Self regulation of advisers not out yet

Securities Commission executive chairman Jane Diplock told a Tower seminar in Wellington that a licensing regime for financial advisers across the Tasman had worked.

"We were told it would be the end of the financial intermediary industry as we knew it but those who lived through it will know that wasn’t the outcome."

However self-regulation by the industry is still on the table.

"But the critical thing with self regulation is you must be able to remove from practicing those who fall below the bar of good practice. That’s always the problem with a self regulatory approach."

Next year will see an International Monetary Fund regulatory audit of New Zealand, and financial advisers would be part of that.

"Markets are having to compete more vigorously to attract investors. There is also compelling evidence that countries with good regulatory environments attract increased flows of capital."

The coming year is likely to see other changes to rules governing advisers, she said. Proposed rule changes put by the commission to the government include:

• requiring a mandatory disclosure statement of all relevant information under the Investment Advisers (Disclosure) Act 1996, instead of, as at present, only having to supply such information if asked;
• making it an offence to recommend illegal offers of securities;
• generally increasing the commission’s enforcement powers.

Those proposals have been well received by the industry and the government, she said, and the commission expects them to pass into law "more or less in their present form."

On a more general note, Diplock urged advisers to "look beyond the minimum standard of compliance to the broader concept of best practice" and said advisors have an important role to play in society.

"Investment advisers help their clients to make wise financial decisions …Such decisions are vitally important for the individual to provide them with the wherewithal to fund their aspirations – to educate their children, to finance their homes, recreation and travel, and to support them in their retirement.