Fate of exempted AFAs undecided
Authorised Financial Advisers who were exempted from parts of the qualification requirements are unlikely to have to sit them once their eligibility “sunset” expires.
Thursday, December 13th 2012, 6:53AM 
15 Comments
by Niko Kloeten
A number of AFAs including suspected Ponzi scheme operator David Ross were given relief from certain unit standards in the National Certificate of Financial Services Level 5 such as Standard Set C, which focuses on aspects of advisers’ practices such as disclosure and record-keeping.
Some of those eligible for exemptions from this standard included chartered accountants, CFP charterholders and NZX advisers; however, this relief is due to expire at the end of next year.
Code Committee Chairman David Ireland said the committee would be reviewing all aspects of the eligibility sunset in the next year, including whether to extend it and what to do about advisers who became AFAs using one of its exemptions.
“The bottom line is it’s yet to be determined; that will play out over the course of next year but there are a few variables at play,” he said.
One of these variables is a review of the industry’s qualifications framework by the Skills Organisation (formerly ETITO), Ireland said.
But he said unless the qualification bar for AFAs is raised those who get exemptions from unit standards are unlikely to have to sit them when the relief period ends.
“The way the sunset works as per the FMA is that where the bar is set is where the bar needs to be when you first apply for authorisation,” he said.
“So long as I am a chartered accountant prior to first applying for authorisation I get relief from Standard Set C so long as I have applied before January 2014. It doesn’t mean after January 2014 I will need to sit Standard Set C when I come to renew my authorisation or it drops away.”
Ireland said the decision to exempt chartered accountants had been made because there was “no discernible benefit to the public” in making them sit Standard Set C due to similar requirements already placed on accountants.
“There was also concern over whether we had enough competent assessors to cover Standard Set C… do we really want 30,000 chartered accountants all rocking up and doing Standard Set C?”
Niko Kloeten can be contacted at niko@goodreturns.co.nz
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Comments from our readers
On 13 December 2012 at 7:55 am denis said:
Are there any numbers around how many current AFAs actually completed Set C to get their qualification? On 13 December 2012 at 8:43 am Phil said:
Given some of the shocking investment advice I hear chartered accountants giving, the best thing that could happen would be to make them all sit Standard Set C, as well as the rest of the papers the rest of us full time AFAs have had to sit. Their advice might then improve. On 13 December 2012 at 9:09 am Ally said:
This guy David Ireland should resign from the Code Committee. It would seem they have had the wool pulled over their eyes by Chartered Accountants and NZX members. He says there was "no discernible benefit to the public" in having Accountants sit SSC. What about the benefit that David Ross in all probability would not have been able to obtain SCC and would have been exposed ? And Ireland seems to be saying there are a further 30000 accountants out their giving financial advice with minimal qualifications ........ On 13 December 2012 at 10:16 am Amused said:
We keep hanging our hats on more and more academic qualifications been the saviour of the industry's “ethics” problems. They won't be sorry. If the David Ross scandal teaches us anything it's that we can always rely on the inefficiency of Government Departments to NOT do their jobs.
And I quote now from another article published this morning:
"The Securities Commission appears to have been warned about suspected Ponzi scheme operator David Ross three years ago, but took no action.
An email obtained through the Official Information Act shows Securities Commissioner Annabel Cotton was told of concerns about Ross in September 2009.
The person, who asked not to be named, said he was told the commission was too busy to look into his concerns. "I remember Annabel's words exactly," he said. "[She said] ‘I hope you're not right'."
Ms Cotton, who owns investor relations consultancy Merlin, said she had no recollection of the conversation.
On 13 December 2012 at 10:18 am Dirty Harry said:
Denis, the ETITO actually administered C, so they will know exactly how many have done it.
Interesting we have yet another MASSIVE estimate of the numbers, which will never eventuate.
BTW I'm quite sure the Skills org would love it if 30,000 people "rocked up" wanting set C. But of course that’s not the point.
Most accountants care about their clients, they know what they know, and what they don't know, and they engage with other advisers. The problem is this "incidental" thing is being massively exploited by some, and Ross is an excellent example of that.
We just need them to either stick to their knitting, or be required to do C if they wish to give investment advice.
Any half decent grandfathered adviser will have little trouble preparing for C, just the annoyance of the time it takes to collate, copy, scan etc. And any accountant who is straying, relying on the exemption, will very quickly be found out. Might even have a new appreciation for what we do.
What I would like to see is when the exemption expires (extend it if needed) C needs to have been completed or you're out. And 'incidental' needs to be clearly defined - set at a low level.
On 13 December 2012 at 10:55 am brent sheather said:
Agree with above comments but I wouldn't blame David Ireland. He wasn't the chairman when those decisions were made. Ross Butler was. He is apparently an ex executive of the IFA too. On 13 December 2012 at 12:30 pm Mac said:
Did 30,000 chartered accountants "rock up" and complete Standard B? Of course not!
“..no discernible benefit to the public ...due to similar requirements already placed on accountants". So all chartered accountancy practices have standard procedures and processes to provide investment advice??? Absolutely not.
On 13 December 2012 at 1:12 pm Niko Kloeten said:
In case it wasn't clear in the story, David's comment about 30,000 accountants doing Standard Set C was tongue-in-cheek and wasn't meant as an actual estimate. On 14 December 2012 at 10:27 am Disppointed said:
Sean Hughes should do the right thing and stand down from his position and an investigation done into the FMA processes - this Ross saga has caused more destruction of faith in our industry and we are paying twice for the FMA to do their job; as tax payers and AFAs. There should be some investigations done into when the flags were raised as Disputes Resolution Service and/or FMA had been warned about Ross 9 months ago. Man up Mr Hughes. On 14 December 2012 at 1:19 pm brent sheather said:
As bad as the RAM business is the losses there are nothing compared to the industry wide losses resulting from bad advice.
The poor selection of people for the Code Committee initially (not all of them) and subsequent capture of the process by the industry wits and thus little in the way of change for the better is why we are where we are..Have a nice weekend !
On 14 December 2012 at 1:33 pm AJS said:
Brent's is on the right track here. The new system/regime was set up largely by those in the industry which is a bit like putting the fox in charge of the hen house. How could it truly be set up with the small investors' interests at its epicentre; very very unlikely I reckon! The FMA has inherited the system and should now get busy influencing those who can change it (voters and politicians) to make it investor-centric (and "nail a few of the bad apples to the wall" in the meantime). On 17 December 2012 at 11:00 am Barbara Gordon said:
Wel, well, it seems like we have one rule for some and another for the rest.
After all this fiasco with David Ross, (and I'm sure there will be more advisers out there who haven't yet been discovered by the FMA), it seems to me thing are being treated like an 'old boys' club.
As far as I am concerned, anyone worth their salt providing full investment advice to the investing public should have to go through the same rigorous process of proving that they are fit and able to do the job properly.
I'm quite sure that if I were to commence giving tax advice or advice on buying/selling direct shares when I am not either an accountant or a sharebroker, that the FMA would come down very hard on me.
That should be the same for anyone else; if you don't want to complete the necessary papers, Standard Set C included, then don't give investment advice.
It is the way we have to operate and everyone should be treated exactly the same.
What David Ross and his ilk have done to his clients and to our industry is despicable and we have to ensure that no other clients end up in the same situation.
I agree with "Dirty Harry" that everyone completes Set C satisfactorily or they're out. No more excuses. This is serious stuff.
On 17 December 2012 at 1:58 pm brent sheather said:
Absolutely Barbara. Gareth Morgan called it industry capture and from memory said that people with CFP "qualifications" lol were responsible for a disproportionate level of bad advice.
I'm thinking finance co debentures. Correct me if I'm wrong but I don't think CFPs had to do Standard Set C either.
They should and the sooner the better.
On 17 December 2012 at 3:17 pm Raoul said:
"be careful what you wish for you may get it" I can't remember who said this famously but all of you having a go at the inadequacy of the law the FMA and everything else should bear this in mind. No law ever stopped illegal activity, there has been a law against murder for decades. Keep whining about the inadequacy of the Code Committee, FMA or anyone else and you might find someone decides to get unreasonably tough - how'd you like to be doing standard set C every year? On 24 January 2013 at 1:17 pm Jon said:
Well done Raoul. I remember as a kid we use to say the law was made to be broken. Making law does not stop the offense. The good book in Romans 5:20 says "Moreover the law entered, that the offence might abound." If we want to stop the offense then we need to open our books to each other, if we can't trust each other then how can we expect the government and the public to trust us. Sign In to add your comment
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