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New code approved

A new version of the Code of Conduct for financial advisers has been signed off by the Commerce Minister. [Copy of Code attached]

Friday, March 28th 2014, 7:31AM 6 Comments

Commerce Minister Craig Foss has signed off a revised Code of Professional Conduct for Authorised Financial Advisers which all AFAs will have to abide by from May 1,

“The Code which has been developed in consultation with New Zealand financial advisers will continue to restore confidence in the professionalism and integrity of the industry. Improving confidence in our financial markets is part of the Government’s Business Growth Agenda,” Foss says.

“I’m focused on ensuring that Authorised Financial Advisers put the interests of clients first and transparency around managing conflicts of interests,” Foss says in a statement.

The Code of Professional Conduct was revised in 2013 after extensive consultation with industry and consumer groups.

“The revised Code will have a positive impact on the quality of advice offered by Authorised Financial Advisers, while reducing unnecessary compliance costs and improving access to advice,”  Foss says.

We have asked the Minister how the revised code reduces compliance cosots and improves access to advice, and will publish his response when we receive it.

DOWNLOAD New Code here

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Comments from our readers

On 28 March 2014 at 2:47 pm brent sheather said:
put your clients interests first..ok what if I work for a stockbroker with an investment bank paid to sell feltex shares..the firm thus has two clients with opposite needs..one will inevitably be more first than the other..lol this is a fun industry.
On 28 March 2014 at 4:20 pm btw said:
Brent, despite Code Committee rhetoric on the matter, advisors/brokers still have fiduciary obligations (act in client’s best interests etc) – which means, amongst other things, that they have to avoid conflicts of interest - so if they can't reconcile the conflict in their client obligations they are not allowed to act (for one or both of the clients). It is [relatively] simple. It only gets complicated when one tries to reconcile these obligations against the Code.
On 29 March 2014 at 9:40 am brent sheather said:
hi btw,im probably a bit slow but I see reality as this..advisers work for two clients..mum and dad and some corporate who wants to sell stock..to discharge their obligations under the code all they need to do is acknowledhe their conflict then they are free to put one clients interests ahead of another..this is just another case of the govt/regulatory authorities being captured by the industry..the best and only solution is to split investment banking from retail banking as per glass steagall (if I remember correctly)
On 30 March 2014 at 3:07 pm traveller said:
I used to work for a financial institution which was a product provider. I had sales targets to meet. I imagine this has not changed in similar organizations. There is the problem.
On 31 March 2014 at 9:41 am btw said:
Absolutely agree with your bigger picture solution (Glass Steagall) Brent – but only if it is coupled with proper regulation.

My immediate point was that compliance with the Code isn't enough for advisors to discharge their fiduciary obligations. Removing or negating advisor's fiduciary obligations would have required very specific legislation in the FAA - and its not there (it would have been a very clear indication that the standards being imposed on advisors under the FAA were lower than that already in place). So, notwithstanding the FAA, the position remains, that if advisors don't meet their fiduciary obligations (as well as those under the Code) they will still be liable in a court of law - the consequences of which far exceed the penalties under the Code. Unfortunately, given the lack of guidance and education on the matter, its going to require an advisor to be sued before people listen (although it might come out in the Feltex action).
On 1 April 2014 at 3:58 pm Brent Sheather said:
Funny you mention an adviser being sued – I was the expert witness in just such a case late last year and the biggest problem the client had was finding an expert witness who was prepared to help prosecute one of his peers. No one else was interested in the job even though it involved many millions of dollars. It didn’t get to Court because the firm settled prior to that but it would have been hugely embarrassing if it had seen the light of day. Unfortunately I am not allowed to name names but I will write an article in the Herald sometime as it is a story worth telling. Glass Steagall would have prevented much of the naughty behaviour.

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