By David Chaplin
Wednesday 24th September 2008 |
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The Financial Advisers Bill (FAB) passed through Parliament under urgency this afternoon, ending its convoluted path into law.
Despite earlier suggestions the FAB vote would be held off until next year there was unanimous cross-party support to push through the legislation today.
However, Lianne Dalziel, Commerce Minister, said the government would listen to industry concerns when drafting the FAB regulations.
"I have decided to establish a working group which will encompass representatives of the industry, the Ministry of Economic Development and the Securities Commission to provide a feedback loop as we go forward," Dalziel said in a speech to Parliament today.
National MP, Simon Power, said it was clear FAB would develop further, in particular with "much more refined and subtle categorisation of product".
"We haven't seen the last of discussion of financial advisers," Power said.
He said the National Party was "keen to give the signal" to the industry that the FAB legislation had bipartisan support.
"Sometimes issues are too big for political discourse - this is one of them," Power said.
Under the law the advisory industry will be governed via a two-tiered model, based on the supposed complexity of the financial products advisers deal in.
Those who provide advice on Category 1 products (which include PIEs, derivatives and financial planning services) will be subject to more onerous compliance requirements and to register individually with the Securities Commission as an 'authorised financial adviser'.
"This does not mean that advisers who advise on simple products will be totally unregulated," Dalziel said today. "Rather, the bill provides that advisers (namely those that are providing advice on products such as consumer credit contracts and insurance products) must comply with basic conduct and disclosure requirements. They will also be required to be registered and be members of a dispute resolution scheme."
The FAB also established the 'qualifying financial entity' (QFE) concept, where approved institutions assume responsibility for any of their "employees or agents" covered by the legislation.
"Category 1 advisers [employed by a QFE], however will still need to be individually authorised. This will ensure that there is a level playing field between advisers who work for such organisations and those who operate independently," Dalziel said.
As well, the FAB will see the creation of a 'commissioner of financial advice', who will create a code of conduct for investment advisers.
Dalziel said the revised FAB, which ditched a co-regulatory approach to the industry, was an appropriate response to the collapse of the finance company sector.
However, in her speech today she said individuals should assume some responsibility for their investment decisions.
"It is very easy in this climate to blame all financial advisers, but I warn against imposing too high a standard on those who were faced with misleading prospectus' or who could not have foreseen the domino effect of the flight to quality which followed the initial failures," Dalziel said.
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