Swain Paul: Financial Advisers Bill — First Reading 
Swain Paul: Financial Advisers Bill — First Reading 
[Volume:645;Page:14352] 
Hon PAUL SWAIN (Labour—Rimutaka) 
: 
 I rise to speak in favour of the Financial Advisers Bill. I will take up an issue that the previous speaker Peter Brown raised about lawyers which I will attempt to answer as I work through my contribution. 
I think it is fair to say—and I think the member touched on it—that there has been a lot of uncertainty as far as the public is concerned about issues relating to financial advice over the last 18 months at least and this has been highlighted by some of the performances by some of the financial advisers particularly over the last 12 months or less. There is no doubt about it that this is a bill whose time has come. 
I have to say I suppose without a great deal of enthusiasm that when I was the Minister of Commerce this issue was raised. I actually recall it being raised by the leader of New Zealand First who was looking into this matter. There was no question that this issue needed to be addressed; the problem was what its level of priority was. The first level of priority when we came into Government in 1999 was protecting small investors which is important. That was done through the Takeovers Code to ensure that all investors or shareholders received rights similar to those of the big investors which had not happened in New Zealand. That was something that was really important. We then had to try to deal with things such as insider trading and toughening up the powers of the Securities Commission and giving it more funds. I know that the Minister of Commerce has been beavering away on a number of other matters relating to this whole financial services area. Now we are in a position to be able to do something about financial advisers and I think it is critical. It is about having confidence in this important area of the financial sector. 
The previous speaker spoke about people who have a small nest egg and who want to invest it to try to protect their future only often to be let down by advice. There do not seem to be any particular penalties that can be brought against advisers apart from taking them to court—a protracted series of events. The idea here is to try to build the fence at the top of the cliff and that is a good thing. The bill is looking to try to promote accountability and transparency for financial advisers and I would hope that the financial advice sector welcomes this with open arms. I have not yet heard anybody opposing it and I would be interested to see whether anyone is prepared to put his or her head over the parapet given what has happened in New Zealand over the last little while. 
Some people will be asking whether this bill is the appropriate model. It sets up a co-regulatory regime and it is a regime that provides for established codes of practice within the industry to be overseen by the Securities Commission. There is a balance between on the one hand having the Government totally regulate which is always a difficult thing to do because often the Government cannot keep up with every modern piece of information that is happening within the finance sector and on the other hand self-regulation which has proved to be absolutely hopeless—the kind of thing that is now being addressed in the real estate area. I think that balance is really really critical. 
The bill basically requires financial advisers to address things like conflicts of interest fees and competency. It requires financial advisers to be competent to ensure that they have the experience expertise and integrity to give the public confidence and it ensures that financial advisers are held accountable for any financial advice that they give. There are some definitions that are probably worthy of repeating. In clause 6(5) a “financial decision” is considered to be anything to do with “(a) saving money: (b) investing holding or realising money or property: (c) borrowing money: (d) incurring a debt: (e) giving a security including a guarantee or indemnity: (f) taking out insurance: (g) making financial provision for the future.” A “financial adviser” is defined in clause 7(a) as a person who “(i) is a member of an approved professional body and is registered:”—under the financial services providers legislation—“and (ii) performs a financial adviser service in the course of the business of that person or of another person;”. 
The member made quite a good point actually which is that the bill excludes lawyers and that is right—it does. We faced this issue in respect of the Immigration Bill when we were looking at trying to regulate immigration advisers. The question really was that if lawyers provide immigration advice—yes they do—should they be bound by a sort of regulatory regime similar to that for other people who are providing immigration advice? Yes they should. But actually when one looks at lawyers one sees that that profession does have its own accountability screens within its own legislation. There is the ability to penalise wayward lawyers and there is the ability to address the concerns that the public have. In the immigration advisory area it was my view that to try to create a dual system where lawyers are accountable not only to their own system but also to a new immigration advisers bill was a bit of overkill. The lawyers of course supported that position as one would expect and it was always my view that we should keep an eye on it and see whether the regime that we had introduced was working effectively. It has been a while since I have had anything to do with it so it has been difficult to see how it has worked through but I imagine that a similar kind of logic or thinking has applied in this particular case. That is an area that the select committee will need to look at. 
If I had anything to do with the select committee my advice to the people on that committee would be to look at the immigration advisers legislation which excludes lawyers because they have legislation covering them to see whether it was working to see whether there had been any complaints in the immigration advice area that had not been able to be resolved and to see whether that kind of regime needed to be duplicated here or whether there was something here that was over and above just ordinary—for example immigration advice that meant the bill should apply to lawyers. Probably one would have to say that the need to regulate financial advice was more important than the need to regulate immigration advice but that is something the committee would want to look at. 
Peter Brown 
: So you’re agreeing with me? 
Hon PAUL SWAIN 
: No I am not agreeing with the member; I am saying he raises a good issue an important issue. I do not think it is as the member indicates. I do not think it is worth voting against the bill from that point of view—and the member has indicated he will not do so—but I think the important thing is that this is one of the issues that the select committee would need to address. I can see some logic as to why the Minister of Commerce has excluded lawyers but I think it needs to be tested out at the select committee. If the committee felt that it was an area that needed to be addressed then it could come back with alternative recommendations. 
I think it is a bill whose time has come. People will argue that it should have been done sooner—the old “too little too late” kind of thing—but a huge amount of work has gone on in the whole securities market and financial market area since this Labour-led Government came in in 1999. A huge number of reforms have been built to try to make sure there is more security and more stability within the sector and this bill is another important piece in the armoury to make sure that people can invest with confidence.