Earlier this week, lawyers acting for investors affected by the collapse of Dunedin financial adviser Barry Kloogh's companies said that they feared law changes which come into effect in June 2020 would prove ineffective.
Mr Kloogh was sole director of Financial Planning Ltd and Impact Enterprises Ltd, which were placed into liquidation in August.
At least 170 people are owned an estimated $12million to $14million.
The legal group, which is acting pro bono for many of the affected parties, said greater scrutiny of authorised financial advisers such as Mr Kloogh was needed, to identify firms which might be in financial trouble, placing innocent parties' funds at risk.
Earlier this year, Mr Faafoi steered law changes through Parliament which were, in part, inspired by the Ross Asset Management case, in which a Ponzi scheme arrangement cost more than 700 clients $115.5million.
The first liquidator's report into Mr Kloogh's firms said they were used as a Ponzi scheme controlled by Mr Kloogh.
The Serious Fraud Office is investigating Mr Kloogh; no charges have been laid.
Mr Faafoi said he could not comment on the demise of Mr Kloogh's firms.
"I would point out that reforms were made after the Ross Asset Management case which introduced an obligation for advisers to hold client money or property in trust, and the reforms apply auditing requirements on those holdings."
The Financial Services Legislation Amendment Act was drafted following an extensive review of the laws governing financial advisers, brokers and custodians, Mr Faafoi said.
"During this review no significant issues were identified with the rules relating to brokers or custodians, and the protections put in place after the Ross Asset Management case have been carried over into the new regime."
The new regime would require AFAs to be licensed by the Financial Markets Authority, and make them them liable for much harsher penalties if they were found to have mishandled client money.
"Providers will be subject to more direct monitoring and supervision by the FMA, and the FMA will have a greater range of enforcement tools at its disposal," Mr Faafoi said.
