Review of Financial Intermediaries
Introduction
The Government has reviewed the regulation of financial intermediaries in New Zealand. Industry and consumer stakeholders have noted that there is good reason to have a change in this industry because:
- the lack of consistent domestic standards means that it is hard for consumers to compare intermediaries;
- consumers have limited information and therefore, only a limited ability to evaluate their financial intermediaries;
- consumers may not be able to verify the information provided by financial intermediaries.
To address these comments, one of the main objectives of the Review of Financial Intermediaries is to ensure that consumers can rely on intermediaries providing them with the information they need to make good decisions. It is important to have appropriate and robust regulatory frameworks on which government, industry and consumers can rely.
Release of the Discussion Document
On 3 July 2006, Cabinet approved the release of a discussion document on financial intermediaries. The discussion document set down possible options and details of the co-regulatory model, with government proposals, and questions about the costs and benefits of possible options.
Submissions closed on 1 September 2006 and Ministry officials wish to thank all submitters for the responses and information provided. Over 140 submissions were received.
Following the Minister's announcement the Financial Intermediaries Discussion Document: Summary of Submissions has been made available.
Officials have reviewed and considered the submissions and Cabinet has made decisions (see Cabinet Decisions on the Review of Financial Intermediaries).
Background
In August 2004 the Minister of Commerce (then the Hon Margaret Wilson) appointed an independent Task Force to consider and report on the regulation of financial intermediaries (Task Force). The Task Force's final report Confidence, Change and Opportunity was publicly released in August 2005. The Minister of Commerce responded to the report on 4 August 2005.
In summary, the Task Force recommended a regulatory framework under which industry bodies ("approved professional bodies") and the government (through legislation and government entities such as a Minister and a regulator) will set standards, rules and obligations for financial intermediaries and will carry out dispute resolution and disciplinary functions.
On 12 December 2005, Cabinet agreed (in principle) to the proposed co-regulatory framework under which approved professional bodies and the Securities Commission (as the government regulator) will work together to regulate financial intermediaries. Cabinet also agreed that the Cabinet paper could be made available on the MED website.
From December 2005 to June 2006, the Ministry carried out the detailed design work on the Task Force proposals to prepare the discussion on financial intermediaries. This design work involved Ministry consultation with potential approved professional bodies, the Securities Commission and other stakeholders.
On 3 July 2006, Cabinet approved the release of a discussion document on financial intermediaries. The discussion document set down possible options and details of the co-regulatory model, with government proposals, and questions about the costs and benefits of possible options.
Submissions closed on 1 September 2006 and Ministry officials analysed submissions from the discussion document and comments from the general consultation.
Cabinet has now made decisions on the Review of Financial Intermediaries (see Cabinet Decisions on the Review of Financial Intermediaries).
Financial Intermediaries, the Review of Financial Products and Providers and the Securities Legislation Bill
The work on financial intermediaries is separate to the work on the Review of Financial Products and Providers. The Ministry's Financial Sector team is managing both reviews, so will be best placed to efficiently make the necessary links and share information.
The Securities Amendment Act 2006, the Takeovers Amendment Act 2006, the Securities Markets Amendment Act 2006 and the Fair Trading Amendment Act 2006 were enacted by Parliament on 12 October 2006. These Acts formed the Securities Legislation Bill .
The Securities Markets Amendment Act 2006 addressed a range of issues on investment advisers and investment brokers disclosure. Ministry officials have taken these issues into account in developing the Financial Advisers regulatory regime.
Contacts
If you would like to send us comments, receive updates or further information about consultation, please contact us at financialadvisers@med.govt.nz.
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