by David Chaplin
A spokesperson for the MED told Good Returns the regulations, which lay down guidelines for implementing the Securities Legislation that was passed in September 2006, are almost finalised."We're aiming to have the regulations ready for Cabinet approval by early November and a reasonable transition period would be allowed," the spokesperson said. The transition period would probably continue until the start of April next year.
The Securities Legislation laid down new disclosure requirements for investment advisers, which require them to tell clients upfront: their experience and qualifications; any criminal convictions; the nature and level of fees charged; other interests and relationships (including all remuneration); and, the types of securities the adviser advises on.
Failure to comply with the disclosure requirements could result in the Securities Commission, which polices the legislation, imposing some hefty penalties on advisers including prohibition orders, corrective orders, disclosure orders and temporary banning orders.
The Securities Commission website says: "The Courts will be able to make orders banning people from acting as investment advisers for up to 10 years.
"Failure to comply with the disclosure obligations is an offence with fines of up to $300,000. Civil penalties of up to $1 million can be imposed by the Court."
The MED spokesperson said the draft regulation do not differ markedly from those circulated to industry parties during the consultation process. It is understood the regulations will allow an exemption from complying with the disclosure requirements for certain types of investment advice given over the phone.
According to the MED spokesperson, the form of disclosure may change for various types of advisers once the coming financial intermediary legislation is operational.
When Approved Professional Bodies (APB) come into existence they may be able to fine-tune the disclosure requirements for their respective members, the spokesperson said. The financial intermediary bill is expected to be in Parliament before the end of the year and should be open for public submissions at the Select Committee stage by early next year.
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