Regulator wants more power to act on advisers
The NewZealand Securities Commission is proposing much tougher disclosure rules for investment advisers, including giving itself the power to ban advisers.
Currently there is no one statutory body responsible for monitoring and enforcing advisers, but the commission, in a discussion document on adviser law reform, is putting its hand up to do the job.
“We consider there should be specific provision for the commission to take or recommend enforcement action where necessary.”
The key points of the commission’s discussion document are:
It should have the power to prohibit advisers from giving advice.
The commission should be able to apply for an injunction to restrain a person from contravening the Investment Advisers (Disclosure) Act.
The commission would be able to suspend disclosure statements where it is of the opinion that the statement does not comply with the law.
The commission could prohibit adviser advertising if it considers the ads are likely to deceive, mislead or confuse.
Changes should be made to the disclosure law so a greater level of information is given to a client up front.
The commission says in its document that the issue of licensing is something that should be decided by the Government.
It says disclosure is a central pillar to securities law in New Zealand and the thrust of the Investment Advisers (Disclosure) Act is consistent with this. However, it acknowledges there are problems with the Act.
One of the main ones is that the current two-tiered disclosure regime is not working and it should be replaced with a single document.
Likewise, it has concerns over the definition of who is an investment adviser and who should be either included or excluded under the Act.
The commission also says that the Act doesn’t appear to be sufficiently far-reaching. For instance, concerns have been expressed over the lack of disclosure relating to trail fees and last resort financing facilities.
“We propose for consideration of a more general obligation to disclose all material benefits,” it says in the document.
The commission also tries to tackle the growing problem of illegal offers being made from overseas issuers which don’t comply with New Zealand securities law.
In the paper, the commission suggests that it should become an offence for New Zealanders to promote such schemes.
Recommended for you
A financial advice firm has been penalised $11 million in the Federal Court for providing ‘cookie cutter advice’ to its clients and breaching conflicted remuneration rules.
Insignia Financial has experienced total quarterly net outflows of $1.8 billion as a result of client rebalancing, while its multi-asset flows halved from the prior quarter.
Prime Financial is looking to shed its “sleeping giant” reputation with larger M&A transactions going forward, having agreed to acquire research firm Lincoln Indicators.
An affiliate of Pinnacle Investment Management has expanded its reach with a London office as the fund manager seeks to grow its overseas distribution into the UK and Europe.
