Budget 2009: Almost $12 million extra for financial adviser watchdog

The government has announced an extra $11.7 million for the Securities Commission over four years to implement a regulatory body for financial advisers, before expecting it to become self-funded through fees and levies.

Thursday, May 28th 2009, 4:14PM

by Paul McBeth

Commerce Minister Simon Power said the government will pump an additional $2 million this year as it seeks to "restore confidence in the financial markets by introducing a minimum standard of competence for financial advisers" and institute the Securities Commission as the central regulatory body for the sector. The government will continue to review its funding requirements, but expects the regime to be fully-funded from 2011/12, Power said in a statement.

"It would be consistent with the way financial services around the world are regulated to expect industry, which is benefiting from regulation, to cope" with funding the regime in four years time, said Angus Dale-Jones, director of supervision at the Securities Commission.

The two largest bodies representing financial advisers, the Institute of Financial Advisers and Professional Advisers Association, are happy to see the government injection, but want to see more detail. Lyn McMorran, president of the IFA, said the expectation for the regime to become self-funding could be a concern, as any fees would have to be passed on to consumers.

The extra money "is good news in the short-term," but we need to see how it's going to be spent, McMorran said. "I'm unsure whether it will be enough."

Dave McMillan, chief executive of PAA, said the industry should be alright provided the costs of implementing the new regime were covered by the government, as many were sole-traders, and wouldn't be able to absorb the costs. He isn't fazed by the prospect of the regime needing to become self-funded, and expected this would be the case.

Power gave the industry some confidence when he appointed Annabel Cotton as commissioner for financial advisers earlier this month. Cotton will appoint members to the council that will write a code of conduct as the sector prepares for the Financial Advisers Act to come into effect at the end of next year. Expressions of interest for the committee close on June 11.

The Ministry of Economic Development struggled to fill the position, so Power appointed Cotton in the interim until a person could fill for the full five-year term.

Before she took up the position, concerns about the timetable were raised at a Professional Advisers Association roadshow meeting at the start of this month, when McMillan said the delayed appointment was disconcerting.

Submissions on adviser competence in the latest consultation document released by the Securities Commission last month close on May 29.

Paul is a staff writer for Good Returns based in Wellington.

Tags: Budget