28 February 2008
New rules for investment advisers in force tomorrow
New rules requiring investment advisers to provide up-front disclosure of fees and remuneration, including commissions,
come into force tomorrow (29 February) and will give investors extra protection, Commerce Minister Lianne Dalziel says.
"This marks a leap forward for the investment industry which will now be subject to more stringent rules. Anyone who
gives investment advice to clients will have to provide more information up-front especially about how they are being
paid to recommend particular investments. Disclosure is mandatory and must be made without the client having to ask for
it," Lianne Dalziel said.
"This is especially designed to help inexperienced investors who may not know what they don't know and it will ensure
that investment advisers are transparent about the investment advice they give."
The new disclosure rules extend to any benefits to be received by the adviser, whether from the client or another
source, and include "soft" commissions and indirect benefits relevant to the advice being given.
Investment advisers' disclosure must include:
- their experience and qualifications;
- criminal convictions;
- the nature and level of fees charged;
- other interests and relationships (including all remuneration); and
- types of securities the adviser advises on.
Disclosure statements must be kept up-to-date and must not be deceptive, misleading or confusing. The new rules also
beef up the Securities Commission powers. It will now police investment advertising and, if necessary, censure advisers
and brokers for misleading advertisements, Lianne Dalziel said. 'Advertising' may include newsletters, seminar
presentations, paid advertising in newspapers, TV, or radio, and radio and TV broadcasts containing investment advice or
promoting securities.
"This is a further step forward in the Labour-led government's efforts to improve accountability and transparency in the
investment industry so that the public can have confidence that they are being fully informed before they make important
decisions on how to invest their hard-earned cash."
ENDS