Disaster averted in late changes to financial advisers’ regime

Eleventh hour substantial repairs to the Financial Service Providers (Pre-Implementation Adjustments) Bill as reported back by the Commerce Committee this week will make the new regime much more workable, Chapman Tripp Partner Tim Williams said today.

Most of our significant concerns have been addressed.  Had the Bill been passed as drafted, even with the original SOP, the effect on the financial services industry would have been disastrous.

Chapman Tripp and others worked very hard to get these late amendments and we are therefore very pleased that the government and the committee have listened.  Some of the changes were recommended to the committee by the Cabinet in May, others originated from the committee in response to expert submissions.

Key changes include:

  • enabling companies and other entities to give financial advice and invest for clients, as long as it is not a personalised service for a retail client - which has to be provided by an individual (the proposal to prohibit companies providing advice was bizarre and impractical)
  • substantially reducing the obligations placed on advisers to wholesale clients and on advisers offering non-personalised advice to retail clients
  • narrowing the scope of the legislation by excluding:
    • financial advice which is not given in the ordinary course of business or which is merely incidental to another business that is not otherwise caught
    • procedural advice
    • internal advice within a group of companies
    • mere guidance (although opinions and recommendations are still generally caught)
    • summary factual product information and recommendations relating to a product type
    • advice on buying or selling property, other than land investment products
  • expanding the QFE model to accommodate groups of entities, and
  • expanding the exemption powers available.

Although the changes represent a significant improvement, the regime is still very complex and compliance will require some skill and resources, notwithstanding the welcome attempts to make it more workable.

Chapman Tripp’s advocacy to get the Bill right is available here.

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