by Paul McBeth
In response to MPs' concern that the proposed legislation did not "clearly carve out simple advice in relation to category two products," the Ministry of Economic Development recommended the committee amend legislation to change the definition of a financial advice service to refer to investment goals rather than financial goals, and introduce a naming restriction on who could call themselves financial planners.
On product classification, officials recommended certain types of products could fall into either category one or two, and that regulators should have discretion to specify which bracket they should fall in, according to the supplementary departmental report on the Financial Service Providers Pre-Implementation Adjustments Bill 2010 clause-by-clause analysis.
In the same document, the Securities Commission "strongly" recommended that home equity release products be considered category one, though it is unclear whether the committee report adopted that advice.
The Commission also advised "it may be unnecessary to amend the definition of ‘financial planning service' because any unintended or unwarranted coverage could be dealt with through the proposed new exemption powers," but if the committee chose to adopt this, it said it was "preferable to focus on the service that is in fact provided and whether the service is held out to be or is reasonably taken to be comprehensive."
In response to committee questions around whether cash and term portfolio investment entities should be category two products, the officials agreed, though said it should not be limited to PIEs offered by banks. The recommendation was adopted in the committee report.
Paul is a staff writer for Good Returns based in Wellington.
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