Curran Clare: Financial Service Providers (Pre-Implementation Adjustments) Bill — Second Reading In Committee 
Text is incorporated into the Bound Volume 
Curran Clare: Financial Service Providers (Pre-Implementation Adjustments) Bill — Second Reading In Committee 
[Sitting date: 22 June 2010. Volume:664;Page:11953. Text is incorporated into the Bound Volume.] 
CLARE CURRAN (Labour—Dunedin South) 
: 
 The Financial Service Providers (Pre-Implementation Adjustments) Bill is a very important bill and it is a very good example of how well parliamentarians can work together swiftly to address a critical issue. The issue is to protect ordinary investors—mums and dads—from shonky and irresponsible financial advice to provide responsible regulation and to restore confidence in the financial sector. I am very proud of the work that was done by the Commerce Committee and all of the officials involved. I acknowledge up front the incredible amount of work that was done by the members of the committee particularly the chair the Hon Lianne Dalziel the deputy chair Sam Lotu-Iiga Katrina Shanks and my colleague Charles Chauvel and I thank them for their hard work on this bill. I also acknowledge the long-suffering officials the clerks parliamentary counsel and the work done by the Minister to move this bill ahead. 
Over the past 4 years millions of dollars have been lost as a result of about 30 financial company collapses and www.interest.co.nz estimates that up to 200000 depositors have been affected. Although this may include double-counting—some of those people may have invested in more than one company—even if it is 100000 people that is an awful lot of people who have been affected. Many of those investors made their decisions based on faulty advice from financial advisers. This bill will not stop all of those obscenities such as Colin Meads saying that Hanover Finance was “safe as houses” when clearly it was not but it might mean that the types of people who were marketing and promoting Hanover Finance as a safe investment will disappear. The issue of truth in advertising kept coming up over and over again when submitters came to the select committee. We heard that the advertising was clearly opposite to the reality. Real financial advisers will now be able to scrutinise investment prospectuses with more rigour and more detail as is required I would have thought by such a profession. 
The intent of this bill is to provide for responsible regulation of the financial services sector and robust consumer protection in order to preserve confidence and trust in our financial services sector. I do not think anybody in this House or anyone who is watching would not agree that that was necessary. I will mention one particular recent case study. Jailed Timaru investment adviser Neville Cant was banned from operating as an adviser or investment broker for 5 years. The ban under the Securities Market Act was the automatic result of Cant’s conviction for theft of $100000 by a person in a special relationship theft from clients and two charges of forgery. Cant was sentenced on those charges and Securities Act charges in early June. He received a 14-month prison sentence on the theft charge and was ordered to pay reparation of $100000 and a concurrent 10-month sentence on the two forgery charges. He was also fined $136000 on six charges laid under the Securities Act in relation to charges of offering and allotting securities to members of the public without a prospectus or an offerer’s statement. Securities Commission spokesperson Roger Marwick was quoted in the  
Timaru Herald 
 as saying that the commission had received a number of complaints regarding investment schemes established by Cant who was now banned from acting as an employee or agent of an investment adviser or broker in any way that would allow him to give investment advice or receive investment money or investment property from a member of the public. He was also not allowed to direct promote or manage any investment adviser or broker company for 5 years. The aim of the Financial Service Providers (Pre-Implementation Adjustments) Bill is to ensure that incidents like this are eradicated from our financial services sector. 
Members have heard that the previous Labour Government passed the initial two bills in 2008 in the knowledge that further tidy-up legislation would be required so that work could proceed on the implementation of the financial service advisers regime as quickly as possible. The Government was slow to introduce this bill and we heard my colleague the Hon Lianne Dalziel refer to that earlier. Really that has been our only criticism of this bill as it prolonged uncertainty for the financial services sector. The bill as introduced did not address all the issues identified by the stakeholders and as a result the Commerce Committee virtually had to rewrite it. An enormous amount of good productive work has gone into that. 
There is a fundamental difference between the groups of people who have lost money that they invested. There are savers and there are investors. Investors are those who have or should have knowledge of risk and who seek advice from different sources and make decisions after weighing up the odds. What they did not assess as a risk was the negligent behaviour of people who had no knowledge except that the more they sold the better-off they were which was conflicted in the extreme. Savers however are the ones who put their hard-earned dollars into the hands of the people whom this bill is hoping to regulate to get the rotten eggs out of the sector. With their savings went their dreams of a retirement with dignity a retirement spent enjoying the fruits of their labour only to see that reality cruelly taken away. Savers do not necessarily price-risk as investors do. They pay others to assess the risk and expect competence diligence and honesty. As members have heard this morning we expect that from an accountant a lawyer— 
Hon Clayton Cosgrove 
: What? 
CLARE CURRAN 
: —mostly we expect it from those people—and a doctor and a dentist. Why should we not expect it from a financial adviser? It is not too much to expect and hopefully this bill will go some way to addressing that situation. 
Investors understand that risk equals return whereas savers—the mums and dads many of whom lost all their money in the financial sector—were not pricing risk. They were putting their money away for their retirement their children’s education or their grandchildren’s education. This travesty has resulted in the increase in ill health and decrease in well-being of a huge cohort of New Zealanders. Labour did something about the problem. We passed the Financial Advisers Act and the Financial Service Providers (Registration and Dispute Resolution) Act. This bill makes adjustments that are machinery in nature and there are an awful lot of them but that does not make it any less important in protecting the most vulnerable in our society so it is an extremely important bill. 
The bill is important for other reasons as well. One of the problems in this country is the do-it-yourself mentality to investment and savings. Many people think they know best about how to make an optimal return on their savings without seeking advice from those who are expected to know the markets and the different investment options. It is a double bind in many ways because I guess if we just did it ourselves then we would be taking the risk ourselves. But if we ask for financial advice from somebody whom we think is reputable and then do not get it it is no wonder there is no confidence in the financial sector. Of course it is not that all financial advisers have acted in an unscrupulous manner and not all of those who were operating in an unscrupulous manner were operating out of the back of a tin shed. There were many financial advisers in glass towers whose advice was as devious and self-serving as the advice of financial advisers operating anywhere else. 
This bill I hope will be another step in the process of rebuilding the confidence of ordinary New Zealanders in the investment advice sector because it is what is needed. It is absolutely necessary because it starts to rebuild the confidence of ordinary Kiwis in the financial advisory market. They need to know that when they take their hard-earned money to a financial adviser they will get independent competent advice from a person who will walk them through all the risks and benefits in a transparent and meaningful way. Once again I thank the Commerce Committee members and all of the officials for the hard work they have done on this bill.