David Ross was last week charged with false accounting and theft by a person in a special relationship.

Tate said those who had pointed the finger at the Financial Markets Authority for authorising Ross as a financial adviser were misinformed because the FMA has few powers to object to an application.

Applicants for authorised financial adviser status must provide proof of competence by completing standard sets b and c, must pass a police check, supply an adviser business statement and two references.

If they satisfy the criteria, the FMA is required to authorise them.

Tate said: “There’s very little the FMA can do. They can’t say ‘we don’t like the look of you’ unless there’s evidence.”

After the Ross collapse, FMA boss Sean Hughes told Commerce Minister Craig Foss that the criteria for entry to AFA status should be tighter. He suggested applicants should have to pass a “fit and proper person” test.

Tate said it should go a step further. “I think it’s really difficult the first time round to get things right. But I’d like to see them have greater capacity to go through and check these people are up to speed before they authorise them.”

He said there were problems in the Set Standards B and C assessments. “Assessment may need to be done on a close relationship basis, with some sort of mentoring. Maybe before they become an AFA, they have to go through some period of supervision. That’s the only thing I can see at this stage that could have avoided the Ross Asset Management situation.”

Tate said it was even easier for Ross to get AFA status because he was an accountant. Accountants have a carve out that means they do not have to do standard set c. “That’s a mistake but that’s not the FMA, that’s the legislation that’s been put in place. I don’t think because someone is an accountant they know about financial advice.”