New Code of Conduct out

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The latest version of the draft Code of Conduct for financial advisers is out. Jenha White outlines the changes and talks to Code Committee chair Ross Butler.

Friday, July 2nd 2010, 4:34PM

by Jenha White

The latest version of the draft Code focuses on three new dimensions: retail customers as opposed to wholesale customers, personalised advice rather than general financial advice and investment planning services rather than financial planning services.

Code Committee chairman Ross Butler says these dimensions better define the scope of the draft Code, making it clearer for everybody as a result of the changes to the Financial Advisers Act (FAA) passed in Parliament last week.

"There's a focus on personalised advice to retail clients involved in investment planning services and areas outside that are not a focus for the Code," he says.

One of the most noticeable standards missing from the draft Code is the previous obligation for an authorised financial adviser (AFA) with reasonable grounds to suspect that another AFA has not complied with the Code or the Act to report suspected non-compliance.

However, Butler says it is now in the FAA with the wording that advisers "may" report suspected non-compliance to the Securities Commission, rather than the wording which was previously in the draft Code which said suspected non-compliance "must" be reported.

"It was beyond the power of the Code Committee to require a higher level of compliance than that," he says.

While that standard has been deleted from the Code, there are references which have been added to several other standards for if and when advisers do report non-compliance to the Code.

For example in Code Standard 1, it says an AFA's obligation to place a client's interest first will not be breached by reporting to the Securities Commission any breaches of the Act that the AFA reasonably believes to have occurred.

Further alternative qualifications have also been added to the Code. For Standard Set A, any New Zealand issued tertiary qualification at degree level or above in or majoring in accountancy, business, commerce, economics, finance or management studies  is allowed and alternative designations of being a member of the New Zealand Institute of Chartered Accountants as well as NZX Associate Advisers are now allowed.

The Institute of Financial Advisers will be pleased to see their submission on greater recognition of the Certified Financial Planner (CFP) and Chartered Life Underwriter (CLU) designations has been taken into account. They have been made exempt from achieving educational Standard Set C, which concern advisers practice and processes. NZX advisers have also been made exempt.

Standard Set E remains for mortgage brokers and insurance advisers with alternative qualifications added: a New Zealand Diploma in Life Assurance, or a Graduate Diploma in Business Studies personal risk management or personal financial planning from Massey University.

Butler says the competence arrangements for Standard Set E remain  because it is putting forward the Code with the assumption that regulations will be promulgated under the act allowing category two product advisers to voluntarily opt into the regime.

Butler says the Code Committee is offering consumers, advisers and groups a final opportunity to comment on the Code before it is recommended to the Commissioner for Financial Advisers, to ensure it has fairly addressed all substantive issues in light of the revised scope of the financial advisers' regime.

"In doing so, we are conscious of the huge effort that has already gone into making submissions to us, and we are not asking for issues previously raised to be relitigated.

"To minimise any further burden being placed on those who have engaged with us in the past, we are happy to receive final feedback and submissions on a relatively informal basis, including by way of debate at public and other forums."

Individuals and groups are invited to provide input on this basis and to do so by 21 July.

On Monday, the Code Committee will advise details of venue and timing for several public meetings.  This will include registration arrangements.

Finally, it will be meeting with various consumer groups, professional bodies, companies, industry groups, and training providers.

"Our intention is to go through the process and regroup the third and fourth week of July to be in a position to give the Commissioner for Financial Advisers the draft Code by the end of July."

Jenha is a TPL staff reporter. jenha@tarawera.co.nz

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