FSC522 The
Regulatory Framework
Case Study – Aotearoa Mortgages
This case study requires you to apply legislation to a
residential property lending situation.
Background information:
Aotearoa Mortgages Limited is an established financial
advice provider (FAP) offering mortgage advisory
services.
The company has a comprehensive set of policies,
procedures, and guidelines, which are designed to ensure
the FAP complies with all relevant legislation and code of
practice principles.
Key policies include:
Public disclosure:
• In compliance with the Financial Markets Conduct
Regulations 2014, Aotearoa Mortgages has their
complaints and dispute resolution process publicly
available on their website.
Fees:
• Mortgages with main lenders – no fees
• Mortgages with non-bank lender – 1% of the loan
amount
Conflicts of interest, commissions, and incentives:
• Aotearoa Mortgages receives commissions from
the providers on whose products they give
financial advice (banks and non-bank lenders). The
commissions range between 0.55% and 0.85% of
the value of the mortgage and depend on which
lender and what type of mortgage is chosen.
1
Appendix
• AML is paid commissions by lenders when a
mortgage settles and in some cases at the
mortgage anniversary each year. All advisors
ensure that they prioritise clients’ interests by
following an advice process that considers their
circumstances and goals. And they research
suitable products and providers to ensure the
advice meets client needs.
Nikau works as a Financial Adviser (FA) employed by
Aotearoa Mortgages Limited. He is a specialist mortgage
adviser and is unrestricted in the range of lending
providers he can use.
No reliability event has happened to Nikau or Aotearoa
Mortgages Limited.
It has been two years since Nikau started working in this
role and he has become busy enough to use Mia, a
mortgage writer assistant also employed by Aotearoa
Mortgages to alleviate Nikau’s workload so that he can
focus on increased adviser growth. Her services to Nikau
are available 10 hours per week.
Mia is not a Financial Adviser, her responsibilities as a
mortgage writer assistant are limited to contacting
clients for the correct documentation required by lenders
and collating the mortgage application for submission to
the bank.
Read the following transcripts of three separate phone
calls and the communication of one email:
1. Nikau receives a call from a client, Ari.
2. Mia makes a call to the client, Ari.
3. Nikau makes a call to the client Ari.
4. Nikau receives an email from Ari.
As you read through the conversations and email
correspondence, identify where specific Acts apply, and
determine whether Mia, Nikau and Aotearoa Mortgages
demonstrate compliance or non-compliance with that
Act.
Transcript 1 Phone Call: Ari to Nikau
Nikau: Hi, this is Nikau speaking and welcome to
Aotearoa Mortgages. How can I help you today?
Ari: My name is Ari and I have an offer on a property
located at 6 Kerei Street, Motueka. I have a finance
clause and my current bank turned me down. Are
you able to help? I have a 500,000 deposit and
require 200,000 in finance.
Nikau: I do hope so, Ari. Can you tell me why your bank
turned you down?

Nikau: Ah, yes main banks are quite particular about this.
Your outcome will depend on me assessing your
financial situation and overall personal / business
circumstances. Do you have time right now to
answer some questions?
Ari: Yes certainly, but I only have five working days
remaining on my finance condition, so am a little
stressed.
Nikau: Ok, let’s see what I can do [Nikau asks questions
about client’s name and contact details, goals,
plans, and challenges and records these in the
CRM system under client interview notes]. That’s
great Ari, based on the information you have
provided so far, I may be able to assist. What I
need to do next is send you a disclosure
document, I will do this right now. This contains
important information that will help you decide if
I’m the right person to give you financial advice.
[Disclosure document sent].
Ari: Ok then what?
Nikau: Well, if you would like to stay on the phone, you
can check your email and open the disclosure
document so that we can go over this to make
sure you understand the contents. Then I can
explain next steps.
Ari: Great, ok it is open now on my screen.
Nikau: Perfect. [Nikau explains key information in the
disclosure document, including that the areas of
advice Ari wants him to focus on are purchasing
an owner-occupied residential property].
Ari: Yes, this is very good thank you. But a couple of
questions: the information I give you is only for
loan application. I mean, I don’t want my
information used for other purposes. I heard some
companies sell information collected to other
companies.
Nikau: Fair question Ari. To answer your questions, I can
go over some of the information principles we
adhere to under the Privacy Act. We are only
collecting your information for the mortgage
application at Aotearoa Mortgages. We do this
electronically with all the required security
safeguards, and at any time you need to access
this personal information you can simply login to a
secure online account we set up for you. All the
information collected is secured from
unauthorised access, and you will also have your
own personal password. While all your information
is private you are also agreeing that the
information disclosed to lenders on our behalf is
authorised disclosure. And I can confirm your
information will not be sold onto another company,
we are in the business of mortgage advisory
services, not selling your information. Does this
answer your question?

lender?
Nikau: Not for banks, however if we must take you to
a non-bank lender there will be a fee of 1% of the
loan amount.

Nikau: Good question, a main lender will have quite
stringent guidelines based on income and stability,
serviceability, and equity. Whilst non-bank lenders
will have a profile approach; this means they will
look at the wider picture of both your personal and
financial situation. These loans may also bear
higher interest rates. Based on your selfemployment situation and timelines, we may need
to look at non-bank options. However, I
will assess our application for a main bank lender
first as we have a responsible lending requirement
to do what is best for your interests.
Ari: Ok, let’s do this.
Nikau: Ok, our next step is a fact find. I will send you a link
so you can complete all the information. Once this
is completed, my assistant, Mia, will be in contact
to ensure you have all the correct documents
submitted.
Ari: Thank you so much. This shouldn’t be a problem; I
have already been through this process with my
bank. When will you send me the link, the sooner
the better?
Nikau: Great enthusiasm Ari, you clearly want this to
work. I am sending through the fact find link now
for you to complete.
Transcript 2 Phone Call: Mia to Ari
Mia: Mōrena Ari, this is Mia, Nikau’s assistant
with Aotearoa Mortgages. How are you today?
Ari: Kei te pai. Yes, Nikau told me to expect your call.
Mia: Excellent, I see you have completed the fact find
and Nikau has gone through all of this and
requested some documents. You have uploaded
everything except the AML identification
document. I see you have uploaded a copy of your
power bill for the proof of address which is good.
Do you know what AML is?
Ari: Yes, I went through this with my bank, I had to
provide a passport and proof of address. But since
then, I have lost my passport and I am in the
process of ordering a replacement. What can I
do?
Mia: Well, if you have a copy of your lost passport, can
you upload that document for me? I think that will
do.

Mia: I see it now. Thanks Ari, that is great. Do you have
any other questions?
Ari: Yes, if my application is approved with what I
understand will likely be a non-bank lender, is there
a cost for me to leave once I can get finance with a
main bank in the future.
Mia: There will not be a cost.

Mia: I only make sure all the documents are in place
and put everything together for the bank. Nikau will
review everything and, if it is all is looking good,
will submit your application. He should be in touch
today with an update.
Ari: Great thanks Mia.
Mia: Nau mai!
Transcript 3 Phone Call: Nikau to Ari
Nikau: Hi Ari, congratulations! We have an approval for
your mortgage application with one of our nonbank lenders. I have also sent you an email
regarding this. This explains my recommendations
for you. I hope you’ve had a chance to read though
that?
Ari: Yes thanks, that’s fantastic news.
Nikau: I also emailed you another disclosure statement.
You’ll recall, when we last spoke, I gave you a
disclosure statement. Well, I’m now required to
disclose further information to you. This will help
you decide whether to act on my advice. Just a
couple of points to highlight for you…
[Nikau discusses key information in the disclosure
statement].
Do you have any questions about that or about my
recommendations?
Ari: No.
Nikau: Ok, have one last look through and if you are happy
to accept, please sign and return.
Ari: I am just so excited I will just sign it; I trust you.
Nikau: That sounds great Ari, let’s get you all signed up. I
will stay on the line while you sign and get that
back to me via our portal.
Ari: Such an amazing system! OK, it’s all signed and
uploaded! Thanks so much Nikau.
Nikau: It has been my pleasure. From here, I will send
your acceptance back to the bank and they will be
in touch with your solicitor to finalise the
mortgage.
Ari: Oh, will there be a follow up after all this is sorted.
Nikau: Usually, I do follow up but because I am so busy, I
have asked Mia to do follow up reviews. But if you
have any questions, please don’t hesitate in asking
anytime.
Ari: Ok, thanks again.
Nikau: Haere mai.
Email: from Ari to Nikau
Hi Nikau
I was very happy to work with you on getting a mortgage
for my new home. But I do have a couple of issues.
Issue 1
When we talked about any cost with a non-bank lender,
you told me it would be 1%. When I went to sign the
documents with my solicitor, they explained the fee was
2,500. I told him that as the lending was 200,000 it should
have been 2,000 (or 1%).
He then explained to me that the letter of acceptance
disclosed the minimum fee is 2,500. I remember when
you sent this to me, and I was so excited I just signed it.
Anyway, I needed to get everything signed and my
solicitor suggested I follow this up with you as I don’t see
why I am paying 500 more than I expected in fees when
this was not explained to me.
Issue 2
And another thing was that I asked Mia if there was a
cost to leave this lender when I am ready for a main bank
lender. She told me there wouldn’t be a cost. When I was
at the solicitors, he explained I was fixed for a year and if
I wanted to move to another lender, I would be paying a
break cost unless I wait the full year. As I said, I really
want this property so signed anyway. He also told me to
talk to you about this.
Please let me know how we can resolve this as it was an
unexpected cost to me.
Thanks,
Ari