Lee Melissa: Financial Service Providers (Pre-Implementation Adjustments) Bill — Second Reading In Committee 
Text is incorporated into the Bound Volume 
Lee Melissa: Financial Service Providers (Pre-Implementation Adjustments) Bill — Second Reading In Committee 
[Sitting date: 22 June 2010. Volume:664;Page:11951. Text is incorporated into the Bound Volume.] 
MELISSA LEE (National) 
: 
 It is a pleasure to rise to speak on the second reading of the Financial Service Providers (Pre-Implementation Adjustments) Bill. Thousands of Kiwis have been affected by about 30 finance company failures in the past 4 years. That led to a loss of confidence in the financial services sector and this bill seeks to amend the Financial Advisers Act 2008 and the Financial Services Providers (Registration and Dispute Resolution) Act 2008 in order to give back the confidence to consumers so that they can once again feel secure and place their trust in the financial services sector. This sector is vital in raising capital for businesses. Getting ahead as a nation economically could well mean our having to get the confidence of the mum and dad investors back on dry ground once again. 
It is not often that I agree with the Opposition but it was a pleasure listening to the chair of the Commerce Committee Lianne Dalziel speak earlier and I agree with her that a lot of hard work was put into this bill by the select committee. I would like to acknowledge the chair Lianne Dalziel who just spoke and the deputy chair Sam Peseta Lotu-Iiga who made an amazing contribution during this process. For someone like me who does not come from the finance sector and often even the acronyms meant nothing to me it was bloody hard work—sorry; my apologies. It was amazing learning from them and even Lianne Dalziel admitted that she found out more about this bill and the processes and the sector as the chair of the Commerce Committee than she ever did as the Minister of Commerce. I would like to acknowledge the Minister for having the foresight to bring this bill to the House to see it through its passage and also like Lianne Dalziel I acknowledge all the officials because they have put in amazing work. As she said we have demanded so much from them with sometimes overnight report-back time frames which has been quite tough on them I am sure. I acknowledge all the clerks the Parliamentary Counsel Office and everyone who has helped us through the process. 
During the select committee process we had some major discussions about the shape this bill needed to take but the thing we always came back to and focused on was to always remember that this bill was designed to protect the unsophisticated investors the mums and dads and the retired grandmother who wants to invest so she has a little something to leave as a legacy for her grandchildren. Often they really have no idea where to start when it comes to investments. These are the people who lost money as the result of finance company failures—quite a lot of money. They could have really used some sound financial advice and this bill addresses that issue. 
As a committee we considered a large volume of things in this bill but one of the things I found very interesting—and I am sure we will discuss it further when we go into other stages of this bill—was the definition of financial advice. We were looking to protect unsophisticated investors so we initially got to a point where we wanted to make sure that everything was captured. It got to a point that even a discussion in a taxi on my way to the airport or headed to Parliament about thoughts on whether to invest in or out of the housing market could have been construed as financial advice. A group of friends sitting around a dinner table discussing the merits of a financial institution could also have been deemed to be financial advice. 
The focus of the select committee was to protect the unsophisticated investors but at the same time to provide clarity to the definition so that there was no question as to what financial advice is and who is providing the service. So it was very pleasing and I am sure there would have been a lot of people who were concerned they would be captured by this legislation who made amazing very technical and very detailed submissions to the select committee. Only those people who provide financial adviser services in the ordinary course of their business and those who provide advice in the course of another financial service are captured by this. This means that advice provided incidental to other services as with the taxi driver I mentioned before are excluded. Also excluded is advice on the procedures for the acquiring and disposing of financial products. Also budgeting services are often called financial planning services. So to make sure there is no confusion we have changed the wording in the bill to “investment planning service”. 
The other issue I found very interesting was the need for authorisation. However if we authorise everyone the compliance costs and the stress on the sector would be quite phenomenal. As a select committee we considered that there was no real need for advisers who work only with category 2 products like mortgages and insurances who work for a qualified financial entity—a QFE. They can do this job without the need to be authorised. They can still become authorised financial advisers should they so wish. 
The best thing about this bill is we are giving more power to the Securities Commission. The commission will now be able to ban people for up to 10 years by way of an application to the courts. They have the power to declare that a product of a qualified financial entity must be sold only through individually authorised financial advisers. Before an entity is provided with a qualified financial entity status it must demonstrate the capacity to comply with the regime. This means that the commission does not have to vet every single product a qualified financial entity sells but will allow the commission to step in under exceptional circumstances when there is trouble. 
The expanded powers given to the Securities Commission will go a long way to enhancing consumer confidence which has taken a major setback. It will promote more professionalism from the sector and the serious deficiencies we have seen in the financial advisers industry in terms of disclosure competence and independence will surely improve. I commend this bill; it is a great bill.