Changes for financial advisers pass first reading

A bill that simplifies the implementation of the Financial Advisers Act and reduces costs while encouraging public confidence in the industry passed its first reading in Parliament last night.

The Financial Services Providers (Pre-Implementation Adjustments) Bill makes technical amendments to the Financial Service Providers (Registration and Dispute Resolution) Act and the Financial Advisers Act.

The focus of the amendments is on changes to the qualifying financial entity (QFE) model.  A QFE is a company approved by the Securities Commission to take responsibility for the advice provided by its employees and other representatives on a limited range of products, instead of those people each requiring their own licence.

The proposed changes will ensure it is clear which representatives' advice will be the direct responsibility of each QFE, as well as widening the range of products that a QFE's advisers can offer advice on without being individually licensed.

Mr Power said he expects the changes to take effect by the middle of the year, giving financial advisers about six months to implement them before the legislation is made compulsory at the end of the year.

"The Government is still working through potential changes to the way investment transactions are regulated under the Financial Advisers Act, following recent targeted consultation with industry at the end of last year. I expect to be able to make an announcement soon on my proposed approach to this issue."

Mr Power also noted that some stakeholders might raise additional issues while the Bill is being considered by the select committee. He further stated that he would be willing to consider some additional alterations to the regime, provided consumer protection objectives are still met.

"I encourage financial advisers and consumers to remain actively involved in the development of the Bill through the select committee process. However, this is not an opportunity to re-litigate the fundamental principles of the regime, such as the requirement that financial advice be delivered by competent and ethical individuals. While certain further adjustments to the regime could be justified if they boost efficiency, submitters should keep this limitation in mind," Mr Power said.

A copy of the Minister's first reading speech on the bill can be found at:  http://www.beehive.govt.nz/speech/first+reading+speech+financial+service+providers