‘Once in a generation’ chance to modernise securities law

Thursday 17th March 2011 4 Comments

Commerce Minister Simon Power has announced Cabinet's decisions on the comprehensive review of securities law.

"This is a once-in-a-generation opportunity to modernise our securities law and I'm determined to get it right," Power said.

He said ongoing input from both investors and the industry would be vital to ensure the changes made would last for the next 30 years.

"The new legislation will be better for mum and dad investors as well as for companies looking to raise capital. It will provide clearer, more consistent information for investors, and clarify for issuers the obligations they have to meet."

Together with the establishment of the Financial Markets Authority (FMA), the new securities law regime will largely complete the major regulatory reform programme in the financial sector.

The reform includes the financial adviser regime, auditor regulation, the licensing of trustees and statutory supervisors, the prudential regulation of the non-bank deposit regime, finance company moratorium requirements and the requirement for financial service providers to belong to a disputes resolution scheme.

Key policy decisions by Cabinet include moving to a more principles-based regulation of financial products, replacing the requirement for issuers to prepare a prospectus and investment statement with a requirement to prepare a single product disclosure statement tailored to retail investors, and creating a single collective investment regime in which schemes will have to comply with a common set of substantive requirements.

Other policy decisions outlined included making the most serious breaches of directors’ duties a criminal liability, giving the FMA power to issue 'no action' letters and a role promoting financial literacy.

Officials are to engage with the industry during the drafting process and the exposure draft of the new legislation is expected to be released later this year.

Comments from our readers

On 17 March 2011 at 4:30 pm Neil said:

Whenever government attempts to reform the system whatever good motive expect things to fall to pieces later. What concerns me is the on going financial illiteracy of investors.Read newspapers etc there are few educational means of educating investors. In 40 years of investment I Haven't seen such a dirth of interest in the markets. Financial advisers in many cases are the problem, putting out their own skewed advice. As well, the NZ sharemarket is just a shadow of its former self.

On 17 March 2011 at 5:04 pm BTW said:

Hopefully the first step will be cleaning up the "reforms" he's presided over the last few years.

On 17 March 2011 at 11:57 pm Simon said:

Neil, well said. The fourth estate in NZ show very little interest in finance. There is, apart from a couple of salient exceptions, no analysis worthy of the name. That was why ANZ and ING could get away with murder in the frozen funds scandal. The typical NZ reporting manner of question-and-answer with little in the way of follow-up questioning merely leaves the press as a stenographer for, in this case, the banks. Even some on-line specialist financial web sites are guilty, I suspect because they are too close to business. ANZ/ING would not have got away with what they did in Australia, where the metropolitan commercial press is more analytic, more probing, altogether less gullible. Neil, would you mind contacting me at anzhustersing@aol.com?

On 18 March 2011 at 10:08 am Peter said:

The regulators should be looking at the crime of "using a document for pecuniary advantage" in relation to unsolicited offers by letter to buy shares at less than market value and failing to disclose their true value. Such an omission is deceiving when advantaging themselves to the disadvantage of the holder and therby commit a fraudulent act