Financial advisers to be referred to disciplinary body
Four financial advisers are to be referred to their oversight body, the Financial Advisers Disciplinary Committee (FADC).
Friday, November 25th 2022, 10:52AM 
3 Comments
It follows a review of wholesale investing by the Financial Markets Authority (FMA).
A larger number of lawyers and accountants will also have their cases referred to their own professional organisations.
In its review, the FMA discovered deficiencies in the eligible investor certificates regarding wholesale investments, which are supposed to be large scale offerings or involve seasoned, high level business professionals.
The review found there was an increase in wholesale investment offerings, which were sometimes being promoted, often in social media, without sufficient information about risks.
There were also examples of aggressive, or hard-sell” techniques involved in marketing these products.
“We found multiple instances of professional advisers confirming certifications where no grounds were stated in the eligible investor certificate or the grounds stated were not capable of supporting the certification,” the FMA said in a statement.
While conducting its enquiry, the FMA sought information from 23 entities and issued warnings against seven of them. It also announced that people involved in “the most egregious cases of deficient eligible investor certificates” would have their cases referred to their professional bodies.
“The FMA can confirm it will be making a referral to the FADC of four financial advisers,” the FMA statement said.
“It will be up to the FADC to determine what action may be taken. We are in the process of confirming final numbers of referrals of lawyers and accountants but can confirm it will be in double digits.”
The FMA added it had separately opened its own enquiries arising from the findings in the report. These were in their early stages and there would be no comment while the process was continuing.
The names of the people involved have not been divulged and their advisers' cases have not yet been transferred to the FADC, though it was the FMA's intention to do so.
Earlier, a high level manager at the FMA Michael Dickson paid tribute to the adviser sector for its lower level of breaches than was true of lawyers and accountants.
“There weren't a lot (of breaches) in the financial advice space which is a good thing,” Dickson, who is manager of disclosure and market conduct at the FMA, said.
“That can be put down to either that financial advisers are doing this correctly or that they are not doing it at all.”
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Comments from our readers
Applicable law id Schedule 1 FMCA.
Someone who thinks they are an eligible investor has to give a certificate under s 41.
A financial adviser (or statutory accountant or lawyer) has to confirm the certificate under s43.
S44 has an offence with a possible fine up to $50k for "giving" a defective sertificate.
Nothing I can see in that schedule has an offence for a financial adviser who confirms a defective certificate.
I thought FMA has to allege a charge against an adviser to get a case in front of FADC. The article talks about a referral to FADC.
Perhaps the lawyers who lurk on this site might be prepared to opine what possible offence against the Code a financial adviser commits when they confirm a defective certificate given by an investor.
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As the quote says "a larger number of lawyers and accountants".
It still amazes me; I can't dabble in legal work or IRD taxation rules/laws and yet we allow those professions to provide advice if it is incidental to their work.
Heck anything with numbers will be incidental to their work!
Be interesting if any names get released from this exercise.