ASSOCIATED PERSON: Patrick Diack
REASON FOR WARNING: We are seriously concerned about SuperLife's sales practices and potential non-compliance with the law.
We have issued a warning to SuperLife Limited and SuperLife Trustees Limited (together 'SuperLife') to overhaul its KiwiSaver sales practices.
FMA Chief Executive Sean Hughes said we are 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. Hughes stated "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, we 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.
We are 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, we continue 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.
We have 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
- We expect 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.
We are 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. We understand 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, stating "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 we encourage 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.
Contact: Roger Marwick 04 471 7659 or Carole van Grondelle 04 474 2066
