14. Businesses as Approved Professional Bodies
297. There has been a lot of comment on whether single employer entities (e.g. banks or insurance companies) can be approved professional bodies. The reason for this is that a number of businesses have noted that they have set processes which mirror the proposed functions of approved professional bodies, they wish to avoid duplication, and, they have invested significant resources in setting up these processes.
298. There are a number of good reasons why businesses may wish to be considered as approved professional bodies:
- businesses have current systems to monitor the quality of advice given by people within that business, or connected to that business;
- businesses are strongly motivated to protect brand, and are aware that employees will be the public face of that brand;
- they have the money and incentive to contribute to internal and external dispute resolution processes;
- there is a reduced risk of conflict between existing business practices and standards set by any approved professional body;
- businesses won't have to share confidential information with approved professional bodies;
- there may be a large number of intermediaries within one business;
- there may be gaps where industry bodies do not wish to form an approved professional body where a business may be able to provide coverage;
- businesses can target competencies that directly relate to their products and systems; and
- employers are already liable for the actions of their employees in any event - this may make it easier for the employer to direct its members.
299. Conversely,
- membership of a business-based approved professional body may not be easily retained if an intermediary leaves his/her employment;
- this may result in a large number of approved professional bodies, which would take more resources of the Securities Commission;
- membership of a business-based approved professional body could discourage financial intermediaries from joining industry-based approved professional bodies due to the additional cost, and this may mean that industry based approved professional bodies cannot achieve the required numbers to operate efficiently;
- there is a risk that product providers who are approved professional bodies could require financial non-employee intermediaries to belong to their approved professional body if they wanted to sell that provider's products. It is unlikely that the Minister would approve rules that are perceived to impose unnecessary barriers to entry or which endorse anti-competitive behaviour;
- Ministry officials are unsure whether the processes set up by businesses are aimed at high level intermediaries, or whether they deal mostly with procedures for product marketers. Product marketers are not required to belong to approved professional bodies. Businesses are free to set their own standards on their product market employees; and
- it is difficult to see how an employer could act as a regulator of "intermediaries" (through being an approved professional body) in situations where the employer is also legally liable for the actions of the intermediaries, through vicarious liability.
Alternate Options
300. There are alternate options to include businesses within the co-regulatory model, for example:
- large single employer firms with high internal standards could take responsibility for their employees as some sort of "corporate member" of an approved professional body; or
- there could be different classes of approved professional bodies.
301. These options build on previous discussion at paragraph 121. Ministry officials are keen to hear views on whether or not approved professional bodies can be business based, or industry based, and whether there are different issues arising for employers as approved professional bodies.
Questions
Q77. Should there be any restriction on the type of entity which can seek to apply to be an approved professional body?
Q78. Do you agree with the reasons listed at paragraphs 298 and/or 299? If not, which ones? And why not?
Q79. What are the costs and benefits of allowing single employer entities to be approved professional bodies? Does the cost outweigh the benefit, or the benefit outweigh the cost?
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