Whether a corporate or an individual, it is often the case that IT purchases will be financed by a credit arrangement.
However, the financial landscape is about to change and those who provide financial services in ICT and beyond need to be aware of what is involved.
The Financial Service Providers (Registration and Dispute Resolution) Act 2008 and the Financial Advisers Act 2008 were passed just before the 2008 election. Both laws make significant changes to the finance industry.
The first requires all financial service providers (FSPs), including all finance companies, money transfer operators and all advisers, to be registered with the Ministry of Economic Development (MED), and become accountable through compulsory membership of a dispute resolution scheme.
The second Act requires all financial advisers to meet new standards of qualification to advise and to be accountable to a Code of Conduct enforced by the Securities Commission. Effectively, what was until now an unregulated industry will be subject to external controls.
It is not clear which financial providers in the IT industry will be affected. The MED says that, in general, if an organisation is providing credit under a credit contract, then they are offering a financial service and the registration requirement will apply, meaning they have to join a dispute resolution service.
“It is not possible to provide detailed comment, as individual businesses should seek legal advice to determine the extent to which their activities are caught by these Acts,” the MED says in a response to questions from Computerworld.
With respect to the FSP Act, the Ministry of Consumer Affairs has not approved any scheme for independent dispute resolution and no date has been set for the opening of the register. The Ministry of Economic Development anticipates that happening in the middle of the year. It also says it is close to finalising approval of dispute resolution providers. No one can apply to register as an FSP unless they are a member of a scheme. The Government has not set up its default scheme. The MED is unable to confirm a firm date for that.
With respect to the Advisers Act, the standards of qualification have not been set. A Code of Professional Conduct has just been released for national consultation. The MED says a final version is expected in June or July.
If these providers do not register this year, by December 1 they will be breaking the law by trading.
For some, the question is which law applies. The Advisers Act has added obligations, but no company in the industry can escape the Financial Service Providers Act.
The government estimates there are 11,262 persons and bodies who must register, though some within industry believe this is somewhat conservative. Can they all be members of an approved scheme, apply and be cleared through the criminal record process and be on the register by November 30 this year? If they cannot, the law is clear: as of December 1, 2010 they are out of business.
The MED advises that the Securities Commission is working on a public education campaign.