25 June 2010

Financial Advisers Urged to Get Ready for Regulation

(Media releases from the Securities Commission)
25 June 2010

The Commissioner for Financial Advisers, David Mayhew, today urged advisers to get ready for the new regulatory regime. He also updated the Securities Commission's financial adviser implementation timetable.

The announcement follows changes made by Parliament to the Financial Advisers Act this week. The Act will be implemented over the next twelve months, coming fully into force after 30 June 2011.

Authorised Financial Advisers

"Now financial advisers have certainty about the regulatory framework, it's up to them to meet the new standards in time to be authorised by 30 June 2011," Mr Mayhew says. "From then on, an adviser must be an Authorised Financial Adviser (AFA) to give advice to the investing public, unless they're exempted by the law."

The top priority for advisers seeking authorisation is to enrol to be assessed against the adviser competence standards. These are set out in the draft Code of Professional Conduct currently being finalised by the Code Committee.

"I am confident that the proposed competence standards are unlikely to change materially and certainly will not be reduced. I'd encourage all would-be AFAs not to wait until the last minute before applying," Mr Mayhew stresses.

"My message to all prospective AFAs is: book your competence assessment now. It's a critical pre-requisite for gaining authorisation."

Mr Mayhew noted that the regulations had yet to be made by the Ministry of Economic Development to confirm that the Commission could authorise an adviser to provide advice only on mortgage or insurance products.

"The Code Committee has indicated that they are continuing to include competence standards for these advisers in the draft Code. That approach is sensible and pragmatic, based on the assumption that the regulations will be published by the time the draft Code comes to be approved and made by the time the Code is implemented."

The AFA timetable has been modified to allow time for late applications and is available at www.seccom.govt.nz/afa

Advisers can book their competence assessment at http://www.afacompetence.org.nz/

Qualifying Financial Entities

Mr Mayhew welcomed Parliament's decision to use the Code as a benchmark for firms and corporate groups seeking to become Qualifying Financial Entities (QFEs). Changes to the legislation confirm that QFEs must provide consumers and investors with a similar standard of protection to that provided by advisers who are subject to the Code. The QFE provisions are aimed at organisations that employ large numbers of financial advisers.

"The Code benchmark is a powerful consumer protection tool in the regulation of all advisers dealing with the investing public, including QFE advisers."

"QFEs must submit an Adviser Business Statement (ABS) to the Commission before getting their licence to explain the policies and procedures they have in place to ensure their advisers operate professionally. We will scrutinise every ABS to ensure that the Code benchmark is appropriately applied," Mr Mayhew says.

In view of the new legislative rules, the Commission has relaxed the QFE application timetable. "I encourage QFEs to submit their ABS by October, although we will accept them up to a final deadline of 1 December 2010."

A QFE "Get Ready" Checklist has been issued and is available at www.seccom.govt.nz/qfe

Superceded guidance withdrawn

The Commission has withdrawn its guidance on financial planning services following the removal of the definition from the legislation.


Contact: Roger Marwick 04 471 7659