News Round Up

Cracking the code, the meaning of independence and while we're at it, the meaning of advice

Tuesday, April 6th 2010, 6:25AM 2 Comments

Perusing the draft Code of Professional Conduct for Authorised Financial Advisers one marvels that the industry has survived so long without such a cornerstone document.
Whilst one might think the majority of the standards in the code would be implicit in any relationship between a financial adviser and their client the absence of having it spelt out in black and white has been a serious flaw.
Placing clients interests first is Code Standard 1 and must be thought to be self-explanatory as there is little in the way of additional detail relating to this.
Use of the term "independent" is the focus of Code Standard 3 and many advisers currently promoting themselves as independent may find themselves on the wrong side of the examples given.

Definitions of category 1 and category 2 products are spelt out in Section H. If this leaves you with a few question marks then the guidance note issued by the Securities Commission last week is sure to add a few more. You can read that story here.

Disciplinary measures for breaches of the code include cancellation of the AFA's authorisation, debarring for a specified period or payment of a fine. Interestingly no range for fines is spelt out.

Disgruntled clients will also be able to lay complaints directly with the Securities Commission if their adviser breaches the code.

The draft code can be downloaded here:
Advisers have five weeks until 7 May to make submissions which can be emailed to consultation@financialadvisercode.govt.nz

The April issue of ASSET magazine has a special feature on the education requirements of the new code. If you are not currently a subscriber we are offering a free copy for a limited time. Simply complete this form before 9 April. You can start earning your unstructured CPT hours as you read!

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Comments from our readers

On 6 April 2010 at 11:56 am Mac said:

One of the exemptions under Code Standard 3 with reference to the definition of independent advisers:
(f) those that are received by the AFA in the form of salary or wages as an employeee that are determined in whole or in any part by reference to volume or other targets."
Nice addition by the institutions, but could anyone provide an example of an AFA on a wage not having any financial or non-financial targets?

On 6 April 2010 at 5:26 pm Ron Flood said:

If a person is employed by an institution and subject to restrictions on the products or services they can advise on, the can not be deemed to be independent irresepective of how they are paid.