It is understood the final financial adviser code will be handed to Commerce Minister Kris Faafoi next week as the industry reform process enters endgame.
The code of conduct will be the first complete leg of the triple-header advice industry reform agenda with both regulations (covering disclosure and licensing) and parliamentary sign-off on the empowering legislation to follow shortly.
Angus Dale-Jones, chair of the Code Working Group (CWG), would not “confirm or deny” the due date for the financial advice code except to say it was “imminent”.
“We said we would deliver the final code to the minister early in 2019 and I have every expectation that we will,” he said.
The advice code will set the “minimum standards of professional conduct that must be demonstrated by all persons who give regulated financial advice” under the Financial Markets Conduct Act (FMC), including behavioural expectations and education levels.
Under the existing legislation only authorised financial advisers (AFAs) must adhere to the current code of conduct, which has been in place since 2008. However, the Financial Services Legislation Amendment Bill (FSLAB) will yoke all advisers to code standards, potentially increasing the captive audience from the current 1,800 or so AFAs to 25,000.
FSLAB, which brings financial advisers into the FMC universe, has languished at 15th on the parliamentary order paper for the last two weeks as it awaits the final house committee and third reading phases. The bill is expected to pass without opposition.
At the same time, the Ministry of Business, Innovation and Employment (MBIE) is finalising adviser disclosure and licensing regulations that will operate under FSLAB.
Dale-Jones said advisers would effectively have at least three years to fully comply with the new code standards from the time it is delivered to Faafoi, who could take a few months before signing off on the document.
After ministerial approval of the code – and assuming FSLAB is passed – the new regime would not kick off for at least a further nine months followed by a two-year transition period.
“That should give advisers three years before they have to comply with the code standards,” Dale-Jones said. In particular, he said advisers should have plenty of time to prepare for the new competence rules, which are expected to set a minimum ‘level five’ achievement – or equivalent – as the benchmark to play under FSLAB.
He said the code committee would keep a watching brief on NZ adviser education rules as global standards evolved.
“For instance, Australia is moving to degree standards for financial advisers,” Dale-Jones said.
All those caught by the FSLAB regime would be accountable to the new code but different disciplinary processes for breaches may apply depending on whether the individual is acting as a financial adviser (FA) or nominated representative (NR) of a financial advice provider (FAP).
Under FSLAB, FAs would be responsible as individuals for compliance while the FAP corporate entity remains on the hook for any breaches by their NRs.
“As I understand it, the Financial Advice Disciplinary Committee [FADC] would only handle complaints against ‘financial advisers’ not the nominated representatives,” Dale-Jones said. “Different sanctions would apply for FAPs whose nominated representatives breached the code.
“While some financial advisers and nominated representatives might do the same things the liability pathways are different.”
The CWG would remain on stand-by after delivering the code to Faafoi with last-minute tweaks possible to align with the MBIE final regulations.
He said once FSLAB was introduced the CWG would morph into the Code Committee with the same members likely to remain in place.