Draft code for financial advisers rejected

Commerce Minister Simon Power. Photo / Mark Mitchell

The Commissioner of Financial Advisers has rejected the draft code of conduct for financial advisers because he says it is inconsistent with the Financial Advisers Act.

David Mayhew yesterday released a letter to code committee chairman Ross Butler calling for the committee to rework some parts of the code as soon as practicable.

"Following my review of the draft code I am not satisfied that the draft code is consistent with the act in three respects, two of which affect operative provisions of the code.

"Accordingly I must, under section 89 of the act, direct the code committee to review the draft code," he said in the letter.

Mayhew, who must approve the code before it goes to Commerce Minister Simon Power, said he was concerned about code standard five because it might leave authorised financial advisers and consumers with the impression that the code is endorsing the provision of advice on wholesale products to retail investors where the product provider is not a related party of the adviser.

Mayhew also requested a revision of code standard eight to make it clearer to consumers whether they were receiving personalised advice.

Under the code advisers who provide a personalised service must ensure it is suitable for their client. But Mayhew said extra provisions providing for situations where consumers asked their adviser not to determine the suitability of the personalised service failed to make it clear that the decision might mean the consumer receives class advice instead of personalised advice.

"At present the draft standard refers only to personalised services, and ... is potentially confusing in this regard."