Discipline
38. The Task Force recommended that all financial intermediaries (both individuals and businesses) would be subject to the jurisdiction of a single disciplinary body established by statute. The disciplinary body (from which there could be appeal to the District Court) would have a number of sanctions available, including temporary and permanent banning orders; orders for supervision or management of practice; orders for correction of information; orders for reimbursement of fees to consumers; and fines.
Why Should Financial Intermediaries Be Subject to Disciplinary Procedures?
39. The Task Force recommended that financial intermediaries be subject to disciplinary procedures, on the basis that this would address the current inability of the voluntary industry bodies to stop inappropriate participants from practising as financial intermediaries.
Cabinet Approval Sought for Disciplinary Processes
40. I am seeking in-principle Cabinet approval that financial intermediaries would be subject to disciplinary procedures. This would allow the Ministry to undertake design work on the disciplinary functions and processes to which financial intermediaries would be subject. This would include work on sanctions, appeals and enforcement (including how to effectively enforce orders against any financial intermediary who is not required to be a member of an APB (see paragraph 44 below)). The Ministry would also consider how the functions of the disciplinary body suggested by the Task Force could be carried out by APBs and the Securities Commission, rather than a separate disciplinary body being created by statute. This is on the basis that:
- the reality is that the large percentage of disciplinary matters would be heard first through internal procedures carried out by a financial intermediary business, then through initial disciplinary function in the APBs. Appeals or any matters considered by the disciplinary body/regulator would be rare, which would raise questions as to whether it would be necessary to set up a separate body to hear such appeals or whether the Securities Commission could hear the appeals. Another potential option may be setting up a particular panel within the Commission to hear disciplinary actions for intermediaries;
- once the Securities Legislation Bill is passed, the Securities Commission will have the ability to take a range of actions against intermediaries for misleading and deceptive conduct, and breaches of the disclosure provisions (including imposing temporary bans or seeking permanent bans on intermediaries). This would mean that the Securities Commission would already have the experience of carrying out many of the functions of the disciplinary body; and
- the use of the Securities Commission would have the benefit of reducing the number of potential bodies in this area. This would result in reduced set-up costs, reduced potential for overlap in the roles undertaken by various bodies and a reduced need for information sharing across entities.
Back to Top