Power Simon: Financial Advisers Bill — Second Reading In Committee Third Reading 
Text is incorporated into the Bound Volume 
Power Simon: Financial Advisers Bill — Second Reading In Committee Third Reading 
[Sitting date: 23 September 2008. Volume:650;Page:18967. Text is incorporated into the Bound Volume.] 
SIMON POWER (National—Rangitikei) 
: 
 Thank you Mr Assistant Speaker— 
Hon Darren Hughes 
: Oh Sarah Palin! 
SIMON POWER 
: What does that member’s billboard look like! I take this opportunity to thank the Minister for her opening remarks. It seems that the Hon Lianne Dalziel and I ended up with two of the most complicated and difficult pieces of legislation to work on—this bill and what is now the Commerce Amendment Act—over the course of the last 12 months. As I said also in the debates relating to that Act the Minister has always been forthcoming has made advice available and has been pretty open-minded on the whole when I have made suggestions during the course of the development of this legislation and I am grateful for that.  
One or two things do need to be said in respect of the opening stages of this bill. First of all the Minister has been generous in her praise of the officials and I certainly share that view when it comes to the enormous amount of work those people on the committee did in the initial phases. But in fairness and in no way reflecting on the Minister who I think did her best in the initial stages I say that the first draft of the legislation that was put before myself and others—and to be fair probably before the House—was poor. It was not up to scratch. 
Hon Lianne Dalziel 
: Fundamentally flawed. 
SIMON POWER 
: The Minister is prepared to say that it was fundamentally flawed and good on her for saying that! Quite frankly the legislation showed so many different drafting styles within the one bill that to the outside eye it was obvious that personnel and staff had changed during the course of the development of that first draft. It was hopeless legislation. It would have meant that the way financial advice was defined and the way that financial advice was captured was so random—for want of a modern term for the sake of the Hon Darren Hughes—that big holes would have emerged instantly in different areas of financial advice. I think—and this is a personal view—that the first draft of the legislation that we looked at did not bear that good a resemblance to the original recommendations under the review of financial products and providers done by the ministry. To be fair to the Minister when those issues were raised with her she took them on board and asked those officials for some changes.  
It became clear early on that trying to define advice by occupation was simply not going to work. That meant for example—and I know the Minister tires of me using these examples but it is my 10 minutes—that if a bank teller standing behind a counter told a customer who had $10000 in a savings account that the money should be put on term deposit the bank teller would have been caught for giving financial advice. If a real estate agent put an advertisement in the paper to say that a rental property was currently returning a 5.7 percent yield on investment in rent and that that was what it would continue to return should the property be purchased at the current price in my opinion that would also be financial advice. If a travel agent told a customer what insurance product the customer should purchase for his or her trip that would be financial advice. We may not think about it in those terms and frankly for nine out of 10 people purchasing travel insurance it probably would not have made the slightest bit of difference. But for the one out of 10 instances where someone in the family ends up ill—and I myself have been in this position—what is given in the advice and what is contained in the insurance policy does matter. But again that is financial advice because it will have an immediate financial implication on what a traveller can or cannot do based on the wording of the policy.  
So then the Minister decided that we would try to look at it from a product perspective which I thought was a more sensible approach. It became clear though that even within that approach trying to create a layered level of differentiation and differing regulatory environments depending on the level of advice or product—whether it was simple or complex—provided its own difficulties. In that case it would have been difficult to provide an overall framework that then allowed those more distinguished categories to fall underneath it. This was where the beauty of the select committee process was so helpful. On the first day of the select committee hearing the chairperson of the committee Charles Chauvel decided that he would allow everybody 10 minutes speaking time—he had negotiated with me; there was nothing wrong with that. But it became clear after we had heard a 35-minute submission from the first submitter I think from memory—it was certainly well over 20 minutes—that we would have to use the submission process to try to rewrite the bill. So at that point as submitters were coming forward I and others on the committee—the Hon Paul Swain was there; I remember that clearly because he had his disc with his CV on it on the table—started negotiating in a way that put ideas on the table at the time for submitters to comment on. That was a bit unfair to the submitters because they had not come prepared for that type of approach. But I think in the time I have been here it was one of the most constructive discussions we were able to have. Then we decided that an interim report was appropriate in the first instance and then extraordinarily—in my time here I cannot remember this happening before—a second interim report would be made to the House consequently driving further consultation with the industry which was absolutely essential because of the massive changes being made.  
I remember sitting in the committee one day and the poor chap from the Parliamentary Counsel Office was sitting opposite. We said at that time: “OK if we were to make these changes how much of the existing legislation would remain in place and how much would you have to redraft?”. He said we could keep the first three clauses. At that point we knew we had a big job on our hands—a big job on our hands. But to be fair to parliamentary counsel and to the officials on that committee who were just stunning in the way they approached it we managed to get the job done.  
I do not think that the job is finished. I still think there will be a much more subtle refining of the categorisation of financial product as time goes on and I think that the flexibility around the regulatory regime at that level is important. That will develop and mature as time passes. I hate to say it but I do not think we have seen the last of a discussion about financial advisers legislation. I still think we will have to refine it as we go along. Having said that I say that National certainly supports this bill in its second reading and believes it is an extremely good step in the right direction.  
When we come to the detail of the bill in the Committee of the whole House—the financial accreditation—the Securities Commission as the sole regulator is a model that is absolutely correct. The Securities Commission should be the sole regulator. I believe that that is absolutely the right move but I will talk about it in more detail during the Committee stage. 
Before we move to the Committee of the whole House—and I know there will be other members in the House who will want to make a contribution—I say that I was very interested to hear the Minister of Commerce talk about a working-group being set up for further discussion. I think that is a good move. I believe she said that industry representatives representatives from the Securities Commission and officials from the Ministry of Economic Development would be involved. When we get to the Committee stage I will be interested to know whether we will have any investor representation on that working-group—in other words whether we will hear what the users of those people who are providing the product would be looking for. I would be interested in any comment the Minister might want to make in that regard.  
We are dealing with an industry that we can talk about having losses or funds at risk in the billions. This is an extremely serious matter. It is a matter that the National Party will not delay during this urgency motion because we are keen to give a signal very early on as John Key did when he wrote to the Prime Minister many many months ago to say we would work with the Government in a bipartisan way on this issue. I was then dispatched to deal with the Minister of Commerce and this matter has been dealt with in a bipartisan way. Sometimes in politics issues are too big for political discourse and this is one of those issues. We have an obligation as a Parliament to ensure the security of our financial markets. This is a step in the right direction. We will deal with the detail in the Committee stage. National will support this legislation.