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Whistle-blowers more exposed under new rules

Whistle-blowers are set to lose some of their identity protection when the new financial adviser legislation comes into force.

Tuesday, September 26th 2017, 6:00AM 1 Comment

by Susan Edmunds

Barrister Merran Keil, former senior legal counsel at the Financial Markets Authority, has pointed out that while the Financial Services Legislation Amendment Bill provides protection for financial advisers or nominated representatives who report breaches of the legislation to the FMA, it does not protect their identity in the same way as if the disclosure was made under the Protected Disclosures Act, or the Financial Advisers Act.

“During my time at FMA there were several occasions where an employee or ex-employee made disclosures to the FMA of acts that amounted to infringements of the law that the FMA regulates," she said. 

"In all cases the FMA did protect the identity of those Informants, however in one of those cases, it was obvious to the employer who the informant was because of the nature of the information the FMA had obtained. 

"This will probably be the case when the employer runs a small practice and the number of people that know about the infringing behavior is limited. Further the FMA will almost invariably withhold the release of information disclosing informants’ identities under the Official Information Act. But, my question is why the bill excludes the requirement that an Informant’s identity be kept secret, when that provision was included in the Financial Advisers Act?"

Sue Brown, former head of regulation at the FMA, said it was a point worth looking at.

"While I can see a difference in context and rationale between a Protected Disclosures Act disclosure - only applies to employees and disclosures about their employer - and the FSLAB provision - applies to financial advisers and nominated representatives and disclosures about anybody -  I don’t see any difference in context between the FAA and the FSLAB provisions," she said.

"Like Merran, I know of cases where the name of an informant who needed the protection has been kept confidential for many years. And I’m not aware of the FAA provision having created practical difficulties such as providing shelter for mischievous or vexatious informants."

A spokesman for the FMA said it would be considered.

“We are working on the implementation of the FSLA Bill. We are always pleased to hear from the market and advisers about the regulatory framework that we administer. As is our standard practise, we’ll consider the point raised, alongside others that we may have, and if it’s something we consider needs to be raised with MBIE we will do so.”

Tags: Disclosure financial advisers Financial Advisers Act Financial Services Legislation Amendment Bill FMA FSLAB regulation Sue Brown

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Comments from our readers

On 27 September 2017 at 7:07 pm gavin austin adviser business compliance said:
Fair comment - knowing her as an ex FMA employee I agree - best wishes Merrin

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