KiwiSaver guidance could be challenged in court
Controversial aspects of the Financial Markets Authority’s stance on KiwiSaver advice could be challenged in court and possibly even overruled, a lawyer says.
Wednesday, November 7th 2012, 6:00AM 
5 Comments
by Niko Kloeten
The FMA’s guidance note, which takes effect in March next year, has received a mixed reaction from the industry, with the Institute of Financial Advisers supporting it and the Bankers’ Association slamming it.
But the final guidance note may not be the end of the legal debate, according to an expert on financial services law.
Chapman Tripp partner Mike Woodbury said it was possible advisers or companies could mount a legal challenge against aspects of the FMA’s interpretation of the Financial Advisers Act regarding KiwiSaver advice.
“It’s probably not the sort of thing that would lend itself to a declaratory judgment,” he said. “However, court guidance could be good to get the requisite certainty in one or two areas that arise.”
He said it’s “not inconceivable” that a judge or judges could take a different view to the FMA on certain parts of the guidance, although “I don’t know whether courts have gone as far as overturning a regulator’s view”.
Woodbury said a court case involving KiwiSaver advice would add useful case law and there were a number of examples in commercial law where courts had helped clarify contentious issues.
“It’s no different to other aspects of the law; over time people have evolved a consensus or the courts have issued meaningful guidance,” he said.
“This has included the meaning of the word ‘material’ in securities law and the term ‘good faith’ in employment law. Another one was the recent judgment around directors’ duties.”
Woodbury said the concept of “implied advice”, which was questioned by a number of submitters, was one part of the FMA guidance that could potentially be tested in court.
Niko Kloeten can be contacted at niko@goodreturns.co.nz
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As a member of the IFA their position on this issue is a ways off mine. Which is fine, I guess. The IFA is trying to maintain relevance, and campaigning for what looks like the greater good of the punter (more people getting access to advice etc), but is sacrificing best of breed ideals in their pursuit of it. I just think there is little room for RFAs to be giving advice on investments - period. And the "guidance " seems more like a trap because the boundaries keep moving, and one could easily find oneself on the wrong side of the line.
The banks will hate it. Their QFE structures allow them to shove, push and promote their own cat 1 products using their own armies of staff. Of course they wish for less competition from RFAs not in their club.
And the lawyers. Amused covered them above. And if it is overturned where will that leave the RFAs?
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The only people who will end up benefiting from a legal challenge to the FMAs interpretation of the Financial Advisers Act regarding KiwiSaver advice are lawyers themselves. The legal fraternity of New Zealand seem to want to apply case law to every aspect of society and in doing so make a hefty earner in the process. I have several school friends who are lawyers and they would be the first to admit this over a beer or two.