Financial Advisers: NZ FAs get a hurry up from the Securities Commission

It was thought, only a few weeks ago, that New Zealand's Financial Advisers would have a year to get ready (see story).

But when the announcement was made on 28th October, that time was truncated to a month.

For, as Mayhew says "from 1 December all financial advisers will be subject to the statutory duties to exercise care, diligence and skill and not to engage in misleading or deceptive conduct."

It will be even more complex than that: the SC's note about the regime says "the Securities Commission has approved the standard conditions for incorporation in the authorisation of Authorised Financial Advisers (AFAs). Those conditions provide the framework for the regulatory relationship between the individual AFA and the Securities Commission, for example, in relation to reporting obligations."

All financial advisers have to be registered by 31 March 2011. To give advice after that date without being registered will be an offence. Advisers wanting to give personalised investment advice to retail clients have to be authorised to do so by 1 July 2011. After that date it will be an offence to provide such advice without being authorised.

And, as usual, businesses are not acting early on the registration process. Mayhew sounded a note of caution about the readiness of the majority of financial advisers to engage with the new regime: "While the Securities Commission will have in place a licensing process for advisers who want to be AFAs by 1 December, too few are currently getting on with the registration and assessment steps necessary for authorisation. There is a real risk that delay now will create a log jam next year," he said.

The Commission has previously said that, provided advisers applied for authorisation by 31 March 2011, the Commission should be able to complete the process by the critical date of 1 July 2011.

"But that assumes significant numbers have already been processed before 31 March", said Mayhew. "The experience to date has been disappointing and, unless there is more engagement now, there may be insufficient capacity in the system to cope with the volume of applications to be processed in the last three months before the regime is fully in force."

That, he did not say expressly but appears to imply, might lead to registrations not being completed in time and - technically at least - some businesses being unable to give advice until their application is processed.