Paragraph (b) of the definition of category 1 product: to omit this paragraph (lines 31 to 33 on page 71) and substitute the following paragraph:

(b) any estate or interest in land; or

Paragraph (c) of the definition of category 2 product: to omit this paragraph (line 2 on page 72) and substitute the following paragraph:

(c) an insurance product excluding a life insurance policy issued after 31 December 2008; or

To insert the following definition after the definition of investment transaction (after line 32 on page 73):

issuer has the same meaning as in section 2(1) of the Securities Act 1978

To insert the following definition after the definition of licensed service (after line 2 on page 74):

life insurance policy has the same meaning as in section 2(1) of the Securities Act 1978

To insert the following definitions after the definition of registered bank (after line 4 on page 75):

registered exchange has the same meaning as in section 2(1) of the Securities Markets Act 1988

registered valuer has the same meaning as in section 2 of the Valuers Act 1948

Definition of trust account: to insert after “New Zealand” (line 37 on page 75) “or any other prescribed entity”.

Clause 8

To omit “for the purposes of this Act” (line 31 on page 76).

Clause 12

To insert the following paragraphs after paragraph (g) (after line 11 on page 78):

(ga) a registered valuer giving advice in the course of his or her professional practice as a registered valuer if the advice is a necessary incident of the professional practice of a registered valuer; or

(gb) any of the following persons making an investment transaction in relation to a security:

(i) an issuer or a trustee (within the meaning of the Securities Act 1978 or the Unit Trusts Act 1960):

(ii) a nominated person of a trustee (within the meaning of the Unit Trusts Act 1960):

(iii) a nominee of a nominated person of a trustee (within the meaning of the Unit Trusts Act 1960):

(iv) a statutory supervisor (within the meaning of the Securities Act 1978):

(v) a security registrar appointed by the issuer; or

(gc) a person who only transmits money or other property without being able to apply the money or property for any other purpose; or

Paragraph (k): to omit this paragraph (lines 25 to 27 on page 78) and substitute the following paragraph:

(k) a person giving advice, or making an investment transaction, in relation to a category 2 product or providing a financial planning service, if the advice is given, or the transaction is made, or the planning service is provided without charge in the course of a service offered by a non-profit organisation; or

Paragraph (m): to omit this paragraph (lines 31 to 33 on page 78) and substitute the following paragraph:

(m) an employer providing assistance to an employee with the implementation of a decision to acquire or dispose of a financial product made available through the employee's workplace unless the assistance includes or is accompanied by a recommendation or opinion as to the suitability of the financial product; or

Paragraph (r): to omit this paragraph (lines 6 to 9 on page 79).

Clause 17

To add the following subclause as subclause (2) (after line 21 on page 80):

(2) An individual (whether registered or not) who is an employee of a QFE may, in the course of the QFE's business,—

(a) give financial advice in relation to a category 1 product of which the QFE is the issuer; or

(b) make an investment transaction in relation to a category 1 product of which the QFE is the issuer.

New cross-heading

To insert the following cross-heading after clause 17 (after line 21 on page 80):

Provisions relating to employer or principal of financial adviser

New clause 18A

To insert the following clause after clause 18 (after line 35 on page 80):

18A No requirement to be member of approved dispute resolution scheme if employer is member

(1) This section applies where a person (A) employs another person (B) as employee to perform a financial adviser service in the course of A's business for A's client or clients.

(2) In any case to which this section applies, B must not be required to be a member of an approved dispute resolution scheme for the purposes of registration under the FSP Act.

(3) Subsection (2) applies no matter what the FSP Act says.

Clause 22

To add the following subsection (after line 7 on page 82):

(3) Regulations made for the purposes of this section may prescribe different disclosure according to different classes of authorised financial adviser, financial adviser service, or client.

New clause 34A

To insert the following clause after clause 34 (after line 9 on page 86):

34A Restriction on use of term sharebroker

(1) A person (A) must not use the term sharebroker in advertising or promoting A as a financial adviser or advertising or promoting a financial adviser service unless A is a member of a registered exchange.

(2) A person who contravenes subsection (1) commits an offence (see section 114A).

Clause 37(1)

To omit “held with a bank in New Zealand” (lines 33 and 34 on page 86).

New cross-heading and new clause 46A

To insert the following cross-heading and clause after clause 46 (after line 14 on page 89):

Commission's direction in respect of breach of disclosure or conduct obligation

46A Commission may give financial adviser direction in respect of breach of disclosure or conduct obligation

(1) This section applies if the Commission has reason to believe that a financial adviser is in breach of a disclosure or conduct obligation.

(2) The Commission may give the financial adviser notice of his or her alleged breach and, if the Commission does give a notice of breach, the Commission must also give the financial adviser a reasonable opportunity to respond.

(3) If the Commission concludes, after considering the financial adviser's response, that the financial adviser is in breach, the Commission may give the financial adviser a direction in writing.

(4) The direction may—

(a) direct the financial adviser to comply with the conduct or disclosure obligation:

(b) stipulate any steps that the financial adviser must take in order to comply with the obligation:

(c) require the financial adviser to report to the Commission within 28 days of the date of the direction stating how and when the Commission's direction will be implemented.

(5) A financial adviser who fails to comply with a direction by the Commission commits an offence (see section 128A).

(6) Nothing in this section precludes the Commission from exercising any of its other powers under this Act against a financial adviser.

Clause 51(a)(i)

To omit “entitled to be registered” (line 8 on page 90) and substitute “complies with section 12(a) and (b) of the FSP Act”.

Clause 58(2)

To omit this subclause (lines 27 and 28 on page 93) and substitute the following subclause:

(2) The Commission may give the financial adviser notice of his or her alleged breach and, if the Commission does give a notice of breach, the Commission must also give the financial adviser a reasonable opportunity to respond.

Clause 70

Subclause (1): to omit this subclause (lines 7 to 9 on page 98) and substitute the following subclause:

(1) This section applies if the Commission has reason to believe that a QFE is in breach of a disclosure or conduct obligation.

Subclause (2): to omit this subclause (lines 10 to 12 on page 98) and substitute the following subclause:

(2) The Commission may give the QFE notice of its alleged breach and, if the Commission does give a notice of breach, the Commission must also give the QFE a reasonable opportunity to respond.

Subclause (4)(a): to omit “terms and conditions” (line 17 on page 98) and substitute “disclosure or conduct obligation”.

Subclause 4(b): to omit “terms and conditions” (line 19 on page 98) and substitute “disclosure or conduct obligation”.

Clause 73(1(c)

To omit “14 and 15” (lines 17 and 18 on page 99) and substitute “14, 15, and 17”.

Clause 77

Paragraph (d): to omit this paragraph (lines 5 and 6 on page 102).

Clause 79

Subclause (2): to omit this subclause (lines 20 to 23 on page 102).

New clause 81A

To insert the following clause after clause 81 (after line 27 on page 103):

81A Certain provisions of Crown Entities Act 2004 apply to members of code committee

Clause 15 of Schedule 5 of the Crown Entities Act 2004 (Schedule 5) applies as if the code committee were a committee appointed by the Commission under clause 14 of Schedule 5 and with all other necessary modifications.

Clause 84(3)

To omit “83(2)(b)” (line 30 on page 104) and substitute “83(2)”.

Clause 88(1)

To omit “elapsed” (line 32 on page 105) and substitute “expired”.

Clause 93(1)

To omit this subclause (lines 10 to 13 on page 107) and substitute the following subclause:

(1) After receiving a complaint, the Commission must investigate the complaint if it is practicable to do so having regard to—

(a) the nature and number of complaints to be investigated; and

(b) the Commission's regulatory priorities as reflected in its statement of intent; and

(c) the Commission's available resources.

Clause 94

To omit “contravention” (line 24 on page 107) and substitute “breach”.

Clause 95

To omit this clause (lines 25 to 30 on page 107) and substitute the following clause:

95 Disciplinary committee must give notice of complaint to financial adviser concerned

If the Commission refers a complaint about an authorised financial adviser to the disciplinary committee, and the disciplinary committee considers that a hearing is necessary to deal with the complaint, the disciplinary committee must serve a written notice of the complaint on the financial adviser.

Clause 96

Heading to clause 96: to omit “Commission's” (line 31 on page 107) and substitute “disciplinary committee's”.

Paragraph (a): to omit this paragraph (lines 1 and 2 on page 108) and substitute the following paragraph:

(a) state that the disciplinary committee considers that there is reason to believe that A may have breached the code; and

Clause 97(2)

To omit this subclause (lines 12 to 15 on page 108) and substitute the following subclause:

(2) The disciplinary committee may take any of the actions referred to in subclause (3) if it is satisfied that A has breached the code.

Clause 100

To omit this clause (lines 24 to 30 on page 109) and substitute the following clause:

100 Functions of disciplinary committee

The functions of the disciplinary committee are to—

(a) conduct disciplinary proceedings arising out of complaints regarding authorised financial advisers referred to it by the Commission; and

(b) take any of the actions referred to in section 97(3) as a result of disciplinary proceedings.

Clause 104

Heading to clause 104: to omit “Commissioner” (line 11 on page 111) and substitute “disciplinary committee”

Subclause (1): to omit this subclause (lines 13 to 15 on page 111) and substitute the following subclause:

(1) A District Court Judge may, on the application of the disciplinary committee or the person to whom the proceedings relate, give a certificate authorising the disciplinary committee to issue a summons under section 105.

Clause 105

Heading to clause 105: to omit “Commissioner” (line 25 on page 111) and substitute “disciplinary committee”.

Subclause (1): to omit “Commissioner” (line 26 on page 111) and substitute “disciplinary committee”.

Subclause (2): to omit “Commissioner” (lines 36 and 37 on page 111) and substitute “chairperson of the disciplinary committee”.

Clause 108

Heading to clause 108: to omit “members of disciplinary committee and others” (lines 4 and 5 on page 113) and substitute “witnesses and counsel”:

Subclause (1): to omit this subclause (lines 6 to 10 on page 113).

New clause 108A inserted

To insert the following clause after clause 108 (after line 22 on page 113):

108A Certain provisions of Crown Entities Act 2004 apply to members of disciplinary committee

Clause 15 of Schedule 5 of the Crown Entities Act 2004 (Schedule 5) applies as if the disciplinary committee were a committee appointed by the Commission under clause 14 of Schedule 5 and with all other necessary modifications.

Clause 110

Heading to clause 110: to omit “in relation to category 1 product” (lines 10 and 11 on page 114).

Subclause (1): to omit this subclause (lines 12 to 17 on page 114) and substitute the following subclause:

(1) Subject to subsection (2), a person who, without being authorised, performs a financial adviser service that under this Act only an authorised financial adviser may perform commits an offence and is liable on summary conviction to a fine,—

(a) in the case of an individual, not exceeding $10,000:

(b) in the case of an entity, not exceeding $50,000.

Subclause (2): to insert after “product” (line 21 on page 114) “or provides a financial planning service”.

New clause 114A

To insert the following clause after clause 114 (after line 20 on page 115):

114A Offence of contravening restriction on use of term sharebroker

A person who contravenes section 34A(1) commits an offence and is liable on summary conviction to a fine not exceeding $5,000.

Clause 126

To omit “commission” (line 18 on page 117) and substitute “Commission”.

New clause 128A

To insert the following clause after clause 128 (after line 4 on page 118):

128A Offence of failing to comply with Commission's direction in respect of breach of disclosure or conduct obligation

A person who fails to comply with a direction of the Commission given under section 46A(3) commits an offence and is liable on summary conviction to a fine not exceeding $5,000.

Clause 144

To add the following subclause (after line 27 on page 123):

(5) The Commission may impose any conditions in relation to communicating information to an agency to which this section applies, including (without limitation) conditions relating to—

(a) maintaining the confidentiality of the information (in particular, information that is personal information within the meaning of the Privacy Act 1993):

(b) the storing of, use of, or access to the information:

(c) the copying, returning, or disposing of the information:

(d) payment of the costs incurred by the Commission in communicating the information.

Clause 147

Subclause (1)(b): to omit “financial” (line 26 on page 124).

Subclause (1)(c): to omit “financial” (line 28 on page 124).

Subclause (1): to insert the following paragraph after paragraph (c) (after line 29 on page 124):

(ca) prescribing an entity for the purposes of the definition of trust account (see section 5):

Subclause (3): to omit “, the Commissioner, and the code committee” (lines 31 and 32 on page 125).

Subclause (4): to insert “in New Zealand or overseas” after “other regulation” (line 37 on page 125).

Clause 150

To omit “by a person in New Zealand, regardless of where that person” (lines 28 and 29 on page 126) and substitute “regardless of where the person performing the financial adviser service”.

Clause 156

To insert the following subclause after subclause (2) (after line 4 on page 128):

(2A) Section 10(1)(c) is amended by inserting “and financial advisers” after “securities”.

To insert the following subclause after subclause (3) (after line 6 on page 128):

(3A) Section 11(1) is amended by omitting “10” and substituting “11”.

Explanatory note

This Supplementary Order Paper proposes a number of changes to the Financial Advisers Bill. The changes are mostly in the nature of minor or technical refinements. A handful are more substantive, but even then they are of relatively minor import. This last category includes the following:

excluding registered valuers, on the basis that they are already subject to equivalent regulation (new clause 12(ga)):
extending to an employee of a QFE the ability to give financial advice in relation to a category 1 product or make an investment transaction in relation to a category 1 product, provided in each case that the QFE is itself the issuer of the product (new clause 17(2)):
exempting a QFE employee from being required to be a member of an approved dispute resolution scheme under the Financial Service Providers (Registration and Dispute Resolution) Bill (new clause 18A):
restricting the use of the term sharebroker (new clause 34A and, for the criminal penalty for breach, new clause 114A):
empowering the Securities Commission to give directions to financial advisers in respect of a suspected breach of a disclosure or conduct obligation (new clause 46A and, for the criminal penalty for failing to comply with a direction, new clause 128A):
importing certain provisions of the Crown Entities Act 2004 in relation to the code and disciplinary committees (new clauses 81A and 108A).

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Financial Advisers Bill - Amendment paper No 253