Minister wants simpler rules on disclosure

Commerce and Consumer Affairs Minister Kris Faafoi wants more easily-understood financial adviser disclosure rules to make sure customers aren’t led astray, and is seeking submissions on regulations accompanying the upcoming law change.

The Ministry of Business, Innovation and Employment discussion document came out the same day that Financial Markets Authority-commissioned research showed investors have found product disclosure statements more useful than the previous regime in offering valuable insights in investment offers.

Legislators are currently considering a bill to remove some of the confusion for consumers in the way financial advisers are designated, and putting client obligations on the industry. While that works its way through Parliament, MBIE is seeking feedback on proposed regulations that will set the disclosure requirements for advisers to make sure consumers get all the information they need at the right time.

“Consumers should have that information to assist them to decide, for example, whether to obtain advice from a particular provider,” Faafoi said. “I want to make sure that important information is presented in simple terms that consumers understand.”

The proposed disclosure regime can draw on the experience of changes to securities law, which pared back the size of investment prospectuses to the more manageable product disclosure statement under the five-year-old Financial Markets Conduct Act.

FMA-commissioned research found the product disclosure statement was the first thing investors looked at to get a sense of a product, using it as a primary information source for decision making. Interviewees told researchers PDS was an improvement on the investment statement-prospectus disclosure regime, but were “long and repetitive”, using “academic” language and “a lot of legal terminology”.

“Some mainly offshore-controlled entities have been ‘ free-riding’ off New Zealand’s reputation for sound financial markets regulation by using their registration to imply that they are actively regulated in New Zealand when that is not the case,” Faafoi said.

“I want feedback on the proposals that aim to address this unscrupulous behaviour.”