Financial Services Legislation Amendment Bill

One issue I would like to raise here—one matter, one question, one observation—is simply that of “What is a financial service?” and, really, the point I have is the—

💬 Hon Gerry Brownlee: Thirty years, a doctor of law, and he asks a question like that! Unbelievable!

Oh, Mr Brownlee, you should be so lucky. The question is relating to cryptocurrencies, and we’ve seen in Christchurch recently the failure of a cryptocurrency firm, and this is a grey area, and it’s one where the regulatory framework is not entirely clear. It’s with some satisfaction that I look at the relatively broad definition of financial services and it appears to me that clause 61, which amends the meaning of financial services, relates to the operators of financial product markets, and I’m heartened that it would appear that bitcoins and cryptocurrencies and all of these strange and somewhat shady products would seem to be captured by that. It’s a matter where it would appear that operators who might be on the fringes of the law—and, in fact, the difficulty I have with some of those cryptocurrencies is that they seem to see very little purpose other than transacting business outside of the eyes of the law. It seems to me that this bill would draw them at least within the purview of the regulation of financial services providers.

My concern is that there are some innocent people who foolishly think that cryptocurrencies are some kind of investment option rather than some quasi-currency which is used by disreputable people to engage in transactions on the dark web and other places, which is because of the blockchain framework where they’re entirely untraceable. In respect of the recent failure in Christchurch, what it has shown is that it’s extremely hard to trace funds or assets—whatever you might call them—in respect of cryptocurrencies.

So look, really all I wanted to observe was that, at least in this reform of the law, cryptocurrencies seem to be drawn into the regulation, and I look forward to seeing further work on this in this regard, so that in fact these very unusual, largely unregulated financial instruments, or whatever we want to call them—which are really simply no more than codes, no more than a series of encrypted codes—are being used as a means of exchange in an extremely volatile market which has no foundation and, in fact, very little foundation in law and certainly no foundation in respect of real assets. This is being drawn into the law here and I hope soon elsewhere as well. Thank you.

Thank you, Madam Chair. I just want to thank you for the opportunity to make a contribution during the committee stage of the Financial Services Legislation Amendment Bill. Really, I think, at the heart of this bill is fairness, because it comes down to the regulation of financial services and service providers as well, and the ability, really, to lift the financial capability of all New Zealanders so that everyone can live their best lives.

It ensures that people are put at the heart of everything that happens and the financial services and products that are offered to them, and that good quality financial services and advice can be provided. Also, I wanted to mention the consistency that is needed. We’ve talked a lot about the consistency and stability that the business sector requires to be able to conduct their business in the past, but that same consistency and stability is needed in the way that advisers are held to account as well, and it’s essential to build trust in the sector.

One of the questions that I wanted to ask the Minister in the Chair, Kris Faafoi, at this point is that we’ve heard quite a bit about the fact that consumers have had a voice in the developing of this bill, in ensuring the code of conduct is developed well, as well. But I wanted to talk about the fact that there is a need that the different communities that we have here in Aotearoa—we’ve got over 200 ethnic communities alone. We’ve got the Pasifika communities as well. I want to make sure that there has been a fair bit of input from these different communities, both as the code of conduct was developed but going broader as well in the other parts of the bill, to ensure that different consumers have had their voices heard, that different players within the financial services market have had their needs considered as well—

CHAIRPERSON (Poto Williams): Are you sure this isn’t a Part 1 debate?

No, it’s getting to the bones of Part 2, Madam Chair—

CHAIRPERSON (Poto Williams): Thank you. We’ve traversed Part 1 quite well, thank you.

Yeah, so I would be keen to—but, actually, if we do look at Part 2, which, of course, we are considering at this point, the registration of providers. The previous point that I made also holds true when it comes to the registration of providers, and that’s a huge part of the amendments in the second part of the bill, which looks at how they’re registered and deregistered as well and some of the exceptions that are made with regard to both.

So clause 74, for example, talks about, in quite a bit of depth and detail, the deregistration of financial service providers—

💬 Hon Gerry Brownlee: Bust a newcomer.

💬 Brett Hudson: Yeah, sorry Kris.

CHAIRPERSON (Poto Williams): Order! Order! Even if you’re interjecting, you should use the member’s correct title. Carry on, Priyanca Radhakrishnan.

Thank you, Madam Chair. Just going back to clause 74, which lays out in a fair bit of depth the deregistration of financial service providers and, actually, if you look at subclause (1), and I’m just going to read this bit because it’s quite technical, “at any time after the expiry of 3 months after registration, is not in the business of providing a financial service or is otherwise no longer required to be registered under section 11”, that’s reasonably straightforward. In subclause (2) it says “has made a representation to the Registrar or the FMA that is false or misleading in any material particular in connection with obtaining or maintaining its registration”, and I’d be quite keen to get to know, I guess, how that information is communicated so that financial services providers are clear and make sure that they aren’t misleading as well and that they comply.

Compliance is a part of the second part as well. But it’s really important that we communicate that message out really well to different groups, so that everyone’s included as part of this as well. The suspension of registration, the registration of various types of financial advisers, and sharing information with various other bodies—so this is ensuring that people are aware of what’s going on is part of Part 2 as well. Who are retail clients? If you look at clause 86, it deals with who retail clients are and, of course, we know, as I mentioned previously, that clients span a number of groups. So a huge amount of detail in this part, Madam Chair and it’s been wonderful to be able to contribute to the discussion on this. Thank you.

The question was put that the amendments set out on Supplementary Order Paper 195 in the name of the Hon Kris Faafoi to Part 2 be agreed to.

Amendments agreed to.

The question was put that Part 2 as amended be agreed to.

Part 2 as amended agreed to.

Part 3 Repeals and amendments to other Acts

The question was put that the amendment set out on Supplementary Order Paper 195 in the name of the Hon Kris Faafoi to Part 3 be agreed to.

Amendment agreed to.

Part 3 as amended agreed to.

The question was put that the amendment set out on Supplementary Order Paper 195 in the name of the Hon Kris Faafoi to Schedule 1 be agreed to.

Amendment agreed to.

Schedule 1 as amended agreed to.

The question was put that the amendment set out on Supplementary Order Paper 195 in the name of the Hon Kris Faafoi to Schedule 2 be agreed to.

Schedule 2 as amended agreed to.

The question was put that the amendment set out on Supplementary Order Paper 195 in the name of the Hon Kris Faafoi to Schedule 3 be agreed to.

Amendment agreed to.

Schedule 3 as amended agreed to.

The question was put that the amendment set out on Supplementary Order Paper 195 in the name of the Hon Kris Faafoi to Schedule 4 be agreed to.

Amendment agreed to.

Schedule 4 as amended agreed to.

Clause 1 agreed to.

Clause 2

The question was put that the amendments set out on Supplementary Order Paper 195 in the name of the Hon Kris Faafoi to clause 2 be agreed to.

Amendment agreed to.

Clause 2 as amended agreed to.

Bill to be reported with amendment presently.