Amendments to Financial Advisers Act introduced

A bill that simplifies the implementation of the Financial Advisers Act and reduces costs while encouraging public confidence in the industry was introduced to Parliament yesterday by Commerce Minister Simon Power.


The Financial Services Providers (Pre-Implementation Adjustments) Bill makes technical amendments to the Financial Service Providers (Registration and Dispute Resolution) Act and the Financial Advisers Act.


The focus of the amendments is on changes to the qualifying financial entity (QFE) model. A QFE is a company approved by the Securities Commission to take responsibility for the advice provided by its employees and contractors on a limited range of products, instead of those people each requiring their own licence.


The proposed changes include:

• Requiring a QFE to name individual contractors whose advice it will take responsibility for, instead of automatically being responsible for advice from all its contractors.
• Allowing a QFE's employees and named contractors to provide financial adviser services on the QFE's category 1 products (complex products such as shares), without being individually licensed. This is currently permitted only for the QFE's employees.
• Permitting the employees and named contractors to provide financial adviser services for products for which the QFE is a promoter under the Securities Act. Currently, the Financial Advisers Act allows this only if the QFE is the issuer of the product.

Mr Power said he expects the changes to take effect in the first half of next year, giving financial advisers about six months to implement them before the legislation is made compulsory at the end of the year.


"I encourage financial advisers and consumers to remain actively involved in the development of the bill through the select committee process.


"The Government is still working through potential changes to the way investment transactions are regulated under the Financial Advisers Act, following recent targeted consultation with industry.


"I expect to be able to make announcements in the new year on the results of targeted consultation on the best approach to regulating investment transactions."