Final changes to the Draft Code

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The latest version of the Draft Code includes some significant changes with boundaries added to three code standards, written provisions removed to allow for oral advice and more alternative designation options added for Chartered Life Underwriters (CLUs).

Friday, July 30th 2010, 2:00PM

by Jenha White

Code Committee chairman Ross Butler says 53 submissions were received and taken into fair consideration.

One of the changes is that boundaries have been created with a reasonableness qualification added to Code Standards one, six and ten.

For example Code Standard One now says "What is required to place a client's interests first is determined by what is reasonable in the circumstances."

Butler says this was prompted as there were suggestions from groups that the Code should move more down the Australian route of prescribed requirements.

"We resisted that as we are taking a principles based approach, however we took into account what advisers and consumers wanted, creating a balance by adding the reasonable qualification."

Chapman Tripp made a submission on the matter and will be pleased to see "reasonable" added. Its submission said if Code Standard one was unchanged with no expressed boundaries, then in dispute resolution proceedings it would have been likely there would always have been something that, with the benefit of hindsight, a claimant could have asserted that the AFA could have done to avoid the claimant's loss.

Another change is that Code Standard seven, which ensures retail clients are able to make informed decisions, has had the written provision removed, as has Code Standard eight, which looks at the suitability of personalised service for retail clients.

This change has been added because in many cases, such as that of a stockbroker, a client will want to give their instructions and receive advice over the phone.

Butler says the committee didn't want to change good commercial practice and it was clear from various groups that earlier Code proposals had been contrary to that.

"We believe the way we have structured it now addresses that issue while still recognising obligations to the consumer, striking a good balance."

Code standard 13 looks at record retention and has had another provision added, with a seven-year minimum period to keep records for information relating to a financial product transaction entered into by the client to commence on the date that all benefits potentially available to the client from the financial product have been realised.

Butler says this has been added to relate to products that have a shelf life.

Code Standard 16 on educational requirements has had the eligibility sunset date for alternative qualifications and designations set at 1 January 2014 and advisers that have a designation previously attained that has not been retained at the time the AFA seeks authorisation, will still be recognised under different circumstances. Previously an AFA had to maintain membership of a professional body for a continuous period of at least 12-months immediately before first becoming authorised.

Now the AFA has to complete at least 20 hours continued professional training (CPD) in the 12-months immediately before first becoming authorised including 10 hours of structured training.

Finally, CLU's will be pleased to see the competence alternatives schedule now has more alternative designations added for Unit Standard E.

This includes a chartered Life Underwriter who prior to 1 January 2010 has attained either the New Zealand Diploma in Life Assurance or the New Zealand Certificate in Life Insurance (Open Polytechnic) or who has attained an Associateship of the Insurance Institute of New Zealand (Life).

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

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