Brown Peter: Financial Advisers Bill — First Reading 
Brown Peter: Financial Advisers Bill — First Reading 
[Volume:645;Page:14350] 
PETER BROWN (Deputy Leader—NZ First) 
: 
 Let me make it clear from the onset that New Zealand First will most definitely be supporting this bill to go to a select committee not because we think the bill is 100 percent correct and we have it right but because we believe there is a need for this type of legislation in this country. I can recall that quite some years back—1987 as a matter of fact and I will just give the House a little bit of my personal experience with financial advisers—I had coming to me two chunks of money both fairly significant with an interval of time in between. This was before the crash of 1987. I saw an advertisement in a newspaper or a financial magazine. I contacted the principals and in due course an agent came to see me gave me a prospectus and gave me an investment statement for want of a better term and I thought it was pretty good. I gave him the chunk of money and told him another chunk of money was coming in so many weeks’ time. In the intervening time the crash of 1987 started to occur and in due course this financial adviser—financial whizz kid; call him what you like—turned up at my home and I had a second chunk of money. He gave me the impression that investing with that particular organisation was safe—as safe as houses as we would say as safe as Bob Clarkson’s buildings—and of course I duly gave him the money. 
What happened? A few weeks later I found out that not only had my first chunk of money diminished somewhat but the second chunk of money had also diminished. If the truth be told somebody would have known that as soon as I gave him that cheque it would shrink by quite some amount. 
Bob Clarkson 
: You should have come and seen me! 
PETER BROWN 
: I tell Mr Clarkson that I missed his comment but I am sure he is— 
Ron Mark 
: He said “Buy a race track.” 
PETER BROWN 
: Yes—[ 
Interruption 
] 
Ron Mark 
: He said he rorted the council. 
PETER BROWN 
: That is very honest of him is it not? But to get back to this bill; I say that that was a serious situation and I was quite disappointed obviously as members can imagine. That money that I had invested had turned into a fraction of what it was when I invested it. I approached the finance house and I got little satisfaction. At the end of the day though with being a little more shrewd I did not lose too much. I managed to work the system and I mean that honestly; I did not short-change anybody. But we can think of the mums and dads and perhaps even more important the retired folk who have put their life savings into investment houses in recent times and come out in some cases with nothing and in other cases with very little and a good deal less than they invested. 
But I go back to my experience. I got a prospectus and I got an investment statement which is all I could call it. But this bill states in clause 6(3) that “Financial advice—“(c) does not include advice about the procedure for taking or implementing a financial decision; and (d) does not include any of the following: (i) a prospectus; or (ii) an investment statement;” But I have to tell the House that thousands of people invest on the strength of those two pieces of paper. They get a prospectus and then they ask the agent or adviser whether they can prepare an investment statement for them. That is what has happened and that is what does happen but this bill says that that is not giving financial advice. 
Now I turn to clause 8 which states: “Act does not apply to lawyer who performs financial adviser service in course of professional practice”. Well I have had some experience with those guys. 
John Hayes 
: You’ve got your boss. 
PETER BROWN 
: My boss is a bloody good lawyer and a very honest one; the member can have no doubt about it. I have to say that the lawyer I am about to talk about—and I am not going to name him because it was some years ago—attended to some legal matters for me and he proved to be an excellent lawyer when it came to the legal side of things. But I also invested some money with him and some of it went astray. Luckily I got my investment back; the law firm honoured it. But there were many who perhaps were not as persistent as me or as determined as me whatever who lost thousands. I have to ask with that experience why this legislation does not apply to a lawyer who performs financial adviser services in the course of professional practice. I think that that is something the select committee has to look it because I am aware that in this country over a period of quite some years several lawyers have taken money from members of the public and it has disappeared without trace. Indeed some of those lawyers have ended up in prison. I really cannot understand why the Minister has included that clause in this bill. There must be a reason but I would urge the select committee to look at the clause in some detail and with some scrutiny. 
I do not want to give the impression that New Zealand First does not understand that when people invest money there is some risk and one cannot legislate totally against risk. But we are talking about legislation that is meant to be giving the public the best security it possibly can when they invest their money. As I said earlier on with some of the events of the last 18 months and with organisations keeling over almost every month for the last 18 months or so one has to wonder where the ethics are why the industry works the way it is and why it has not made a more positive attempt to tidy its own backyard up. This bill is needed but as I said earlier I have read the bill only very briefly and I have found some flaws in it. 
Another flaw that I found—and I can accept that I am not fully au fait with the whole thing—is in clause 35 “Protection of client’s money held on trust” which states “The money of a client that is received or held by a financial adviser on trust—(a) must not be used to pay the debts of any other creditor of the financial adviser;” and there is another paragraph paragraph (b). Well that is self-evident I would have thought: one does not take money that belongs to a client and pay one’s own debts. But there is no penalty clause for anybody who does that—at least if there is I cannot find it. There are penalty clauses in preceding clauses—clauses 30 32 33 and 34—but when we get to clause 35 and see that it states that the adviser must not use money to pay debts there is no penalty for the person who does that. Maybe the provision has to be read in conjunction with one of the earlier clauses but it does surprise me that there is no penalty attached to a financial adviser who takes money that legitimately belongs to a client or has been given to the adviser by the client and who uses it to pay the debts of any other creditor of the adviser. 
New Zealand First will support this bill. We urge the select committee to give it a thorough examination because we think and suspect there are some flaws in it. If we are going to produce legislation like this it is in the public’s interest that we examine it and we want the best legislation there possibly can be.