Last call to stall disclosure millstone

Lianne Dalziel

Financial advisers and other investment professionals are being urged to take advantage of one of their last chances to head off the introduction of the cumbersome disclosure-of-interest statements dogging Australia's investment industry.

Commerce Minister Lianne Dalziel recently released a discussion paper on proposed regulations that will give teeth to the Securities Legislation Bill.

The bill is set to be passed in the next few weeks and its most significant provisions will come into effect when regulations are issued a few months later.

The discussion paper outlines the proposed regulations and asks for submissions on:

* Investment advisers' and brokers' disclosure.

* Substantial security holders' disclosure.

* Insider trading exemptions.

* Market manipulation exemptions.

Commercial law expert Roger Wallis, of Chapman Tripp, said most of the issues around substantial security holders' notices, insider trading and market manipulation exemptions had been well traversed in earlier discussions of the bill.

However, the area of most interest was how the investment adviser regime was going to work.

"There are some quite practical issues such as having a standard form disclosure document that you're supposed to produce or can you allow people to do their own things.

"Are we going to end up with an 80-page disclosure statement like the Aussies appear to have got or is it a two-pager?"

There were also important issues relating to how disclosure applied to advice given over the telephone, the internet and other electronic media.

"The industry needs to put forward suggestions to make those things realistic because the Aussies seem to have dropped the ball in that area," said Wallis.

"It really is a chance for the industry to make sure they come up with a workable regime.

"Now's their chance to make sure they're not stuck with 80-page disclosure statements and can continue to use the phone as part of their business."

Wallis said there were indications that work done by the taskforce on financial intermediaries had influenced some of the proposals contained in the discussion document.

During the taskforce's work, numerous warnings were made about the danger of following in the footsteps of Australia, where disclosure requirements had been "hijacked by lawyers", resulting in mind-numbingly long and technical statements becoming a mandatory part of consumers' dealings with advisers.

Financial Planners and Insurance Advisers Association chief executive George Elkington said his group agreed with the taskforce recommendation that disclosure needed to be focused and analysed from the perspective of benefit to the consumer.

"Before determining the final content and form of the disclosure," he said, "there is considerable value in researching consumer views on what they would consider useful information and what form of disclosure would be most effective in conveying that information."

Elkington believed Australia had short- circuited the consultation process before introducing its disclosure regime.

"I've yet to see evidence of how or how well it has benefited consumers."

He said sufficient consumer research had been completed in New Zealand with regard to investment and savings advice but not for insurance and other areas.

While Dalziel's recent discussion document focuses on those advisers in dealing with securities, taskforce member Ross Kent, general manager of Alliance Capital Management, said the resulting regulations would "absolutely" set the lead for subsequent regulations applying to other types of advisers.

"My sense is that some parts of the industry haven't quite understood that connection," he said.

"I've been trying to stress to some of the adviser groups that if you've got something to say about this you ought to make a submission now because the cast will be set on this particular category and it will be difficult to make distinctions for other categories like life insurance and mortgages."

Submissions on the proposed regulations close on April 21.