Govt supports Commissioner of Financial Advisers plan

Wednesday 13 August 2008, 6:26PM
By Lianne Dalziel

The government is backing the establishment of a Commissioner of Financial Advisers who will be a member of the Securities Commission, as suggested in a second interim report issued by the Select Committee considering two Bills to regulate financial advisors and institutions.

Commerce Minister Lianne Dalziel said the commissioner would have a statutory responsibility to engage with industry to develop a code of conduct and to establish a disciplinary body.

"I'm confident that this approach will ensure that we have the strength of central supervision, without losing the experience and knowledge of industry participants," Lianne Dalziel said. "It will help ensure that the Securities Commission can act as both the statutory enforcer and the professional regulator."

The Finance and Expenditure Select Committee second interim report on the Financial Advisers' Bill also suggests a two-level approach to imposing obligations on financial advisers that are appropriate to the complexity of the financial product involved, and allows for institutional certification to ensure that the regulation is proportionate to the risks associated with the financial advice given, Lianne Dalziel said.

"The industry and officials have been grappling with the problem of defining who should be captured by the new rules regulating financial advisers. By focusing on the actual product rather than financial decisions or occupations we are able to provide certainty about who is covered by the Bill."

The committee is proposing two levels of financial advisory services be established in the Bill, each imposing a different level of obligation.

Category 1 includes advice on complex securities or investment and savings planning. Anyone providing category 1 advice must be individually authorised by the Securities Commission.

Category 2 covers advice on credit, general insurance or simple securities such as bank term deposits or call accounts. Individuals would not need to be individually authorised to provide these services.

In addition, the committee is considering adopting a model whereby the Securities Commission can certify financial institutions which meet the standards under the Bill. Certified Financial Institutions would then be responsible for financial advice offered by their staff on simple products.

"This is intended to cover bank tellers and insurance sales staff and the like who are selling basic products offered by the bank, insurance company, credit union or other financial institution and where there is little or no risk to consumers," Lianne Dalziel said.

Under these proposals authorised financial advisers (selling complex Category 1 products) employed by a Certified Financial Institution would still have to meet their individual obligations.

"I think these proposals by the Select Committee bring a great deal of common sense and clarity to what is a complex issue. I will be interested in further comments from submitters to the changes that are being considered," Lianne Dalziel said.