Securities Commission supports move to international accounting standards

By NZPA

Tuesday 15th October 2002

Adopting international accounting standards is one way the integrity of New Zealand's markets could be helped, Securities Commission chairwoman Jane Diplock said today.

Mounting international evidence showed solid laws and good enforcement provided positive results for capital market development and the ability of issuers within a market to attract outside capital, she said in speech notes prepared for an accountancy conference in Wellington.

"This trend in research is particularly significant given the unprecedented change and upheaval faced by world securities markets at present."

"In particular, there is an international focus on financial reporting and corporate governance and the need for internationally recognised standards."

While New Zealand had not had an Enron or an HIH debacle, neither had it escaped the nervousness that has enveloped the world's markets in the wake of the scandals that have hit major corporates overseas.

The Securities Commission was addressing some of the issues on corporate disclosure and market behaviour through the Securities Markets and Institutions Bill due to come back to Parliament in the near future.

The speech, written by Ms Diplock but to be delivered on her behalf, said New Zealand's challenge was to align its financial reporting standards for offers of securities with the standards for periodic financial reporting.

The commission's review of the Securities Regulations would increase the degree to which issuers could use general purpose financial statements prepared in accordance with New Zealand Financial Reporting Standards in securities offer documents.

She noted the Financial Reporting Council of Australia recently announced support for adopting international accounting standards by 2005 and the Australian government had announced its support for this.

The European Union has also decided to adopt international accounting standards across the EU from 2005.

Ms Diplock said harmonisation or convergence with international accounting standards was vitally important to the world's capital markets.

The goal was to be able to compare the financial reports of issuers in different countries. This would make these financial reports more useful for investors as international investment opportunities increase, she said.

"How this goal is best achieved is an ongoing debate in which the commission will be taking a strong interest," she said.

The Securities Markets and Institutions Bill would strengthen continuous disclosure requirements for companies and directors' disclosure obligations.

It will also strengthen insider trading laws and penalties and extend the regulatory requirements that apply to the Stock Exchange to any registered securities exchange.

Directors will have to disclose any share trading within five working days.

The Commerce Minister will be able to refuse to approve the conduct rules of any new exchanges if they have not made adequate provision for continuous disclosure of material information.

The continuous disclosure criteria includes:

* providing an adequate level of protection for investors;

* seeking to maintain the integrity and international competitiveness of the New Zealand listed markets;

* avoiding unfair advantages that can result from inappropriate selective disclosure of information.

The commission will have extended powers to enforce continuous disclosure and penalise companies deemed not to have complied.

The commission and the NZSE are working on a memorandum of understanding setting out how they will co-operate to regulate the market under the new law and regulations.

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