Law Reform: Reporting unlawful activity to the FMA
The Financial Services Legislation Amendment Bill introduced earlier this month, which among other things replaces the Financial Advisers Act, provides protections for a financial adviser or nominated representative (the Informant) who reports breaches of the legislation to the FMA. The Bill provides immunity to an Informant as a result of making the report against:
(a) civil, criminal or disciplinary action, or
(b) the termination of their appointment or employment.
However, the Informant’s identity is not protected in the Bill in the same way that it is protected if the disclosure was made under the Protected Disclosures Act, or the Financial Advisers Act.
During my time at FMA there were several occasions where an employee or ex-employee made disclosures to the FMA of acts that amounted to infringements of the law that the FMA regulates. In all cases the FMA did protect the identity of those Informants, however in one of those cases, it was obvious to the employer who the Informant was because of the nature of the information the FMA had obtained. This will probably be the case when the employer runs a small practice and the number of people that know about the infringing behavior is limited. Further the FMA will almost invariably withhold the release of information disclosing informants’ identities under the Official Information Act.
But, my question is why the Bill excludes the requirement that an Informant’s identity be kept secret, when that provision was included in the Financial Advisers Act. I couldn’t find anything in the Ministry’s consultation paper, or the paper introducing the Bill on the reason for this change. Surely if the FMA and the Ministry would like to encourage this source of information, a statutory obligation to protect the Informant's identity will be reassuring to those contemplating coming forward.
More about the Bill - If you would like me to provide a complimentary one-hour CPD training session to your advisers on the duties on persons giving regulated financial advice set out in the new Bill contact me by email at merran@finanicialbarrister.com.
Dated: 25 August 2017