by Richard Newell
Deputy Prime Minister Dr Michael Cullen, opening the annual conference of the Financial Planners & Insurance Advisers Association (FPIA) in Auckland, stated: “It is increasingly important that we have a cadre of high quality financial advisers…and it is essential that we regulate those giving investment advice, so consumers are encouraged to seek counsel from a professional industry, in order to make the most of their savings.”The government has already introduced rules requiring advisers to disclose important information to potential clients, such as how much commission they will receive, and to keep clients informed if material information changes after the initial advice is given. Cullen said the changes acknowledge that under current rules, information is only provided on request, but that “many investors are simply unaware they can request certain information.”
To ensure that advisers comply with the new disclosure rules, the government is proposing to give the Securities Commission the ability to suspend an adviser for up to 14 days. Beyond this Bill, to be introduced later in the year, the question remains whether more comprehensive regulation is required for financial intermediaries. This will be assessed in a forthcoming review of the Securities Act.
Cullen commented that: “We do need a strong, but not onerous, regulatory regime.” He added there was no intention of copying the stringent regulations introduced in Australia in March this year: “The new Australian regime has been criticised by industry for the compliance costs it has imposed. Whether this cost is justified by better information or advice to investors remains to be seen.”
FPIA chief executive Phillip Matthews confirmed that the timeframe for new regulation of financial advisers has been brought forward from five to three years.
He said the various industry representative bodies have worked together on proposals that will form part of the Ministry of Economic Development’s initial deliberations on regulation: “We are hopeful that a self-regulating solution can be found. The initial feedback we have from the government is that they are open to the idea if it can be shown to fulfil the aims of regulation. Those aims are clearly the setting and raising of standards of advice and protection of the consumer.”
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