those businesses who currently hold one of the following market service licences, as it is the holders of these types of market service licences who will need to comply with the proposed condition:
- Managers of registered (but not restricted) schemes
- Providers of discretionary investment management services
- Derivatives issuers in respect of a regulated offer of derivatives
- Providers of prescribed intermediary services (ie peer to peer lending and crowdfunding service providers).
What do I need to consider?
Each licence holder of an affected market service licence will need to, prior to the business continuity and technology system condition being applied, ensure they have an adequate BCP, sufficient operational resilience of core systems, and processes for notifying the FMA following a material disruption.
If the proposed standard condition is applied, the FMA has indicated that this would likely occur between one and three months following the condition being finalised.
If you have any questions about the proposed business continuity and technology systems condition or about compliance with your requirements as a market service licence holder, please contact a member of our financial services regulation team.
