Parliament beefs up adviser disclosure rules

A Parliamentary select committee has toned down some of the more draconian aspects of the Securities Legislation Bill but some others remain.

Friday, June 17th 2005, 1:24AM

by Rob Hosking

These include new disclosure rules for financial advisers and brokers which appear to cut across much of the work being carried out by the Task Force on Financial intermediaries.

Numerous submitters to the commerce select committee suggested holding off until the Task Force reports in July.

However the MPs have carried on with the bill. The bill works in two areas - it beefs up disclosure rules for investment advisers and brokers and also the insider trading rules. Of most immediate effect is new disclosure rules which require advisers and brokers to disclose:

Fees they will charge
Other interests and relationships, including any remuneration
Any relationship with anyone who may reasonably expected to influence the provision or content of the investment advice
The nature and extent of that relationship
Any director indirect or pecuniary other interest
Professional qualifications
A brief description of their experience
Whether they are a member of a professional body
Whether they have professional indemnity insurance and the nature of that insurance
Whether dispute resolution services are available
Any relevant criminal convictions.

And the MPs on Parliament's commerce select committee have also recommended that the Securities Commission and Takeovers Panel also be permitted to share information with the Commerce Commission.

Some of the original disclosure requirements have been removed, including ones which would have defined bank deposits as a security and meant banks have to issue a disclosure statement when a customer phones to put their money on term deposit.

The committee also appears not to have addressed concerns that a non-specialist employee, for example an human resources staffer passing on information about a workplace superannuation scheme, is defined as an adviser.

Rob Hosking is a Wellington-based freelance writer specialising in political, economic and IT related issues.

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