Lotu-Iiga Peseta Sam: Financial Service Providers (Pre-Implementation Adjustments) Bill — Second Reading 
Lotu-Iiga Peseta Sam: Financial Service Providers (Pre-Implementation Adjustments) Bill — Second Reading 
[Volume:664;Page:11944] 
PESETA SAM LOTU-IIGA (National—Maungakiekie) 
: 
 I rise to contribute to the second reading of the Financial Service Providers (Pre-Implementation Adjustments) Bill. It is a pleasure to speak to this bill and I commend the Minister of Commerce Simon Power for the work that he has done in moving this bill to the House. It is as the previous speaker Charles Chauvel referred to a bill that amends two different Acts the Financial Advisers Act 2008 and the Financial Service Providers (Registration and Dispute Resolution) Act 2008 which were enacted under the previous Government.  
The work done by the Commerce Committee as has already been stated was quite extensive. I thank my fellow committee members for the collaborative way that we worked towards getting the bill to this point. I also want to acknowledge quickly the officials who worked tirelessly behind the scenes getting the advice ready at short notice and often working on weekends and late into the night in order for us to get this quick turn-round of the bill. I salute the officials.  
As has already been stated the financial services sector plays an important role for businesses to raise capital. This legislation is partly a response to the need to protect unsophisticated investors. Those were the investors who were affected by the collapse of over 30 finance companies in the past 4 years. Many people out there know of are related to or have friends who were affected by these collapses so this bill goes a long way towards addressing some of the issues particularly around financial advisers and the advice they give. Let us be clear though that this bill does not regulate risk—it does not regulate risk. Risk is important because as many people will know with risk comes return and there is a risk-return trade-off. The Government is not into regulating risk but it is regulating those who operate within the capital markets. This bill not only balances the regulation of advisers who provide financial advice but also bears in mind that compliance-regulation red tape sometimes stifles commerce and the transactional nature of capital markets. That fine balance is what we had to look at when we went through each of the clauses of this bill.  
The Commerce Committee has recommended a number of amendments in order to strengthen the provisions of both Acts. I will not go into all of those in any detail but suffice it to say that the bill does narrow the scope of the Financial Advisers Act to apply it only to those persons who provide financial adviser services in the ordinary course of business—and that particular qualification is important—and to persons who provide advice in the course of providing another financial service. It provides for a carve-out and it excludes financial advice that is provided incidentally to providing other services. We heard a number of submissions during the select committee process relating to those who provide some form of financial advice that is incidental to the main provisions of the businesses and organisations that were represented. Of course those include citizens advice bureaus lawyers accountants business advisers and investment bankers. A whole raft of organisations and businesses provide advice without financial advice being the core to their business. This regime really focuses on those services that are generally understood to be those provided by financial advisers. 
The advice that we looked at in terms of clarifying what constitutes financial advice states that advice on the procedure for acquiring and disposing of financial products will not be caught by this legislation. We also looked at the type of advice that leads to broad statements about classes of products such as “KiwiSaver is a good product.” Statements like that made by customer service agents at retail banks will be outside the scope of this legislation. We also looked at the definition of financial planning services and made a clarification of what those financial planning services will entail. Those services will no doubt be discussed during the Committee stage of this bill. What is most important is that advisers will still be able to voluntarily become authorised financial advisers even when they are not compelled to do so under this legislation. 
This bill also provides a more flexible regime by adding a number of regulation-making powers for the Securities Commission. Currently the commission can provide limited exemptions from the financial adviser obligations but it is expected to focus on exemptions for classes of persons for whom the cost of compliance with certain obligations would be unreasonable or unjustified and that is a particularly important point. This legislation is not designed to capture those who obviously are not in the business of providing financial advice or those who obviously cannot afford to be part of the regime. We heard some very good submissions from various credit unions and other businesses whose primary focus in terms of the service provided is not providing financial advice. 
I conclude by saying the wholesale carve-out within the statute was a difficult process and a difficult question and the Committee was torn in many ways when considering who should be included in the carve-out and who should be excluded. In the final analysis I think we worked together well as a team with the officials and also with the industry. We were constantly in touch with various players within the industry who provided us with some very good advice. I support this bill in its second reading.