Progress made on the implementation of the new financial advisers' regime

A number of work streams to implement the Financial Advisers Act 2008 and the Financial Service Providers (Registration and Dispute Resolution) Act 2008 are now well underway. In this update, solicitor Debbie Wong outlines the current key developments.

The Financial Advisers Act 2008 (the FAA) and the Financial Service Providers (Registration and Dispute Resolution) Act 2008 (the FSP Act) are scheduled to come fully into force by the end of 2010. This legislation introduces significant regulatory requirements that will affect a broad range of businesses. A number of work streams to implement the FAA and the FSP Act are now well underway. The current key developments are outlined below.

Further amending legislation proposed

In October, Commerce Minister Simon Power announced that further technical amendments to the FAA and the FSP Act would be introduced through amending legislation in response to industry concerns about aspects of the new regime. The proposed amendments include:

• Requiring a qualifying financial entity (QFE) to nominate the individual agents whose advice it will take responsibility for (currently, a QFE may be responsible for all individuals who are its agents at law).

• Allowing nominated agents of a QFE to provide financial adviser services in relation to the QFE's category 1 products without having to be individually registered or authorised (currently, this is only available for the QFE's employees).

• Allowing employees and nominated agents of a QFE to provide financial adviser services in relation to products of which the QFE is a promoter (currently, this only available for products of which the QFE is the issuer).

The amending legislation is currently scheduled to be introduced to Parliament in December 2009.

New Commissioner for Financial Advisers appointed

David Mayhew has been appointed the new Commissioner for Financial Advisers for a five-year term which commences on 25 January 2010. He will replace the current Commissioner, Annabel Cotton, who was appointed on a short-term basis while a full-term candidate was found. The Commissioner for Financial Advisers is responsible for overseeing the development of the Code of Professional Conduct and chairing the Disciplinary Committee for authorised financial advisers.

Code Committee appointed

The Financial Advisers Code Committee has been appointed and is currently in the process of drafting the Code of Professional Conduct for authorised financial advisers. However, it has already had two members resign following the release of a Consumer New Zealand report on the finance advice industry in November. The two members were associated with firms which gave advice that was "rejected" in the report and chose to resign to remove the potential for loss of public confidence in the work of the Code Committee.

The Code of Professional Conduct will provide for the professional conduct that must be demonstrated by authorised financial advisers, including minimum standards of competence, knowledge and skills, ethical behaviour and client care. The Code will also provide for continuing professional training requirements. A draft Code is expected to be released for consultation by early 2010.

Consultation papers on minimum standards for authorised financial advisers

The Financial Advisers Code Committee has released two consultation papers on the proposed minimum standards for authorised financial advisers. The first consultation paper seeks feedback on proposed minimum standards of competence, knowledge and skills and the second consultation paper seeks feedback on the proposed minimum standards of ethical behaviour and client care. Submissions on the first consultation paper were to close on 13 November 2009 but the Code Committee extended the deadline until 27 November 2009 for individuals (or organisations) who requested and were granted an extension by the Committee. Submissions on the second consultation paper close on 18 December 2009.

Discussion document on fees

The Ministry of Economic Development has released a further discussion document on the proposed fees to be charged by government agencies to assist with the implementation and ongoing costs of the new regime. Submissions closed on13 November 2009.

Further information Bell Gully has prepared a guide to assist with navigating the legislation and determining the extent to which it may apply to various businesses. See the Financial Service Providers Law – Guide which is available on our website. For further information go to http://www.seccom.govt.nz/invest/financial/consumers.shtml and visit the Code Committee's new website at http://financialadvisercode.govt.nz/

Enquiries and information

For more information on any of the cases, articles and features in Commercial Quarterly, please email Diane Graham or call her on 64 9 916 8849.