Mortgage brokers likely to escape tougher regulation
Most mortgage brokers look likely to escape full-scale government regulation if the latest blueprint for policing financial advisers becomes law, according to the head of the mortgage broking industry's leading trade organisation.
Sunday, August 10th 2008, 12:43PM
by Maria Scott
Parliament's Finance and Expenditure Select Committee is considering the Financial Advisers Bill and, late last week, released a second interim report. It proposes that there should be two tiers of regulation; "category one" advisers would require authorisation by the Securities Commission and would include advice on complex securities or investment broking and savings or investment planning.
The second, "category two" would include advice on credit, general insurance or simple securities such as bank term deposits or call accounts. Advisers dealing with these products would not have to be authorised but would have to comply with basic disclosure and conduct requirements.
"It looks like mortgage brokers don't have to be authorised under these new changes. It seems fairly clear that the mortgage brokers will fall into category two," said Salt.
However, she expected brokers to have to be authorised to sell the retirement investment scheme, KiwiSaver. Some brokers are starting to sell KiwiSaver plans as a way to diversify their businesses.
Salt said that some brokers might have to be authorised for some of their business and not others. It was unclear whether life insurance would be an authorised activity.
Aspects of the committee's proposals had improved on an earlier set of suggestions put forward by the Government, said Salt, but she questioned whether the new two-tier approach would meet the changes taking place in the market.
She was uncertain about the benefit to consumers.
Salt also questioned whether the proposed system would deal adequately with a scheme like that sold by the collapsed packaged property investment firm Blue Chip.
The full implications of the latest proposals would not be clear until the draft legislation was available.
The NZMBA had criticised a proposal for institutions such as banks to be able to acquire authorisation covering most of their staff. The committee's interim report has endorsed this idea but Salt said that bulk authorisation did not pose as big a potential problem for mortgage brokers if most would not themselves have to be authorised. This would remove a lot compliance costs.
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