Financial Services Legislation Amendment Bill- First Reading – Video 1

the eyes habit a call on government order of the day number two financial services legislation amendment bill first reading I call the Honourable Christine O’Donnell madam Speaker madam Speaker I move that the financial services legislation amendment bill be now read a first time and I nominate the economic development science and innovation committee to consider the bill madam Speaker the financial services legislation amendment bill amends the regulation of financial advice at other financial services it will ensure that these services are provided in a way that promotes the confident and informed participation of businesses investors and consumers in financial markets the bill madam speaker does three main things especially it overhauls the current regulatory regime for financial advice secondly had the bill makes changes intended to address the misuse of the financial service providers register and thirdly the bill makes minor changes to address technical issues that have arisen since the implementation of the financial markets contact act over the past three years the Ministry of business innovation and employment has undertaken a comprehensive review of the legislation that regulates financial advice and prior to the current legislation being passed in 2008 financial advice was largely unregulated and investor confidence was low while the current regime has made some positive changes and this in this respect there are a number of issues that need addressing madam Speaker the financial advice has an important role to play and the lives of all New Zealanders financial products can be complicated and are not easily understood by consumers so good advice can help bridge this gap financial advice can help consumers plan for life significant milestones such as buying a first home or moving into retirement it can be instrumental in helping everyday New Zealanders improve their financial position and given the growing balances under the KiwiSaver scheme it is important as ever that consumers can access high-quality financial advice because of the complex nature of financial products there is a real potential for harm to consumers as a result of poor advice when decision and when making a decision about a financial product media consumers need to rely on the information given to them by a financial advisor as consumers put a great deal of trust in these people and institutions they provide the financial advice it is important that they be held to appropriate standards of conduct and competence following extensive consultation with industry participants and consumers the ministry found a number of issues with a current regime that are preventing consumers from accessing high-quality financial advice the current regime is unnecessarily complex and has set contact and competency standards that are inconsistent across the industry this has created real a real disincentive to provide certain types of financial advice and as a result consumers have struggled to get answers to simple questions such as which key we say the fund is the right one for me the complexity of the existing regime can also cause confusion for consumers who are left to wonder what standards their advisor is held to and this complexity has a problem financial for financial advice businesses to some of whom raised concerns about undue compliance compliance costs the financial services legislation amendment bill will overcome these issues and will improve access to high-quality financial advice for all New Zealanders the regime puts the consumer at the center of financial advice and this will go a long way to improving consumer confidence in this industry the new regime establishes a level playing field of regulation for all who provide financial advice it will ensure that consumers have the same protections regardless of how or where they choose to access that advice and this includes a requirement for everyone giving advice to put the consumers interests first and to meet the standards of conduct competency and client care when the speaker the bill also gives the Financial Markets Authority the tools that it needs to effectively regulate financial advice at present only some advisors at large firms are subject to active regulatory oversight by the FMA the new legislation will require everyone providing financial advice to retail clients to be covered by license meaning they are actively monitored the bill strikes a balance between ensuring consumers can access quality advice and not imposing any undue compliance costs on that on the industry and to the siient Licensing will be granted at the firm level to reduce costs on individual advisors well the speaker the bill takes a flexible and technology-neutral approach to allow for different business models and to future-proof the regime this one and I this will enable computer-generated phone financial advice owners Robo advice to be given to consumers Robo advice presents an opportunity that will enable more New Zealanders to access financial advice and regardless of how a firm decides to deliver financial advice consumers will have the same products to encourage confidence in the financial advice the bill retains the ability for consumers to access redress through the independent dispute resolution schemes the bill also makes the use of a flexible approach to enforcement that exists in the financial market contact act as it stands the FMA will be given a range of tools so they can deal with misconduct in the most appropriate manner finally the new regime will introduce simplified disclosure statements current disclosure documents are long complex and filled with jargon consumers are often left in the dark about commissions and other factors that may influence the advice they receive the bill will ensure that consumers are given the key information they need to make confident and informed financial decisions I recognize that the new regime will involve significant changes for many in the industry and I also understand that meeting competency requirements may take some time for some advisors who need to balance study with work the bill therefore seeks to enable a smooth transition to the new regime industry participants will have the time they need to upskill and obtain licenses madam Speaker I have heard that there are some concerns for the industry about this bill particularly from smaller operators in the market and these will no doubt be discussed it’s a committee to those that have been following the review of the financial advice regime and the passage of this piece of legislation I encourage you to provide a submission to the Select Committee because we want ensure that the legislation seeks the right balance between ensuring consumers can access financial advice they need without imposing any undue compliance costs particularly on those smaller businesses providing financial advice when the speaker the ministries review also looked at the misuse of the financial services service providers register there have been instances of offshore entities registering here in New Zealand to mislead consumers by implying that they are subject to regulatory oversight here in New Zealand this has the potential to harm New Zealand’s reputation and reduce confidence in the regulation of our financial markets Mehta speaker this bill seeks to address this issue by amending the financial service providers Act these changes will require businesses to have a stronger connection to New Zealand in order to be registered they’ll also impose additional requirements on businesses that have advertised the original status to ensure that consumers are not being misled the bill also includes some minor changes to the financial markets conduct act to address technical issues that have emerged since the industry began operating under the Act I’m going to speak it in conclusion the financial services legislation amendment bill will implement a package of changes that will deliver positive outcomes for every day New Zealanders and metal Speaker I commend the bill to the house the question is that the motion be agreed to I call the Honourable Chris Finlayson madam Speaker the

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