Tuesday 21st June 2011
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The Financial Markets Authority (FMA) has issued a warning to SuperLife Ltd and SuperLife Trustees Ltd to overhaul KiwiSaver sales practices.
The warning today followed an FMA statement this month urging investors to be wary of unacceptable sales practices being used by unregistered KiwiSaver sales representative Patrick Diack, who represented SuperLife.
Diack's sales approaches included soliciting members of the public outside Winz offices, offering them money to join a KiwiSaver scheme and signing them up to scheme membership without providing them with the investment statement, the FMA said.
The investment statement was the disclosure document that provides investors with the information they need to make an informed decision.
FMA said it was concerned about the distribution practices of the SuperLife KiwiSaver scheme represented by Diack. Particular concerns related to SuperLife’s apparent failure to properly train its employees and monitor their compliance with legal requirements.
FMA chief executive Sean Hughes said it was concerned about a number of matters regarding SuperLife's sales practices, potential non-compliance with the law and apparent poor monitoring of the activities of its sales force.
From the start of July, FMA would monitor compliance by KiwiSaver providers with their obligations under the Financial Advisers Act.
"We will not hesitate to take enforcement action against KiwiSaver providers who fail to ensure they comply with their legal requirements," Hughes said.
After discussions with SuperLife, FMA continued to be particularly concerned that SuperLife:
* failed to ensure its employees giving advice - such as Diack - were registered on the Financial Service Providers Register, as required from March 31,
* failed to rigorously train and test its employees in relation to the requirements of law, and
* failed to adequately monitor its employees’ performance and to performance manage any employees who fell short of the standard required.
The FMA said that it had warned SuperLife, and now emphasised to all KiwiSaver providers that door-to-door selling of securities was illegal, and any form of high pressure, coercive or misleading selling was inappropriate for KiwiSaver schemes.
It was expected that before an application for membership of a scheme was accepted, the issuer would have taken reasonable steps to satisfy itself the applicant was aware of the nature and extent of the obligations they were incurring and had made the decision freely and on a properly informed basis, the FMA said.
The authority said it was concerned that SuperLife intended to continue distributing the SuperLife KiwiSaver scheme without ensuring its representatives were authorised financial advisers or QFE advisers as required by the Financial Advisers Act.
The FMA said it understood SuperLife was doing that on the basis that its employees were providing an "information only" service.
Hughes said the provision of information may amount to financial advice depending on the context.
"The potential investor’s expectation of the service, and the context in which those services are provided, need to be carefully considered," he said.
"A person gives 'financial advice' if he or she makes a recommendation or gives an opinion in relation to acquiring or disposing of a financial product.
"This definition is very broad. While the Financial Advisers Act does contain some exemptions and exceptions, these are limited in their application and will be carefully interpreted with Parliament's intention in mind," Hughes said.
"We believe it is unlikely that a person presenting the merits of a particular KiwiSaver scheme to a person, in a workplace context or otherwise, will not give financial advice in the course of his or her discussions with a prospective member."
SuperLife was not immediately available to comment on the FMA warning.
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