Code Standard 7 in the Draft Code of Professional Conduct says that an authorised financial adviser (AFA) who has reasonable grounds to suspect that another AFA has not complied with the Code, or that a person has not complied with the act, must report the suspected non-compliance to the Securities Commission.

The Financial Adviser Associations of New Zealand (FAANZ) submission on the Draft Code says it strongly recommends that there needs to be prescriptive guidance around how the Securities Commission will protect and provide anonymity for the whistleblower.

It also says there needs to be regulatory protection for the whistleblower from civil liability.

FAANZ chairperson Lyn McMorran is also concerned that there could be anti-competitive behaviour with mischevious reporting to put an adviser out of the market.

"What protection is there if an adviser goes to the Securities Commission with concerns where there are no grounds, but under-lying concerns about competition?"

Financial Focus director Murray Weatherston was very surprised to see the whistleblower code in the Draft Code and he says it seems very onerous.

"But basically the Securities Commission is making every other adviser their policeman for all sins.

"I can understand that it is to make sure no-one is unauthorised but with respect to every part of the code I'm not sure it's within an adviser's best interests to do that.

"Very clearly the Securities Commission will have to ensure that complaints are kept anonymous and they will have to make sure advisers will be statutorily protected against civil claims made by the person complained against.

"There's nothing in the code that talks about that," he says.