Co-regulation hard to make work: Kent

The adviser industry needs to confront its own vested interests, says Alliance Capital chief executive Ross Kent.

Wednesday, May 31st 2006, 5:35AM

by Rob Hosking

Kent – who was a member of last year’s Task Force on Financial Intermediaries – told a forum at this week’s Life Brokers Association annual conference that the regime the industry and officials are trying to develop is a difficult one to make work in practice.

The Task Force recommended a “co-regulatory” model, with oversight by the Securities Commission and Approved Professional Bodies (APBs) policing the rules and managing dispute resolution, professional education and standards.

Cabinet endorsed that approach in principle late last year.

“Co–regulation is a very hard thing to make work,” Kent told the forum. He cites two recent industries, which have adopted the co-regulation approach; one of which worked and the other did not.

“The electricity industry could not make it work. The gas industry did. And I think if you look at why gas worked it was because it was prepared to confront its industry’s vested interests.”

The Task Force recommended much greater level of disclosure – and some of those rules are already in a bill before Parliament. However Kent says there is a risk of the industry focusing too much on the disclosure issues.

“The key issue to focus on is managing the conflicts of interest – actual and potential. Too much of the focus has been on disclosure. I think a lot more nervous energy should be spent on the quality of advice. That’s where you need to be focusing.”

A discussion document is due out in late June or early July with options for making co-regulation work.

A large number of industry bodies are talking about forming APBs together at present, and Kent warns the industry might be steered by the policymakers into having only a APBs.

“I’m fearful of a discussion document which tries to collapse the number of APBs. If we have too few that is not going to recognise the complexity of the industry."

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

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