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What can happen if a financial advice provider breaks the rules

Licence action, court penalties, compensation, personal liability and discipline for advisers: what New Zealand law allows, in plain English.

By the Riverhorse Compliance team · Last checked 15 November 2026

The short answer

The Financial Markets Authority (FMA) licenses and monitors financial advice providers. When a provider or an adviser doesn't meet the rules, the law allows a range of responses, from a public censure through to losing the licence, court penalties and compensation. What follows are the outer limits the law sets. They are not what happens every time.

Who can do what

• The FMA monitors providers. It can censure a provider, give it a direction and cancel its licence, and it can take a provider to court. Its 2024 monitoring report records that its action against financial advice providers had included a public censure, the cancellation of a licence and a direction order.
• The courts can order penalties and can order a provider to compensate clients.
• The Financial Advisers Disciplinary Committee deals with individual advisers.
• Dispute resolution schemes deal with clients' complaints and can award a client compensation.

The licence

A censure, a direction and the cancellation of a licence are all available to the FMA. Without a licence (its own, or cover under another firm's) a provider generally can't give regulated financial advice to retail clients, so for most firms this is the most serious outcome of all.

Penalties from a court

According to the Ministry of Business, Innovation and Employment's factsheet on liability under the regime:

• for most breaches of the advice duties, a court can order a penalty of up to $200,000 for an individual or $600,000 for a company
• for false or misleading statements or omissions in disclosure information, the limit is higher: up to $1 million for an individual or $5 million for a company, or three times the gain made or loss caused, whichever is greater.

A court can also order compensation for clients who lost money.

Directors and managers

It isn't only the company. Under the Financial Markets Conduct Act 2013, a person who is involved in a contravention can be liable for it too, and that can include a director or senior manager who was knowingly concerned in the breach. The Act also keeps open criminal liability for a false or misleading statement in disclosure information.

Individual advisers

The Act treats an individual financial adviser differently from the provider. For a breach of the advice duties an adviser isn't civilly liable in the way the provider is, but can face disciplinary action. The Financial Advisers Disciplinary Committee can censure an adviser, require training, put conditions on their advice and fine them up to $10,000, and an adviser's registration can be suspended or ended.

Reputation

The FMA's censures and licence cancellations are public. It publishes them, naming the firm, where clients and the people who refer clients to you can find them.

What to do about it

Most of what a regulator or a client's lawyer would look at first is in plain sight: what your website says, and what your disclosure and scope of service documents say. Read them against the requirements, fix what is out of date, and keep a note of when you last checked. Our article on what a financial advice provider's website must say sets out the list.

A review can't promise that none of this happens. It shows you what a careful reader of your website and documents would find, and how to fix it, before anyone else points it out.

General information only – not legal advice.