Act penalties insufficient
A former Financial Markets Authority regulator says the fine handed down to Christchurch adviser Rodney Bourke-Shaw was not severe enough, but the Financial Advisers Disciplinary Committee had its hands tied.
Wednesday, October 2nd 2013, 6:00AM 
2 Comments
by Susan Edmunds
Bourke-Shaw advised his clients to put their money in Ross Asset Management.
They lost millions as a result and the Financial Advisers Disciplinary Committee censured him for not disclosing his concerns about Ross, as well as inadequate record keeping and giving advice that did not suit clients’ risk appetites.
He gave up his AFA registration and was fined $4000.
Gavin Austin, who was a senior adviser in retail surveillance at the FMA before setting up his business, ABC, helping advisers with compliance, said the fine was too small.
But he said there was nothing the FADC could do because the section of the Financial Advisers Act that relates to complying with what “a reasonable adviser would do” did not have any set consequences.
“The only way they could fine him was because he was in breach of the standard terms and conditions and did not comply with the Code.”
Breaking the terms and conditions of the Code of Professional Conduct for Authorised Financial Advisers carries a maximum fine of $10,000.
But if Bourke-Shaw had been accused under the Act of misleading customers or engaging in deceptive advertising, he could have been handed a $100,000 fine.
Austin said that meant the punishment in the case was too light. “Bourke-Shaw did not do any due diligence or exercise any duty of care under the Code but he only got a slap on the wrist with a wet bus ticket because that’s all the FADC had in its armoury.”
Austin said he was at the FMA at the time complaints were first raised. “I’m disappointed that harsher penalties weren’t imposed.”
He said he wondered how one-person financial adviser operations managed in the new regulatory environment. “It must be getting pretty difficult to do that. There is so much misinformation out there on what the requirements are under the various Acts.”
The conduct requirements for AFAs would soon become the baseline for all advisers, he said.
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The disciplinary committees powers come from section 101 of the FA Act. Part 3 subsection g allows a fine of up to $10,000 so the $4,000 fine was even more of slap on the wrist with a damp ( no wet) bus ticket.