Adviser Regulation Ready To 'Go-Live' On 1 December

(Media releases from the Securities Commission)
28 October 2010

The Commissioner for Financial Advisers has taken the last formal step required for the introduction of the new financial advisers regulatory regime, with publication in the Gazette that 1 December 2010 will be the date on which the Code of Professional Conduct for Authorised Financial Advisers (AFAs) comes into effect.

The Code of Conduct contains the minimum standards of competence, knowledge and skills, ethical behaviour and client care that AFAs will be expected to uphold.

Commissioner for Financial Advisers David Mayhew said it was an important milestone for the implementation of the new regime.

"This confirms that Authorised Financial Advisers will be a reality from 1 December 2010. From that date advisers giving personalised investment advice to retail clients will be able to operate within the new regime designed to promote the sound and efficient delivery of financial advice and to encourage public confidence in the professionalism and integrity of advisers," he said.

He also noted that from 1 December all financial advisers will be subject to the statutory duties to exercise care, diligence and skill and not to engage in misleading or deceptive conduct.

At the same time, the Securities Commission has approved the standard conditions for incorporation in the authorisation of AFAs. Those conditions provide the framework for the regulatory relationship between the individual AFA and the Securities Commission, for example, in relation to reporting obligations.

Mr Mayhew said the Commission was grateful for the efforts of all those who made submissions on the proposed standard conditions and that responses to the consultation would be published on the Commission's website shortly.

However, Mr Mayhew sounded a note of caution about the readiness of the majority of financial advisers to engage with the new regime. "While the Securities Commission will have in place a licensing process for advisers who want to be AFAs by 1 December, too few are currently getting on with the registration and assessment steps necessary for authorisation. There is a real risk that delay now will create a log jam next year," he said.

The Commission has previously said that, provided advisers applied for authorisation by 31 March 2011, the Commission should be able to complete the process by the critical date of 1 July 2011.

"But that assumes significant numbers have already been processed before 31 March", said Mr Mayhew. "The experience to date has been disappointing and, unless there is more engagement now, there may be insufficient capacity in the system to cope with the volume of applications to be processed in the last three months before the regime is fully in force."

See: Standard Conditions for AFAs at seccom.govt.nz.

See: Code of Conduct at legislation.govt.nz

Ends

Contact: Roger Marwick 04 471 7659

Note for editors

All financial advisers have to be registered by 31 March 2011. To give advice after that date without being registered will be an offence. Advisers wanting to give personalised investment advice to retail clients have to be authorised to do so by 1 July 2011. After that date it will be an offence to provide such advice without being authorised. See the Securities Commission AFA 'Get Ready' Checklist at http://www.seccom.govt.nz/far/afa/checklist.shtml. There are exceptions to both these requirements if the adviser works for a qualified financial entity (QFE), see http://www.seccom.govt.nz/far/qfe/products.