Good Returns reported two weeks ago of two Bay of Plenty insurance advisers that had received court convictions in Australia after misleading consumers over their investment properties, but had still been accepted on the financial services register

"There's nothing to prevent it happening," Hughes said.

He said the FMA had no control over the financial services providers register, which is administered by the Companies Office, part of the Ministry of Economic Development (MED).

"The registrar has no discretion to refuse registration to somebody who holds a conviction from overseas, they can with a New Zealand conviction, but not with an overseas conviction."

Hughes said he was aware the issue was problematic, especially as it held New Zealand advisers to different, higher standards.

"We have discussed this issue with the Minister and with his officials and we have suggested some potential solutions to that because we don't think it's necessarily good for the New Zealand market, or for the integrity of the register that there be a different set of rules for New Zealand people compared to foreigners coming onto the register," he said.

"We would be supportive of any tightening up."

He said that at present, as long as an adviser registered and signed up to a disputes resolution scheme, "then they could operate in New Zealand because the registrar is part of the MED and is unable at this point to refuse them registration."

He agreed the current system was unfair "not only to advisers but to consumers who won't know if their adviser has an overseas criminal conviction or not."

Hughes said the FMA is already conducting surveillance work in parts of the country and while he said it was too early to comment on the findings - he said they hoped to report before Christmas - he was clear that there would be consequences for those not abiding by the new regulations.

He said he sympathised with advisers who were complying with the new regulations, and thanked those who had bought instances of non-compliance to the FMA's attention.

"I think it's reprehensible what they are seeking to do and I sympathise with those advisers' who've done the right thing. We think we've got a responsibility to come down hard on those that are flouting those rules."