Faafoi wants easier-to-understand adviser disclosure; FMA finds investors happier with offer docs
By Paul McBeth
April 10 (BusinessDesk) - Commerce and Consumer Affairs Minister Kris Faafoi wants more easily-understood financial
adviser disclosure rules to make sure customers aren't led astray, and is seeking submissions on regulations
accompanying the upcoming law change.
The Ministry of Business, Innovation and Employment discussion document came out the same day that Financial Markets
Authority-commissioned research showed investors have found product disclosure statements more useful than the previous
regime in offering valuable insights in investment offers.
Legislators are currently considering a bill to remove some of the confusion for consumers in the way financial advisers
are designated, and putting client obligations on the industry. While that works its way through Parliament, MBIE is
seeking feedback on proposed regulations that will set the disclosure requirements for advisers to make sure consumers
all the information they need at the right time.
"Consumers should have that information to assist them to decide, for example, whether to obtain advice from a
particular provider," Faafoi said in a statement. "I want to make sure that important information is presented in simple
terms that consumers understand."
The proposed disclosure regime can draw on the experience of changes to securities law, which pared back the size of
investment prospectuses to the more manageable product disclosure statement under the five-year-old Financial Markets
Conduct Act.
FMA-commissioned research found the product disclosure statement was the first thing investors looked at to get a sense
of a product, using it as a primary information source for decision making. Interviewees told researchers PDS was an
improvement on the investment statement-prospectus disclosure regime, but were "long and repetitive", using "academic"
language and "a lot of legal terminology".
"The significant work issuers have put into PDS documents is paying off, with investors paying attention to the
information," FMA director of capital markets Garth Stanish said in a statement. "The PDS is a significant improvement
to the previous disclosure regime and this research provides valuable insights from investors into how the PDS can be
improved further."
Faafoi also said MBIE was taking submissions on proposed regulations to the financial services providers register which
is part of the legislative programme.
"Some mainly offshore-controlled entities have been 'free-riding' off New Zealand’s reputation for sound financial
markets regulation by using their registration to imply that they are actively regulated in New Zealand when that is not
the case," Faafoi said. "I want feedback on the proposals that aim to address this unscrupulous behaviour."
The register regulations would set thresholds and exemptions requiring registration, set limits on promotion of
registration, and impose information requirements.
Submissions on the adviser regulations are open to May 25 and the register regulations to May 15
(BusinessDesk)