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Commission wants power to ban advisers - and more

The Securities Commission is proposing much tougher disclosure rules for investment advisers in a discussion document released yesterday.

Tuesday, August 28th 2001, 2:35PM

by Philip Macalister

It says there is no one statutory body responsible for monitoring and enforcing advisers, and it is putting its hand up to do the job.

"We consider there should be specific provision for the commission to take or recommend enforcement action where necessary."

The key points of the commission's discussion document are that:

  • It should have the power to prohibit advisers from giving advice
  • The commission should be able to apply for an injunction to restrain a person from contravening the Investment Advisers (Disclosure) Act.
  • The commission would be able to suspend disclosure statements where it is of the opinion that the statement does not comply with the law
  • The commission could prohibit adviser advertising if it considers the ads are likely to deceive, mislead or confuse.
  • The commission says in its document that the issue of licensing is something that should be decided by the Government.

    It says disclosure is a central pillar to securities law in New Zealand and the thrust of the Investment Advisers (Disclosure) Act is consistent with this. However, it acknowledges there are problems with the act.

    One of the main ones is that the current two-tiered disclosure regime is not working and it should be replaced with a single document.

    Likewise it has concerns over the definition of who is an investment adviser and who should be either included or excluded under the act.

    The commission also says that the act dosen't appear to be sufficiently far-reaching. For instance concerns have been expressed over the lack of disclosure relating to trail fees and last resort financing facilities.

    "We propose for consideration of a more general obligation to disclose all material benefits," it says in the document.

    The commission also tries to tackle the growing problem of illegal offers being made from overseas issuers which don't comply with New Zealand securities law, eg lack of adequate documentation.

    In the paper the commission suggests that it should become an offence for New Zealanders promoting such schemes.

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  • To read the Executive Summary and download the full report click here
  • Good Returns' will run a report on the Securities Commission's press conference later today, plus it will have reaction from the industry.
  • VOTE in our poll: Should the Securities Commission have the power to ban advisers? Vote here
  • You can read Philip's blog here: http://www.goodreturns.co.nz/blog/

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    • RFA requirements 'inadequate'
      “I strongly disagree with the David's on this one. I suspect that this is the first step towards pushing everyone up to AFA...”
      11 hours ago by Jenny Campbell
    • RFA requirements 'inadequate'
      “It would help if more people had a better understanding of applicable fiduciary obligations. Blah, blah, blah, ...record...”
      15 hours ago by btw
    • RFA requirements 'inadequate'
      “Well said Carey. I'd be interested in David's response...”
      16 hours ago by Pragmatic
    • RFA requirements 'inadequate'
      “I agree with David and David that this is an issue that needs a lot more discussion. A recent experience has highlighted...”
      18 hours ago by Carey Church
    • Bank advice concerns questioned
      “@Dr. Taylor. Dave Mason from BNZ here. BNZ has no restrictions on produce being on house as we do not manufacture. We prefer...”
      4 days ago by Bankadviser
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