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Susan Edmunds
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First FADC action taken

Tuesday 27th of August 2013

A hearing was held in Wellington to deal with the cases of three advisers earlier this month. Two were to be decided on the papers after the hearings and one had the complaint dismissed.

The committee has revealed that it has taken action against Musaphia.

Musaphia was referred to the committee over breaches of the following code standards:

  • CS One, which requires that advisers put a client first
  • CS Eight, which says that advisers must take reasonable steps to ensure personalised service is suitable for the client
  • CS Nine, which covers the need for a written basis for advice, and
  • CS12, which relates to record-keeping.
Musaphia had been an AFA since 2011 but after a monitoring visit, the FMA raised concerns about the suitability of advice for a client and the lack of documentation available. A second monitoring visit and interview with the client revealed that although the client was a solo parent, only working 20 hours a week and needing advice on what to do with a lump sum insurance payout. Eighty-five per cent of the payout was to be invested and there was a chance that the client would want to withdraw some of the money to buy a first home.

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Paul Flood: The danger is that the 'goalposts' (regarding what is acceptable or unacceptable adviser conduct) may be susceptible to change. Our 'Principles based' legal/regulatory environment lends itself to “prevalence-induced concept change” over time, perhaps not so much in the written laws and Code, as in the interpretation of the prescribed principles.
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Just a tip, if you use more than six, six letter words in a sentence you lose most Kiwi's. So avoid client/adviser confusion when writing your post or article if you would like it read and understood. Ironically, my last sentence was not likely read.
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FMA outlines its latest expectations for advisers
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