It has been talking with high level institutions to stop the Government from pushing through legislation that grapples with issues that were settled by another law three years ago.

Financial Advice NZ's chief executive Katrina Shanks said those talks had been going “very well.”

The controversial new bill is the Financial Markets (Conduct of Institutions) Amendment Bill, or COFI.

Shanks said in principle, that bill was fine, because it produced a code of conduct for institutions such banks, insurers or non-bank deposit takers.

But midway through parliament, the bill was changed to bring oversight to the financial advice sector.

However, that sector was already governed by the Financial Services Legislation Amendment Act of 2019 (FSLA).

FSLA administers the Financial Advice Provider, or FAP, regime, which advisers have been busy complying with at considerable cost in time and money. The process began last March and is due to finish next March,

But having a second set of rules dumped on advisers part way through implementation of the first set of rules was a law too far for Shanks.

“All of a sudden you had two conduct and culture legislative requirements,” she said.

“You would have had the Financial Markets Authority (FMA) monitoring one lot of supervision.

“Then you would have had the product providers enforcing conduct and culture requirements, but differently, because with different legislation there would be different requirements.”

As these concerns developed, the Government decided to stall the COFI bill part way through the parliamentary process, pending delivery of a Supplementary Order Paper (SOP) which would clarify what was to be done.

That SOP is being prepared by the Ministry of Business, Innovation and Employment (MBIE) and the FMA. Shanks has been in touch with staff there to make her concerns known and is pleased with how the talks have progressed.

“I think they have been going very well, we have raised legitimate concerns over the legislation and about unintended consequences of that legislation on financial advisers.

“The intention was never that the financial advice would have two significant pieces of legislation for conduct and culture. It was only originally intended that FSLA would govern conduct and culture for financial advisers.”

The final contents of the SOP are still awaited.

A related problem with the COFI bill was that it originally intended that financial institutions such as insurers should train, manage or supervise intermediaries such as advisers who deal with their products.

This produced complaints that the obligation was broad and unworkable, and could cause advisers to reduce the number of institutions they work with to avoid having to comply with multiple programs.

This in turn could reduce competition and choice for consumers, which would undermine the intent of the legislation.

Shanks noted that FSLA required competency, knowledge and skill among advisers, so further training by institutions would be redundant.

In a cabinet document released in March, the Government pulled back on the idea of training and managing intermediaries but still wanted them covered by the COFI law.

Any further change in this regard is dependent on the final shape of the SOP.

It is unclear when that will be released, although the Government has said it wants the legislation finished by mid-year.