IFA calls for controversial rule to be scrapped
The Institute of Financial Advisers has come out swinging against a proposed law restricting "unsolicited offers" of financial products, calling for the section to be scrapped.
Monday, June 25th 2012, 3:05PM
by Niko Kloeten
As reported by Good Returns, section 71 of the Financial Markets Conduct Bill (FMCB) restricts the ability of advisers to "offer" financial products as a result of an "unsolicited meeting".
IFA chief executive Peter Lee told the FMCB select committee hearing that the section had to go.
Lee said the FMCB was always meant to be a companion piece to the Financial Advisers Act. "Advisers are already pretty well regulated."
"As the clause is written it doesn't matter how many meetings you have. If the first one was unsolicited then you can't offer products".
Asked if this meant advisers would be able to recommend but never sell in such cases, Lee replied, "that's our interpretation of it".
In answer to a question about the future of the clause, Lee told the committee "scrap it. It doesn't make sense when you've got the Financial Advisers Act."
In its submission on the Bill, the IFA said that, under a reasonable interpretation of the clause, it would be impossible for an adviser to gain new clients.
"Clients do not in general contact an adviser," says the IFA. "As it's now proposed, no adviser would be able to approach any prospective client because it will almost certainly result in a sale further down the line".
The IFA also queried in its submission why "quoted securities" were exempted. "Why should an adviser offering shares be exempted, when the same adviser offering the same shares via a managed fund would be caught?"
Niko Kloeten can be contacted at niko@goodreturns.co.nz
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