Sharples Pita: Financial Advisers Bill — Second Reading In Committee Third Reading 
Text is incorporated into the Bound Volume 
Sharples Pita: Financial Advisers Bill — Second Reading In Committee Third Reading 
[Sitting date: 23 September 2008. Volume:650;Page:18970. Text is incorporated into the Bound Volume.] 
Dr PITA SHARPLES (Co-Leader—Maori Party) 
: 
 Tena koe Mr Assistant Speaker tena tatou katoa. The Maori Party is pleased to support the Financial Advisers Bill to enable a clear distinction to be made between financial advice that carries significant risk for consumers and advice that carries minimal risks. The intention of the bill is honourable but the bill is well overdue.  
An analysis of 25 financial advisory firms by Stephenson Thorner and fi360 Australasia released earlier this year concluded that many financial advisers may look trustworthy but are potentially risky. The risk factor is all around the concept of trust. The study showed that most New Zealand advisers ran their businesses with an inadequate duty of care. In fact the study went as far as to say their reports verged on becoming dysfunctional. Just how dysfunctional some of the sharks in the industry have been is old news now given the fact that more than a dozen New Zealand finance firms have gone under in the past 18 months. That is nearly $2 billion of investors’ money gone down the tubes. It is not in dispute that something had to be done. There have been frequent and increasingly urgent calls for tighter Government controls to tidy up the sector and make it more accountable to investors.  
It is not as though we have not been down this road before. Many of us remember the mortgage scandals of the mid-1980s when an unregulated sector of the finance industry extracted millions of dollars from what could only be called unsophisticated investors. That is a flash name for what the industry calls mum and dad investors: a segment of the population including Maori who have been investing their savings without necessarily realising the risk— 
R Doug Woolerton 
: Most of the population. 
Dr PITA SHARPLES 
: —yes—that they were exposing themselves to. In the 1980s the contributory mortgage companies screwed millions of dollars from New Zealanders lured by the promise of a quick buck and high interest rates. The classic was Registered Securities Ltd (RSL) which when it collapsed in July 1988 had ratcheted up loans to the sum of $97.8 million. Overnight more than half of that was deemed to be irrecoverable.  
But there is a startling difference between the contributory mortgage companies and the risk of the non-regulated financial companies and financial advisers. Back in mid-1988 when RSL hit the bottom of the market the then Minister of Justice Sir Geoffrey Palmer immediately took decisive action by amending the Securities Act. His amendments covered contributory mortgages and introduced sector-specific regulations yet here we are 20 years later finally getting around to introducing regulations to increase prudential standards—a move we support but action that should have taken place a lot earlier than it has.  
The point is we are not talking about people getting sucked into the Nigerian multimillion-dollar banking scams. Members know the type: “A tragedy has befallen us. Your long-lost Uncle Nigel has drowned leaving you as the sole benefactor of his estate. All we need is your bank account.” Everyday New Zealanders—the mythical middle New Zealanders—are being stung here. We are not talking about businesses or corporates; everyday citizens have been placed at risk. We are talking about the people whom successive Governments have ignored: humble trusting investors many of whom have entrusted their life savings to finance companies. Their lives have been turned inside out by the callous squandering of their funds. Worse not only do they have to endure the shame and guilt of having their funds squandered but also they are literally powerless and unable to afford the cost of legal advice.  
The Maori Party has always stood up for people who too often are voiceless in the corridors of power and our support for this bill is no exception to that. Sure the bill is a good thing. The regulatory framework should promote confidence and participation in the financial markets by investors and institutions. That is all positive. But what about those who have been burned by financial advisers and who are teetering on the brink of collapse? What measures have been put in place to look after their interests? Will the Securities Commission launch an inquiry into how those large-scale losses were able to occur? What support will be available for clients who have lost money to enable them to launch court proceedings against financial advisers who have been negligent?  
The issue all comes down to the basic truths around justice and the nature of power. One of the tikanga of the Maori Party around kaitiakitanga encourages us to promote the active exercise of responsibility in a manner that is beneficial to resources and the welfare of the people. In everyday language that means we promote the goals of living in a society where crooks and shonky advisers are not welcome. In other words there should be sanctions in place to ensure that those types of people—people who are negligent in their responsibility to care for the resources and collective good of their community—are not able to prosper.  
One could say as the  
National Business Review 
 has said recently that there have been sanctions against murderers and robbers for centuries but society still has not been able to eradicate such crimes. But for my money I want to live in a society where careful analysis and prudent assessment of risk are routinely part of the package for any financial deal where credibility and experience matter and where an individual can make an informed judgment about the qualifications and professional standing of a financial adviser before leaping in. In reality Maori businesses do not usually use finance companies to finance their business developments. The interest rates are too high and often security is required over land so it is a no-go area. Banks are more likely to secure loans over cash flow stock equipment and machinery without having to rely on putting our whenua at risk.  
The Maori Party will support this bill. We think it provides changes that are necessary to allow deposit takers to be better monitored and evaluated and at the end of the day that has to be better for the nation and for all our people in moving forward. But notwithstanding all the regulations approvals enforcement and remedies included in the scope of the legislation the key to success will rest in the conduct obligations outlined in the bill. The bill specifically obliges financial advisers to act with integrity and competence. Integrity cannot be regulated for but it nevertheless must be a foundation in order for the changes to actually work. We need to have protection for consumers and we need to have the changes provided in this bill in order to ensure an effective environment operates.  
Finally although we support this bill at these final readings we wonder why it was separated out from a bill that is on the Order Paper to come up later the Financial Service Providers (Registration and Dispute Resolution) Bill. Surely logic would demand that the two bills be read together to ensure due focus on the health of the sector. Thank you.