Date posted: 05/02/2024

Update of NZ Client Monies Standard

The NZ Regulatory Board proposes to update the NZ Client Monies Standard to reflect modern banking practices and changes made to the NZ Code of Ethics

In brief

  • Proposed PS-2: Client Monies is designed to reflect modern banking practices and the NZICA Code of Ethics (including new requirements for all members who control the money of others)
  • Members are invited to comment on proposed PS-2. Your views should be provided to us by 7 May 2024
  • It is intended that proposed PS-2 will apply to all members of CA ANZ in New Zealand and all other practitioners subject to NZICA jurisdiction from 1 January 2025

Invitation to comment (incl. ED)

Invitation to comment (including exposure draft): Proposed PS-2: Client Monies

Dowload pdf

The New Zealand Regulatory Board of New Zealand Institute of Chartered Accountants (NZICA) is seeking comments on proposed changes to NZICA professional and ethical standard PS-2: Client Monies (proposed PS-2)1 by 7 May 2024 - please see page 4 of the Invitation to Comment for details of how to make a submission.

It is intended that proposed PS-2 will apply to all members of CA ANZ in New Zealand and all other practitioners subject to NZICA's jurisdiction2 from 1 January 2025.

The changes proposed are intended to update existing PS-2: Client Monies so that it is consistent:

  • with the most recent version of the NZICA Code of Ethics
  • with modern banking practices including the removal of cheques by New Zealand banks
  • with New Zealand laws and regulations including the Anti-money Laundering and Counter Financing of Terrorism Act 2009 and new regimes introduced by amendments to the Financial Market Conduct Act 2013 by the Financial Services Legislation Amendment Act 2019
  • as far as practicable, with the requirements for members of CA ANZ resident outside New Zealand as set by APES 310: Client Monies issued by the Australian Accounting Professional & Ethical Standards Board (APESB).

1. NZICA regulates the conduct of CA ANZ members that reside in New Zealand. This includes maintaining, monitoring compliance with and enforcing professional and ethical standards as required by the NZICA Act 1996.

2. Other practitioners subject to NZICA jurisdiction include: Licensed Insolvency Practitioners (who are not otherwise a member of CA ANZ); Qualified Statutory Accountants recognised by NZICA in accordance with sections 36S and 36T of the Financial Reporting Act 2013; Non-member principals; and a member of CA ANZ who does not reside in New Zealand but who practices the profession of accountancy in New Zealand.

Overview of key proposals

Proposed PS-2 has been drafted in a format consistent with recent updates to NZICA standards.

Many of the core requirements addressed in existing PS-2 remain in proposed PS-2 – merely in a revised form. These include requiring members in public practice to:

  • Be strictly accountable for all client monies and any activities relating to client bank accounts (collectively client monies activities)
  • Comply with all laws and regulations relevant to client monies activities
  • Keep all client monies separate from all other monies of the member or firm
  • Conduct all client monies activities exclusively for the client in accordance with their instructions (and not conducting them for any other purpose)
  • Advise NZICA immediately if any deficiencies occur in a trust account.

The key proposals include:

  • A new overarching requirement that expressly requires all members who control the money of others to safeguard that money, use that money only for the purpose for which the money was provided, and be ready to account for that money.
  • A new requirement that members whose activities do not come within the scope of PS-2, but who otherwise control the money of others comply, as far as practicable, with the spirit and intent of the standard (elevated from guidance material in existing PS-2).
  • Defined terms that have been modernised and future proofed including:
    • adding of an overarching definition of “client monies activities” that specifically includes situations where a member in public practice controls client monies but does receive or hold the money themselves.
    • narrowing the “fees paid in advance” exclusion from the definition of “client monies”.
    • clarifying that direct debit authorities come within the ambit of PS-2.
  • A new requirement that reflects members’ responsibility to act in the public interest, consistent with the Code of Ethics.
  • A new requirement that members consider, document and discuss with the client any practical alternatives to the proposed client monies activities before agreeing to perform those activities.
  • Sections that address the operation of trust accounts and client bank accounts separately.
  • Removal of the ability to pay private or practice monies relating to real estate or investment transactions into a trust account.
  • Additional internal control procedures, including:
    • A new requirement and application material regarding taking reasonable steps to ensure no receipt of client monies without client authority.
    • More prescriptive requirements and application material regarding client monies that are not being held electronically.
    • New requirements and application material regarding authorised signing authorities on trust accounts.
    • A modified requirement to provide monthly statements unless the client specifies in writing an alternative period.
    • New requirements and application material regarding authorised signing authorities on client bank accounts.
  • New requirements and application material regarding components of the firm’s system of quality management including prescribed monitoring activities and record retention timeframes.

Submissions / approval process

7 February 2024 Invitation for submissions on ED 2024-1 issued.
7 May 2024 Submissions on ED 2024-1 are due. Information on how to submit a response is included on page 4 of this ITC.
22 July 2024* NZRB meet to consider submissions and Management’s report on the submissions. NZRB will finalise PS-2 (or decide on an amended timetable if further work is required).
August 2024* Anticipated date for issue of PS-2.  PS-2 will be published on CA ANZ website, together with a copy of Management's report and the submissions received (see page 4 of this ITC).
1 January 2025* Effective date of PS-2.

* Timing subject to volume of submissions received

NZICA Due Process

NZICA Ethical and Professional Standards – Due Process and Working Procedures

Find out more

New Zealand regulations:

NZICA Act, Rules, Code of Ethics, Professional and Engagement Standards

Read more