Foss Craig: Financial Advisers Bill — Second Reading In Committee Third Reading 
Text is incorporated into the Bound Volume 
Foss Craig: Financial Advisers Bill — Second Reading In Committee Third Reading 
[Sitting date: 23 September 2008. Volume:650;Page:18979. Text is incorporated into the Bound Volume.] 
CRAIG FOSS (National—Tukituki) 
: 
 It is with great anticipation that I rise to speak in the Committee stage of this bill. I would like to touch on clause 6 “Act binds the Crown”. Obviously the Crown is exempt from the regulations around this bill. But firstly I shall turn to clause 3 the purpose clause. 
Clause 3 states: “The purpose of this Act is to promote the sound and efficient delivery of financial advice and to encourage public confidence in the professionalism and integrity of financial advisers by”. I was thinking somewhat laterally as I do about a situation in which the Crown were to give financial advice then to renege on that financial advice—and I know that the Crown is exempt from this legislation. I give the example of the “chewing gum tax cut” where people were given advice in a Budget they made financial decisions and plans based on that advice then the Minister of Finance reneged and took the “chewing gum tax cut” off the table. I would be interested to hear the Minister in the chair the Hon Lianne Dalziel make any comment at all on that matter. I know that it is a lateral thought but if the public are to have confidence in the financial services industry as is outlined in the purpose clause then surely they need first of all to have confidence that the regulator the Government of the country will be true and hold to its word. 
I turn to the interpretation clause and the definition of “advertisement”. It is plainly obvious that it is some form of communication. We recently had an example in Wellington that is not addressed by this bill or the disputes bill but may fall under the Commerce Act I guess. An organisation had a billboard outside its retail outlet offering funds at 8 percent interest and at the bottom of the advertisement was the statement “8 percent p.w.”—per week. Most people who went in there to borrow money had no idea what “p.w.” meant. In fact 8 percent interest per week compounded amounts to thousands of percent per annum. Under the Commerce Act that organisation was being quite open because the billboard stated “p.w.” but the people using that service did not have the financial literacy to know what it meant. Perhaps we need some more financial education in the public domain in our schools—and probably in Parliament. 
I go back to a point I made before. Someone was interjecting on one of our previous speakers who was speaking about real estate. I note the definition of “category 1 product”. Whoever interjected said that real estate is excluded but the definition states that “category 1 product” means “any estate or interest in land for which a separate certificate of title can be issued …”. There you go! That is a derivative because someone can own the land can use it as a guarantee can use it as collateral can use it as security and way down the chain someone can borrow against it to buy a car—someone whom the landowner has never ever met. There may be three people in the chain. That is why real estate is a category 1 product. I would be interested to hear the Minister clarify that. I do not whether she was the interjector. I give her the benefit of the doubt—perhaps she was not.  
Complex derivatives etc. are also category 1 products. The definition refers to futures contracts or any other contracts that may be specified along the way. The crisis we currently have in the financial markets is in and around those complex products. Events that occurred initially in New York and Cleveland are affecting people right down here in New Zealand. Unfortunately or fortunately that has been part of the global financial system we are in. 
In looking at clause 5 “Interpretation” I point out the obligations of financial advisers and who they are. As earlier speakers have noted they are not liable for the return on any investment as long as everything is declared upfront and disclosed be it a category 1 product or a category 2 product. That is all well and good but we must distinguish what they are because in these current times when New Zealand is in a recession many people are looking at the advice they were given. They need to determine whether they were given the full information and if they were not given it whether that impacted on the return on their investment. Someone may advise someone else to invest in say Australian equities and that adviser may forget to give that person the relevant foreign exchange advice. As I said earlier it is all about risk. 
I would be interested to hear other members speak about trust accounts. I refer to the definition of “trust account records”. Under this bill we interpret “trust account records” to mean “records relating to a trust account; and (b) includes any information that relates to a trust account and that is recorded or stored by means of any tape recorder computer … and any material subsequently derived from information so recorded …”. As we all know and without going into the detail interpretations of trust accounts and what goes through them—the interpretation of them—and the impact on not only the trustees but the beneficiaries of those trusts declared or otherwise is a very pertinent issue before this House and before the public right now. On issues like that the public has to have full confidence that the legislators in this House abide by the same rules that we ask the public and the financial advisers for whom we are regulating to abide by. We should put ourselves under the same microscope and regulation that this bill will put the financial sector under. Thank you Mr Chairman.