Draft Code consultation meetings in full swing

Meetings to follow up the release of the Draft Code of Professional Conduct are happening around the country. Good Returns attended the meeting in Tauranga.

Wednesday, April 14th 2010, 6:05AM

by Jenha White

One possibility raised here was that there may be a bit more breathing space given to achieve compliance with the education standards. If the education system for financial advisers cannot cope with training and assessment requirements before December then some parts of the Code may be delayed until next year.

Advisers wanting to become Authorised Financial Advisers (AFA's) under the Financial Advisers Act 2008 have to either graduate with a National Certificate in Financial Services (Financial Advice) (Level 5) or achieve the equivalent educational outcome by December.

At the consultation meeting in Tauranga, attended by around 25 advisers, Code Committee chairman Ross Butler said the Committee will have to wait and see whether that is a feasible target or not.

"We'll have a good indication by September/October and if the system cannot cope with training and assessment requirements, then most of the code will be activated but it might say those parts that can't be coped with we'll turn on sometime next year".

Butler also clarified who the Code applies to.

"People have been asking for a while now, why we're just picking on a limited group of stockbrokers and advisers when there are a whole lot of other professionals who are masquerading as advisers and being able to walk away under some other title."

He says this is not the case. The Code applies to a wide range of professions providing investment advice from real estate agents to accountants, lawyers and even funeral directors.

"In this regime, you can't be half pregnant."

He also discussed regulation across the Tasman where detailed provisions haven't worked.

"Giving the client a truckload of documents about disclosure and prospectuses doesn't work, so Australia's heading down the track we're going in.

"They've picked up our level 5 certificate already and converted it and they're going down the same track with individual registrations as opposed to the structure they have at the moment."

He says there's a lot of commonality with Australia and the only area where Australia may speed things up is in the banning of commissions on investment products and financial planning, which is up to a parliamentary inquiry with the Ripoll report at the moment.

Also under discussion was the restriction on advisers borrowing from or lending to clients.

"Now you might be asking why we went down that track?" says Butler.

"What we've seen in a couple of these cases with finance companies, involving accountants, lawyers and financial advisers, is underlying some of these activities there have been other bad business transactions as well, which has been messy."

Audience members also asked about independence, with advisers suggesting they would use alternative words to describe their businesses, such as unbiased.

Butler made it clear that synonyms won't work and that the bar has been raised substantially around independence.

"The reality is many advisers will not be able to call themselves independent under the new Code.

Jenha is a TPL staff reporter. jenha@tarawera.co.nz

Tags: regulation