APBs out, adviser definition narrows: committee report
The Financial Advisers Bill appears headed for a major rewrite after recommendations published yesterday by the select committee considering the legislation. If adopted, the select committee proposals would effectively end the advisory industry co-regulatory model and narrow even further the definition of who would be caught by the impending legislation.
Thursday, April 17th 2008, 4:59PM
by David Chaplin
Lawyers and accountants have already escaped the proposed advisory legislation but under the revised definition published yesterday the bill would capture "only those whose primary business is the provision of financial advice or who regularly provide such advice in the course of their business".
"Most of the opposition to the definition of financial adviser proposed in the bill is based on a belief that its scope is too broad, and might unintentionally capture businesses that provide advice as an ancillary service only, or infrequently," the select committee report says.
It is understood the new clause would exempt advisers such as bank tellers and real estate agents.
Secondly, the select committee has recommended the approved professional body (APB) system should be replaced by the Securities Commission acting as sole regulator.
Murray Weatherston, head of the Society of Independent Financial Advisers (SIFA) - one of four industry bodies co-operating on an APB - called the proposals "despicable".
"It's [the proposal to dump APBs] contrary to everything that has been done so far... principles have been thrown out of the window," Weatherston said. "The proposal to narrow the definition of financial adviser looks to have been made to keep powerful groups out of the mix.... If I'm caught by the legislation then every [financial adviser] should be."
"It's like saying if you're a heart surgeon who does 50 operations in a week you'll have to meet standards but if you only do one heart operation every six weeks, you don't have to."
Dave McMillan, head of the Professional Advisers Association (PAA), also said the proposals appear to be the result of political pressure.
"It's no surprise but my concern is that with the narrower definition we will lose parity across the industry that was part of the original intention of the bill," McMillan says.
"If the government adopts the single regulator model like the UK and Australia I hope it doesn't make the same mistakes we've seen in those jurisdictions where the industry wasn't listened too."
Nonetheless, he says most PAA members would be happy to accept the proposals particularly if, as expected, existing practitioners would be 'grandfathered' in the new regime. "It should bring forward the legislation too... we can just get on with it," McMillan says.
Simon Hassan, Institute of Financial Advisers (IFA) president, also said the latest proposals were "expected". "We're supportive of the intent of the changes to make it a more workable act," Hassan said. "While we were keen to see a broad definition of financial adviser it can get to the point where it becomes silly and expensive."
For example, he said low-level bank tellers probably didn't need to be caught by the legislation.
"There's a sting in the tale, though, where if you give financial advice and you're not registered you will have to say so," Hassan said.
The select committee has called for submissions on the latest recommendations, however, no closing date has yet been issued.
It is understood the changes are a 'done deal' with the consultation process expected to take only a matter of weeks.
According to Hassan, the Financial Adviser legislation could now be in place with a register of advisers operating before the election this year.
Originally, the bill was expected to pass later this year with a further two-year period before it was fully implemented.
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