Sales practices get SuperLife a slap on wrist

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The Financial Markets Authority (FMA) has issued a warning to SuperLife to overhaul its KiwiSaver sales practices.  

Wednesday, June 22nd 2011, 5:00AM 8 Comments

by Benn Bathgate

FMA chief executive Sean Hughes said the regulator was concerned about a number of matters regarding SuperLife's sales practices, potential non-compliance with the law and apparent poor monitoring of the activities of its sales force.

He said that from July 1, the FMA will monitor compliance by KiwiSaver providers and their obligations under the Financial Advisers Act.

"We will not hesitate to take enforcement action against KiwiSaver providers who fail to ensure they comply with their legal requirements."

On June 9 the FMA urged investors to be wary of unacceptable sales practices being used by unregistered KiwiSaver sales representative Patrick Diack.

Diack's sales approaches included soliciting members of the public outside WINZ offices, offering them money to join a KiwiSaver scheme and signing them up to a scheme membership without providing an investment statement.

The FMA was also concerned about the distribution practices of the SuperLife KiwiSaver Scheme represented by Diack. Particular concerns related to SuperLife's apparent failure to properly train its employees and monitor their compliance with the requirements of laws including the Securities Act and Financial Service Providers (Registration and Dispute Resolution) Act.

After ongoing talks with SuperLife, the FMA highlighted areas of particular concern including SuperLife's failure to ensure its employees giving advice, such as Diack, are registered, its failure to rigorously train and test employees in relation to the requirements of the law and its failure to monitor employees' performance and to performance manage staff who fell short of required standards.

The regulator has warned SuperLife that door-to-door selling of securities is illegal under the Securities Act, as is any form of high pressure or misleading selling in inappropriate for KiwiSaver.

The regulator is also concerned SuperLife intends to continue distributing the SuperLife KiwiSaver Scheme without ensuring its representatives are Authorised financial Advisers (AFAs) or QFE advisers as required by the Financial Advisers act.

The FMA understands SuperLife's stance is that its employees are providing an ‘information only' service.

Hughes said that the provision of factual information may amount to financial advice depending on the context.

"The potential investor's expectation of the service, and the context in which those services are provided, need to be carefully considered.

"A person gives ‘financial advice' if he or she makes a recommendation or gives an opinion in relation to acquiring or disposing of a financial product."

Hughes said that while the definition of financial advice was very broad, "we believe it is unlikely that a person presenting the merits of a particular KiwiSaver scheme to a person, in a workplace context or otherwise, will not give financial advice in the course of his or her discussions with a prospective member."

At the time of writing Good Returns messages to SuperLife CEO Michael Chamberlain have not been replied to.

Benn Bathgate is a business reporter for ASSET and Good Returns, email story ideas to benn@goodreturns.co.nz

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