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:
FMA has warned SuperLife, and now emphasises to all KiwiSaver providers that:
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.
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 Consumers section on FMA's website.