Cotton told the Institute of Financial Advisers (IFA) conference in Auckland that advisory firms would "probably" have to produce an 'Adviser Business Statement' (ABS) once the new regulatory regime comes into force.

"I say probably because the Securities Commission hasn't decided yet but what I'm telling you today is a strong indication [that the ABS will go ahead]," she said.

The ABS would have to include all relevant information about the people, products, risks and compliance procedures inside an advisory business. Cotton told delegates all firms would have to keep an ABS on site and make it available to Securities Commission enforcmement agents.

"The ABS would show the enforcement person how [advisory firms] go about their business," she said.

It is understood the ABS system would differentiate between Qualifying Financial Entity (QFE) advisory businesses and stand-alone firms. Under the proposals, ABS documents produced by QFEs would have to be pre-approved by the Securities Commission.

Cotton said QFEs would also have to supply an annual report to the Commission showing they have followed the practices documented in the ABS.

Non-QFE firms would not require pre-approval for their ABS documents, however, they would be open to inspection by the Securities Commission at any time.

Cotton also said the adviser registration process laid out in the legislation would probably start in the middle of next year, with a website-based application system under construction.

Once registration was completed, due by the end of 2010, financial advisers should feel no hesistation in dobbing in unregistered operators, she said.

"If you see advisers operating outside [the regulatory regime] please don't have any mercy on them," Cotton said. "Report them to us. If you don't, the [unregistered advisers] could lower the standards of the industry."