21 June 2011
The Financial Markets Authority has issued a warning to
SuperLife Limited and SuperLife Trustees Limited (together
'SuperLife') to overhaul its KiwiSaver sales practices.
FMA Chief Executive Sean Hughes said FMA was seriously concerned
about a number of matters regarding SuperLife's sales practices,
potential non-compliance with the law and apparent poor monitoring
of the activities of its sales force.
"From 1 July, FMA will monitor compliance by KiwiSaver providers
with their obligations under the Financial Advisers Act. We
will not hesitate to take enforcement action against KiwiSaver
providers who fail to ensure they comply with their legal
requirements."
On 9 June 2011, FMA urged investors to be wary of unacceptable
sales practices being used by unregistered KiwiSaver sales
representative Patrick Diack.
Mr Diack's sales approaches included soliciting members of the
public outside WINZ offices, offering them money to join a
KiwiSaver scheme and signing them up to scheme membership without
providing them with the investment statement - which is the
disclosure document that provides investors with the information
they need to make an informed decision.
FMA was also concerned about the distribution practices of the
SuperLife KiwiSaver Scheme represented by Mr Diack.
Particular concerns related to SuperLife's apparent failure to
properly train its employees and monitor their compliance with the
requirements of laws including the Securities Act and Financial
Service Providers (Registration and Dispute Resolution) Act.
After ongoing discussions with SuperLife, FMA continues to be
particularly concerned that SuperLife:
- failed to ensure that its employees giving advice, such as Mr Diack, are registered on the Financial Service Providers Register as required from 31 March this year
- failed to rigorously train and test its employees in relation to the requirements of law
- failed to adequately monitor its employees' performance and to performance manage any employees who fell short of the standard required.
FMA has warned SuperLife, and now emphasises to all KiwiSaver providers that:
- door-to-door selling of securities is illegal under the Securities Act
- any form of high pressure, coercive or misleading selling is inappropriate for KiwiSaver schemes
- FMA expects that before an application for membership of a scheme is accepted, the issuer will have taken reasonable steps to satisfy itself the applicant is aware of the nature and extent of the obligations they are incurring and has made the decision freely and on a properly informed basis
- KiwiSaver providers must comply with the Financial Advisers Act and Financial Service Providers (Registration and Dispute Resolution) Act and be aware of their effect on the requirements for distribution of their products.
FMA is further concerned that SuperLife intends to continue
distributing the SuperLife KiwiSaver Scheme without ensuring its
representatives are Authorised Financial Advisers or QFE advisers
as required by the Financial Advisers Act. FMA understands
SuperLife is doing this on the basis that its employees are
providing an 'information only' service.
Mr Hughes said that the provision of factual information may
amount to financial advice depending on the context.
"The potential investor's expectation of the service, and the
context in which those services are provided, need to be carefully
considered.
"A person gives 'financial advice' if he or she makes a
recommendation or gives an opinion in relation to acquiring or
disposing of a financial product.
"This definition is very broad. While the Financial Advisers Act
does contain some exemptions and exceptions, these are limited in
their application and will be carefully interpreted with
Parliament's intention in mind."
"We believe it is unlikely that a person presenting the merits of
a particular KiwiSaver scheme to a person, in a workplace context
or otherwise, will not give financial advice in the course of his
or her discussions with a prospective member."
Mr Hughes said FMA encourages all KiwiSaver providers to ensure
their sales representatives are appropriately authorised.
Investors who want to receive advice on what type of KiwiSaver
investment is right for them should ask for personalised advice
from an AFA or a QFE adviser.
Ends
Contact: Roger Marwick 04 471 7659 or Carole van Grondelle 04 474
2066
Note: A list of AFAs and QFEs is published on the FMA website
www.fma.govt.nz. Investors can also check whether a person or firm
offering a financial service is registered on the Financial Service
Providers Register at www.fspr.govt.nz. Investors should also refer
to information in the "Help me invest" section on FMA's
website.