Investors to get direct access to watchdog

Investors who find fault with the way they are given advice will be able to lay a complaint directly with the Securities Commission from the end of the year if their adviser breaches a new code of conduct.

A draft version of the new financial adviser code was released last Thursday and has a six-week period of consultation to go through before going to the Securities Commission's Commissioner of Financial Advisers David Mayhew.

The code is intended to increase investor protection after finance company collapses which have cost New Zealand investors billions.

Mayhew will approve the code before passing it on to Commerce Minister Simon Power who will pass it into law.

Securities Commission director of supervision Angus Dale-Jones said the target for getting all advisers up to speed and meeting the code was early December.

All advisers must be registered with the Companies Office on a public register which is expected to be made available for general access next year.

Those who give advice on more complicated products such as investments, including KiwiSaver, will have to be registered as authorised financial advisers while those who sell more basic products such as car insurance or a term deposit can be registered under a qualifying financial entity.

The register is expected to open around July and it is hoped that most will meet the new minimum requirements to become registered by December.

Dale-Jones said the timeframe was going to be tight and the Securities Commission was keeping a close eye on the training and competency assessments of advisers.

"It might be that we get to a stage where we have to make a call [to extend the timeframe] if it all looks a bit tight."

Dale-Jones said the major challenge with meeting the target was that the exact number of advisers and what is required to bring them up to speed to meet the minimum requirements is largely unknown.

The commission expects around 5000 individuals to register as AFAs and several hundred QFEs such as banks and insurance companies.

Advisers will also have to be registered with a dispute resolution scheme. No schemes have been officially registered yet but the Banking Ombudsman's office has said it intends to set one up. The Ministry of Consumer Affairs will also have a default scheme.

The system will be similar to that run by the Banking Ombudsman. Investors will need to try to resolve their dispute directly with the adviser and his or her firm before going to the dispute body.

Dale-Jones said the dispute schemes were all about giving people redress in situations where they think they have been "ripped off".

At the moment the only way investors can try to resolve this is by going to the adviser's professional body, if they are a member, or through a court - a costly exercise.

Investors who are concerned about the conduct of their adviser will also be able to get in touch with the Securities Commission directly although exactly how this will be done is yet to be finalised. The commission will take complaints from anyone who thinks they received poor advice and wants to make sure their adviser lifts his or her game.

Dale-Jones said the commission was conscious that some people would not know who to go to about their concerns and it would need to provide some "signposts". He said anyone caught giving advice without being on the register would be shut down once the code came into force.