Tardy financial advisers risk regulatory log jam

The new Code of Professional Conduct for Authorised Financial Advisers, which sets out minimum standards of competence, knowledge and skills, ethical behaviour and client care, will come into effect on December 1.

Financial advisers commissioner David Mayhew said the announcement, published in the Gazette, was an important milestone for the implementation of the new regime.

“This confirms that authorised financial advisers will be a reality from December 1 2010.

“From that date advisers giving personalised investment advice to retail clients will be able to operate within the new regime designed to promote the sound and efficient delivery of financial advice and to encourage public confidence in the professionalism and integrity of advisers,” he said.

He also noted that from December 1 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.

At the same time, the Securities Commission has approved the standard conditions for incorporation in the authorisation of 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.

Mr Mayhew said the commission was grateful for the efforts of all those who made submissions on the proposed standard conditions and that responses to the consultation would be published on the commission’s website shortly.

However, he 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 a licensing process for advisers who want to be AFAs by December 1, 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 March 31 2011, the commission should be able to complete the process by the critical date of July 1 2011.

“But that assumes significant numbers have already been processed before March 31,” said Mr 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.”