Removing conflict will provide peace of mind

The Financial Professional Services Trading Advice Transparency Bill, which was drawn from the ballot last week, will remove an inherent conflict of interest that exists for those providing advice on the trading viability of troubled companies, National’s Barbara Kuriger says.

“Businesspeople, creditors and investors need to be assured any perception that an element of self-interest might exist for those providing professional advice about the viability or future of businesses, such as accounting firms, is removed.

“When market conditions are difficult, and a business is under pressure, all parties with money at stake will be concerned to ensure their positions are protected.

“Often professional financial advisors, such as accounting firms, are called in by creditors like banks, trustees or business owners seeking advice on whether the company can manage its way through choppy waters.

“Sometimes it is the view of these advisors that the best course of action is to wind the company up, a process which can take a number of years – and be a significant source of fees for the appointed receiver – as financial positions are unwound and the business’s assets are sold.

“The Financial Professional Services Trading Advice Transparency Bill, which amends the Companies Act and the Receiverships Act, makes it clear to individuals and financial services firms that they can give the advice that sees a company wound up, but they can’t then earn fees over the ensuing months or years winding it up.

“While conflicts of interest and threats to objectivity are covered under codes of ethics for the financial services sector, this sort of self-regulation is inadequate, and absolute removal of doubt to give everyone confidence in the process is required by a beefing up of the law.

“What we’re talking about here is the often fraught process of assisted business death.

“Everyone involved, but especially business owners and directors, need to know all options for a company’s future will be professionally and dispassionately explored.

“I’m saying to professional financial advisory firms, you can give the lethal injection or be the undertaker, but you can’t do both.”