The New Zealand Law Society supports a MBIE proposal to continue to exempt lawyers from the operation of the Financial Advisers Act 2008 in relation to financial advice that they might provide as part of their normal activities.
The Law Society has released its submission on the Options Paper Review of the Financial Advisers Act 2008 and the Financial Service Providers (Registration and Dispute Resolution) Act 2008.
The submission agrees with Options Paper reasons for not changing lawyers' exemption: that lawyers are already fully regulated under the Lawyers and Conveyancers Act 2006 and the associated regulations and rules, there is no evidence that the exemption has a detrimental impact on consumers' financial outcomes, or in the professionalism of, or consumer confidence in, the financial advice industry.
"The Law Society has provided detailed guidance to lawyers in relation to what is considered to be 'in the ordinary course of business', and has seen no evidence to date that lawyers are 'crossing the line' from financial advice in the ordinary course of business," it says.
Elsewhere in its submission, the Law Society says further work should be done to identify the benefits of amending the Financial Advisers Act to establish a sole professional body for financial advisers.
"A professional body could be responsible for licensing financial advisers and regulating conduct through setting and enforcing a Code of Conduct for Financial Advisers," it says.
The Law Society says such a professional body could co-regulate with the Financial Markets Authority (FMA).
The FMA would continue to have an important oversight role, while the day-to-day guidance and disciplining of financial advisers was managed through the professional body.
"It would be important to ensure the boundaries between the professional body and the FMA were clearly established to avoid any duplication of regulatory oversight."
Financial service providers would remain regulated by the FMA under the fair dealing provisions of the Financial Markets Conduct Act and other regulators, such as the Reserve Bank, the submission says.
Considering ethical and client-care obligations, the Law Society says all financial advisers should be required to put the consumer's interests first. It says consumers would expect their interests to be put first when they receive financial advice from a professional.
"If an adviser puts his interests before the client's interests it is not advice - it is a sale. It may even be mis-selling, exposing the adviser and financial service provider to liability under the Financial Markets Conduct Act."
The Law Society says the legislation should be amended to make a clearer distinction between "sales" and "advice".