Consideration for sole traders to register once
The Cabinet Economic Growth and Infrastructure Committee (EGI) paper proposes that sole traders should register as individuals but not as companies to reduce compliance costs.
Thursday, November 11th 2010, 7:17AM 
16 Comments
by Jenha White
As the regulation currently stands, both the individual and the company have a legal obligation to register separately, with advisers operating under this structure needing to pay two registration fees.
The EGI committee says instead, sole traders should have to only register as individuals with the condition that the adviser notifies the Registrar of the company he/she operates through at the time of registration.
The paper says this is to ensure regulators have access to information on adviser firms, allowing effective identification for anti-money laundering purposes and to enable the public to search the Register for the company as well as for the name of the adviser.
Companies would also have to be a member of a dispute resolution scheme.
"The benefit of this approach is that it reduces the compliance costs of sole traders while retaining the benefits of registration of both individual advisers and companies."
Institute of Financial Advisers (IFA) chief executive Peter Lee believes this proposal is fantastic for sole traders to help ease the complexity and cost of regulation, however he has a few concerns.
Firstly Lee says there is only three weeks till the cut-off for registration so the decision is coming too late as most advisers will already have registered twice. This begs the question of how will those already registered get refunded?
Lee also believes the strict interpretation of sole trader adviser will mean a vast majority of advisers will miss out on the exemption. The paper defines a sole trader as an individual operating through a company of which they are the sole director and shareholder.
"For example some advisers will have company structures with two shareholders and two directors, but for all intensive purposes the other shareholder and director is a sleeping partner, for example a spouse and as a result they won't meet the requirement which we believe is unfair."
The Securities Commission says a final decision on this issue will be made soon.
Jenha is a TPL staff reporter. jenha@tarawera.co.nz
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Comments from our readers
On 11 November 2010 at 9:28 am Murray Chong said:
Whats your full name John ? On 11 November 2010 at 10:22 am Philip said:
Hi all - thought it would be useful to clarify our process with comments. We do moderate comments and some don't get approved. Also we allow nom-de-plumes but recommend people use their real email when posting. This is not displayed.
On 11 November 2010 at 11:03 am Alister said:
From a legal perspective it would seem to make more sense to register as an individual rather than as a company. Being a sole trader and having to be registered both as an individual and a company is to me overzealous on the part of the regulators. Anything introduced to keep the cost of regulation to a bare minimum is in my books always a good thing. Paying ACC levies for a business you run by yourself is bad enough when you already have income protection insurance elsewhere! On 11 November 2010 at 12:44 pm PM said:
The shambles continues. We nearly saw evidence of some common sense...but the joint shareholding of an Adviser and spouse won't qualify. Normal transmission has resumed. On 11 November 2010 at 1:02 pm LPL said:
To look at matters another way. There is still three weeks. And, failing that it may be a problem for the first year, at worst - is it really so bad?
With reference to the "sleeping partner"; no doubt this is the same sleeping partner that income is being split with? Perhaps a little dent in the tax benefit, nothing more!
On 12 November 2010 at 10:24 am Regan said:
@LPL have you seen the costs to register? Here you go:
http://www.business.govt.nz/fsp/help-support/fees
If my wife is shareholder, director and employee the 'dent' to tax is tiny, because as above states, she might need to resign as director, and we might have to transfer some shares. Big deal, not actually the main problem. She can still be an employee by all assumption, The problem is duplicated paperwork and fees.
What's this about me, and my company, both having to join a disputes scheme? Surely if duplicated registration can be resolved then this can be as well?
On 12 November 2010 at 10:51 am Regan said:
Could Mr Lee please clarify when he thinks we have to be registered? I though advisers had until 31 March 2011, which means we should be waiting for this issue to be sorted. Everone who has jumped early in this whole process has been slammed every time - from training providers who went off a bit prematurely, to DRS's, to registering early and paying twice...
@LPL have you seen the costs to register? Here you go:
http://www.business.govt.nz/fsp/help-support/fees
If my wife is shareholder, director and employee the 'dent' to tax is tiny, because as above states, she might need to resign as director, and we might have to transfer some shares. Big deal, not actually the main problem. She can still be an employee by all assumption, the problem is duplicated paperwork and fees.
What's this about me, and my company, both having to join a disputes scheme? Surely if duplicated registration can be resolved then this can be as well?
On 15 November 2010 at 10:34 am traveller said:
brent sheather may not be top of the pops with most advisers but I think his article on page C9 of the NZ Herald of November 13 deserves reading and some thought. His discussion with one Disputes Resolution Service, revealed they have no-one with experience of financial planning or investment advising. But they intend to appoint two. It would be interesting to know how they intend to go about finding suitable people.Perhaps you could ask suitable questions to one or more of these companies.
I also was told that whilst clients have the right to appeal if they don't like the decision following a complaint, the adviser has no such rights.I wonder if advisers really appreciate this?
Which makes it doubly important that the right sort of people are appointed as adjudicators in a complaint.
Give ten advisers the same brief and you will get 10 different answers, none of which is neccessarily wrong.
On 15 November 2010 at 3:20 pm jason said:
Interestingly as a sole trader registering a company with the company's office we register it as a limited liability company as a backup to our PI insurance or as a safety net. As an individual we can't do this... doesn't make me happy being more exposed! why can't I just leave it as is with a 100% shareholding? On 17 November 2010 at 9:07 am Sarah said:
As they say in the forces - SNAFU
Situation Normal All **** Up
On 18 November 2010 at 11:44 am LPL said:
Regan, yes I have seen the charges - and paid them. I don't think they are that onerous. Certainly the education process is costly if you have to complete this as well. Remember though others have paid University charges; that avenue is more costly. Regulation/change has been on the horizon for a number of years. It was individual choice to not participate earlier and formally up skill in anticipation of what was coming.
These comments aside I do think there remains some outstanding issues. However, I feel confident at this stage they will be addressed over time.
Traveller makes a valid point. A process without the ability for an adviser to appeal is concerning. Especially with the level of liability $100-$200k.
On 23 November 2010 at 7:33 am Frustrated said:
Any word on when these Wallys are going to let us know? My deadline is December 1st. Theirs was months ago, but I doubt they will be held accountable let alone hit with the baseball bat used for small soletraders who do not comply. On 23 November 2010 at 9:48 am John said:
Unlikely Frustrated. We are after all talking about government departments here making a decision and as anyone in the public sectors knows there are strong incentives for public servants NOT to be efficient. It keeps the illusion going that they are actually busy hence the can justify their jobs. On 23 November 2010 at 10:22 am Regan said:
LPL I already had two of the Grad Dip papers under my belt, so over $1200 of massey fees, and the time invested, but since it's incomplete it doesn't count. No RPL either. So I'm into the full whack of Level 5, just to get to AFA, then i can carry on with the real, meaningful study and eventually get to CFP.
Re the charges, when one stops and thinks about who really was to blame for the losses suffered by the public it wasn't really advisers. Sure a few rogues caused some headlines, but for EG Phil M has previously commented that around 70% of fin co deposits were direct, and Morningstar did put their stamp on the DYF/RIF. So when I am required to fund a scheme that wont really add much protection to consumers, potentially being double dipped because I own a company, yeah, I reckon they are too high.
My greatest concerns on behalf of the public and the industry are inter-linked: That is if the regulation of the industry causes advisers to leave, and those who stay to increase charges, then will the public have more or less access to advice? and will they be more or less inclined to seek it? If 70% of the fin co losses were from direct, unadvised deposits, how much more would be gone if not for advisers recommending against, (or in moderation) fin cos? More people need to take more advice, more often. Sure, they need to be assured that the advice is delivered from competent advisers, I just have doubts over whether the regulators have the balance right, and whether they have spotlights on the right parts of the stage. Methinks the 'band' and the 'backstage' will still play the same show after 1 July, IE product providers and manufacturers, issuers and researchers seem to be getting through all this pretty lightly.
On 23 November 2010 at 8:48 pm billy the broker said:
Very frustrating is all i can say. But made some enquires myself. it is recommended that you sign up to a disputes resolution disputes tribunal and register with the FSPR (at more cost i might add) before Dec 1st. But you have to be legally bound to be fully registered by March 31 2011. Have rung different parties and all I can say is the left hand hasnt a clue wot the other hand is doing. Good luck to us all!!!!!! Commenting is closed
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What a bureaucratic shambles! What do these Government Departments do all day???