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Financial Advisers Bill - Addendum to initial advice (Consistent) (Section 17) [2007] NZBORARp 55 (21 November 2007)

Last Updated: 5 January 2019

Financial Advisers Bill - Addendum to initial advice

21 November 2007 ATTORNEY-GENERAL LEGAL ADVICE

CONSISTENCY WITH THE NEW ZEALAND BILL OF RIGHTS ACT 1990:

FINANCIAL ADVISERS BILL

Addendum to initial advice

1. On 16 November 2007 we provided you advice (‘the advice’) on whether the Financial Advisers Bill (PCO 8190/8) (the Bill) is consistent with the New Zealand Bill of Rights Act 1990 (‘Bill of Rights Act’). Since the advice was submitted, some changes to the Bill have been made. This addendum to the advice considers whether the new version of the Bill (PCO 8190/9) is consistent with the Bill of Rights Act. We understand that this Bill is still likely to be considered by the Cabinet Legislation Committee at its meeting on Thursday 22 November 2007.
2. We have considered one additional issue of prima facie inconsistency with section 17 (freedom of association) of the Bill of Rights Act and we have assessed whether or not this issue is justifiable under section 5 (Justified limitations) of that Act.
3. We have reached the conclusion that the Bill still appears to be consistent with the rights and freedoms affirmed in the Bill of Rights Act.
   

BILL OF RIGHTS ACT ISSUE

Section 17 – Freedom of association

Clause 48 (Disqualified person must not be member of approved professional body)

4. Paragraph 14 of the advice notes that under clause 9(1) of the Bill a person may not perform financial adviser services for a consumer unless that person is a member of an approved professional body. In the new version of the Bill a new subclause (2) has been added, which provides that a person cannot perform financial adviser services if that person is a disqualified person under clause 13 of the Financial Service

Providers (Registration and Dispute Resolution) Bill (‘FSPRDR Bill’). This requirement is enforced by means of an additional offence provision (clause 106(3) – Offence of false representation as to membership of approved professional body or registration).

5. Further, a new clause 48 (Disqualified person must not be member of approved professional body) has been added to the Bill, providing that the person must not be a member of an approved professional body, and an approved professional body must take reasonable steps to ensure that a person is not accepted as a member of it, if the person is a disqualified person under clause 13 of the FSPRDR Bill.

6. Clause 48 raises an issue of prima facie inconsistency with the freedom of association affirmed in section 17 of the Bill of Rights Act. It may be argued that the freedom of association of both the financial adviser (since the person cannot freely choose to become a member of an approved professional body) and approved professional bodies (as they cannot decide freely who to accept as a member) is limited by clause 48.
7. The Ministry of Economic Development (MED) has advised that clause 48 will ensure that there is consistency between the Financial Adviser Bill and the FSPRDR Bill. Financial advisers are a subset of Financial Service Providers under the FSPRDR Bill. It would be inconsistent treatment of financial service providers if financial advisers were disqualified under the FSPRDR Bill from providing financial services but not also disqualified from providing financial advice under the Financial Advisers Bill.
8. There is also a consumer protection objective attached to this provision. That is a consumer who deals with any financial service provider, including financial advisers, needs to be assured that the person is not disqualified from registration under the FSPRDR Bill. We find these significant and important objectives.
9. In our view, clause 48 is rationally and proportionally connected to these objectives. According to MED, the objectives can only be achieved if the approved professional body has to check whether a person is disqualified. The financial adviser regime is co-regulatory, which means that there is an industry supervisor of financial advisers,

rather than a statutory body who performs this role. The approved professional body performs the regulatory role under supervision of the Securities Commission.

10. For these reasons, we have concluded that the limit that clause 48 places on the freedom of association appears to be justified under section 5 of the Bill of Rights Act.
    

In addition to the general disclaimer for all documents on this website, please note the following: This advice was prepared to assist the Attorney-General to determine whether a report should be made to Parliament under s 7 of the New Zealand Bill of Rights Act 1990 in relation to the Financial Advisers Bill. It should not be used or acted upon for any other purpose. The advice does no more than assess whether the Bill complies with the minimum guarantees contained in the New Zealand Bill of Rights Act. The release of this advice should not be taken to indicate that the Attorney-General agrees with all aspects of it, nor does its release constitute a general waiver of legal professional privilege in respect of this or any other matter.