Two New Zealand credentials look similar on a website footer and mean completely different things. One is registration on the Financial Service Providers Register, which is an administrative listing. The other is a derivatives issuer licence granted by the Financial Markets Authority after an assessment of your capability, capital, systems and people. For a decade the first was sold as if it were the second, mostly to clients on the other side of the world, and the cleanup shaped the rules that exist now.
What the licence covers
The framework is the Financial Markets Conduct Act 2013. A firm that issues derivatives to retail investors, which covers contracts for difference and margin foreign exchange, needs a derivatives issuer licence from the FMA. The application is a capability assessment rather than a form: governance, directors and senior managers who are fit for the role, risk management, systems that can do what you claim, professional indemnity arrangements, outsourcing controls, and capital appropriate to the business.
Licensed issuers must also prepare a product disclosure statement lodged on the public Disclose Register, hold client money in separate trust accounts with reporting on it, and be a member of an approved dispute resolution scheme for retail clients. There is no single headline capital number to quote, because the requirement follows the scale and the risk of the business you propose.
The registration trap, and how it was closed
Registration on the FSPR is not authorisation. It became a problem when offshore operators registered New Zealand shells with no real presence and used the listing as a credibility marker abroad. The response was a territorial connection test and a power to deregister firms whose registration would damage the integrity or reputation of New Zealand's markets, exercised against firms with no meaningful local business.
The practical effect for anyone shopping for a jurisdiction: a New Zealand registration without a licence buys you very little now, and it buys you nothing with a compliance officer at a bank. The same confusion recurs everywhere, which is why licence versus registration is the first thing to establish about any jurisdiction on your shortlist.
This describes the framework, it is not legal advice. FMA licensing is a formal process and applicants use New Zealand counsel and, usually, a local licensing consultant.
Who accepts a New Zealand licence
A genuine FMA licence is a well regarded credential. New Zealand is a member of the usual international standard setting bodies, it is not on any grey list, and its supervision is taken seriously by counterparties. What it does not do is make you local everywhere else.
- New Zealand and Australian banks will look at a licensed issuer with a local entity, local directors and audited accounts. They will still apply their own de-risking policies to the retail derivatives category, and correspondent banking pressure travels down the chain.
- Acquirers price on merchant category and chargeback ratio. A licence improves underwriting, and it does not exempt you from rolling reserves in a high risk category.
- Liquidity providers rate the jurisdiction well, which usually shows up as better terms rather than as access you would otherwise be refused.
- App stores and advertising platforms want authorisation evidence per target country. A New Zealand licence covers New Zealand clients, not clients in Europe or the Gulf.
That last point catches out firms who assume a respectable licence permits global marketing. It does not. Serving clients in another jurisdiction usually needs a permission there, which is the same conclusion firms reach when they compare it with an ASIC authorisation next door. Teams building in the region can find our operating notes on the Pacific side under Auckland.
Is it the right licence for you
New Zealand suits a firm that genuinely wants to operate in or from New Zealand and Australia, that can staff a real office, and that is prepared for an assessment where the regulator reads your systems documentation and asks questions about it. It is a poor fit for a firm looking for a cheap flag to display while operating somewhere else, because the deregistration power exists precisely for that case.
One thing worth saying plainly to founders: the licence assessment will ask what your platform actually does, how client money is reconciled and how you evidence execution. Those are software questions with paper answers, and firms that leave them to the last month of an application usually add another quarter to the timeline.
The application is a systems review in disguise
Applicants underestimate how much of the assessment is about operations. The FMA wants to understand how orders reach the market, how client money is reconciled and by whom, how you would detect a pricing failure, what happens when your platform vendor has an outage, and how your reporting is produced. Answers of the form "our provider handles that" invite follow up questions, because responsibility for outsourced functions stays with the licensed firm.
Directors and senior managers are assessed individually. A board with no derivatives experience is a weakness in the file no matter how good the business plan reads. Firms that treat licensing as a legal exercise and hire the operational people afterwards find the process takes longer than the ones who put the team in place first and then apply.
The client money question
Trust account handling is where licences are lost rather than won. Money received from retail clients has to reach the right account, be reconciled on a defined rhythm, and be reportable. The failure mode is rarely theft. It is a reconciliation process that depends on one person and a spreadsheet, which works until volume grows or that person leaves.
"Registered and licensed are two different words. Half the brokers I have seen quoting a New Zealand number were quoting the register, and their bank worked that out eventually."
— Alex Onta, Executive Director, SINGUARD
Key Takeaways
- The derivatives issuer licence is granted by the FMA under the Financial Markets Conduct Act 2013 after a capability assessment.
- FSPR registration is an administrative listing, not authorisation, and firms without a real New Zealand connection can be deregistered.
- Licensed issuers need a product disclosure statement, trust account handling of client money and dispute resolution scheme membership.
- A New Zealand licence is well regarded by counterparties but authorises New Zealand business, not global marketing.
Frequently Asked Questions
Is FSPR registration the same as an FMA licence?
No. Registration lists a provider on a public register. A derivatives issuer licence is granted by the FMA after assessing governance, capital, systems and people. Only the licence authorises issuing derivatives to retail investors.
What does the FMA assess in a derivatives issuer application?
Governance and directors, risk management, operational systems and their capacity to do what the applicant claims, client money handling, outsourcing arrangements and capital appropriate to the proposed business. It is an assessment of capability rather than a document filing.
Can a New Zealand licensed firm market to clients anywhere?
Not automatically. Other regulators require their own authorisation for firms serving their residents, and advertising platforms and app stores generally ask for authorisation evidence per country targeted.
The application is a systems review in disguise
Applicants underestimate how much of the assessment is about operations. The FMA wants to understand how orders reach the market, how client money is reconciled and by whom, how you would detect a pricing failure, what happens when your platform vendor has an outage, and how your reporting is produced. Answers of the form "our provider handles that" invite follow up questions, because responsibility for outsourced functions stays with the licensed firm.
Directors and senior managers are assessed individually. A board with no derivatives experience is a weakness in the file no matter how good the business plan reads. Firms that treat licensing as a legal exercise and hire the operational people afterwards find the process takes longer than the ones who put the team in place first and then apply.
The client money question
Trust account handling is where licences are lost rather than won. Money received from retail clients must go to the right account, be reconciled on a defined rhythm, and be reportable. The failure mode is not usually theft. It is a reconciliation process that depends on one person and a spreadsheet, which works until volume grows or that person leaves.
About the Author
Alex Onta is an Executive Director at SINGUARD. He built eTrader, the terminal, the mobile apps, eTrader Broker, Copytrading, Business and Community, along with the worldwide clustered-server infrastructure it all runs on, with his brother Roman Onta helping on the design, and he leads that division today. Together with Roman he builds the Prop Firm CRM, the Broker CRM, Scalegram and CopySignals, and the two of them carry worldwide compliance, payment processing and international business structuring side by side. He lives and works in Dubai for most of the year. Meet the executive duo leading Singuard's five divisions.