New law gives watchdog power to bite

Investors' watchdog the Securities Commission has gained the power to ban and also name and shame investment advisers who breach the Financial Advisers Act which kicks in this year.

Sitting under urgency, Parliament yesterday unanimously passed the Financial Service Providers (Pre Implementation Adjustments) Act.

The law was initially intended to simplify and reduce costs associated with the introduction of new laws and regulations for financial advisers. It narrowed the range of professionals the new laws applied to and streamlined the registration and oversight of advisers and contractors working for large firms or "qualifying financial entities" such as banks and insurance companies.

But it was extensively rewritten after recommendations from the Parliament's commerce committee and consultation with the finance industry.

As passed yesterday, the law contains a new clause which strengthens the Securities Commission's power to police financial advisers under the Financial Advisers Act (FAA) and Financial Service Providers Act.

The commission gains the power to place a temporary ban on an adviser who persistently breaches the FAA or the Securities Act, or who has been subject to a similar ban overseas. It also gains wider powers to seek High Court orders to ban advisers for up to 10 years or to freeze their activities and even those of third parties in order to prevent breaches of the FAA.

The commission, which has faced criticism for not disclosing action it has taken against some finance firms, will be able to publicise any action it takes against financial advisers or financial services firms.

Securities law expert Roger Wallis of Chapman Tripp said the commission's "broader intervention powers" would allow it to act quickly where it believed there was a breach of the new law.

The changes also filled a gap left in the new law for financial advisers, which relied almost entirely on dispute resolution services similar to the Banking Ombudsman.

Labour commerce spokeswoman Lianne Dalziel said the new powers for the commission marked the "the first time financial advisers have been specifically regulated".

The bill was passed under urgency so it would be place before registering of all financial advisers begins next month. They must be registered by December and have a minimum level of training.