Advisers forced to tell on each other
There is concern in the financial adviser industry surrounding the draft code requirement for advisers to be whistleblowers and the lack of protection for that role.
Monday, May 10th 2010, 9:31PM 
7 Comments
by Jenha White
Code Standard 7 in the Draft Code of Professional Conduct says that an authorised financial adviser (AFA) who has reasonable grounds to suspect that another AFA has not complied with the Code, or that a person has not complied with the act, must report the suspected non-compliance to the Securities Commission.
The Financial Adviser Associations of New Zealand (FAANZ) submission on the Draft Code says it strongly recommends that there needs to be prescriptive guidance around how the Securities Commission will protect and provide anonymity for the whistleblower.
It also says there needs to be regulatory protection for the whistleblower from civil liability.
FAANZ chairperson Lyn McMorran is also concerned that there could be anti-competitive behaviour with mischevious reporting to put an adviser out of the market.
"What protection is there if an adviser goes to the Securities Commission with concerns where there are no grounds, but under-lying concerns about competition?"
Financial Focus director Murray Weatherston was very surprised to see the whistleblower code in the Draft Code and he says it seems very onerous.
"But basically the Securities Commission is making every other adviser their policeman for all sins.
"I can understand that it is to make sure no-one is unauthorised but with respect to every part of the code I'm not sure it's within an adviser's best interests to do that.
"Very clearly the Securities Commission will have to ensure that complaints are kept anonymous and they will have to make sure advisers will be statutorily protected against civil claims made by the person complained against.
"There's nothing in the code that talks about that," he says.
Jenha is a TPL staff reporter. jenha@tarawera.co.nz
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Comments from our readers
God help us when ideas like this are encousaged by the regulators. Democracey is slowly dieing to Dictatorship
Hang on. Isnt that what self regulation was supposed to do?
If you want the profession of financial adviser to be respected by the public, then every adviser must have a duty of care, not just to their own clients, but to every client of the industry.
Imagine if a doctor wasnt able to report serious malpractice by another doctor just because there was a chance that it would be seen as "anti-competitive" behaviour? What if they didnt do it because they couldnt be bothered?
If one financial adviser knows that another adviser is ripping off their clients, stealing money, investing in their own interest and not the clients, then why shouldnt they have a duty to report it?
@ Johnny... yes, but unfortunately that's the cost of being part of a professional industry. The vexatious and maliciously motivated complaints will eventually get sorted in time.
Until such protections are in place for the whistle-blower I, like anybody, would be inclined not to 'see' anything unless it was very serious and I was sure. I also wouldnt be able to take advice from another adviser, for fear they would have to tell on me for not telling - a breach in itself!
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The NZ Regulator is well out of their depth, and has been for some time. It is time for responsible adults to take over this mess.