FMA plans to beef up transparency on stock exchange
By Paul McBeth
Feb. 28 (BusinessDesk) - The Financial Markets Authority says improving levels of transparency on New Zealand's stock exchange is one of four major areas it will keep tabs on this year as the government's partial privatisation programme steps up a gear.
New Zealand's securities watchdog was unimpressed by "poor administrative practices by substantial shareholders, directors and officers, resulting in delays in notifying the market of trading" and has concerns about "a lack of focus on obligations to investors by some issuers and their directors," it said in its compliance focus for this year.
"Areas of particular concern are the inadequate handling and disclosure of conflicts of interest and disclosure of business changes," it said.
The note comes after the Supreme Court gave the green light for the government to embark on its sell-down of MightyRiverPower in the first of the Crown's planned mixed ownership model. The proposal to partially sell several state-owned assets is being touted as the government's way to revive a flagging capital market and attract retail investors still burning from the 1987 stock market crash.
The government also expects increased disclosure requirements to sharpen up the performances of the partially-privatised companies, an issue which is gaining more attention after state-owned coal miner Solid Energy's rapid decline towards insolvency.
The FMA plans to focus its compliance monitoring efforts on building customer trust, raising standards in existing regimes, embedding new regimes, and KiwiSaver. It will also keep a wary eye on the Canterbury rebuild and how capital is raised and insurance funds are invested.
“Signalling our focus for 2013 makes sense. It provides an opportunity for participants to assess their activities and take the necessary steps to improve compliance in these areas,” chief executive Sean Hughes said in a statement.
“Priorities will evolve as we monitor financial markets and evaluate emerging risks, but we’re anticipating that these themes will remain beyond 2013,” he said.
The note comes in a year when the country's decades-old securities law is set to be replaced with the Financial Markets Conduct Bill slowly weaning its way through Parliament. The rewrite of legislation aims to improve the level of company disclosure and revive investor confidence after the collapse of the finance companies through the latter half of the 2000s.
The watchdog wants particular care to be paid to retirees, who may be seeking higher yielding investments, but are less able to recover from losing their capital.
"FMA expects participants to take into account the vulnerability of these customers when advising on, or delivering financial products," it said.
The watchdog gave a serve to futures dealers, saying initial visits to authorised dealers found some firms have "poor compliance controls in place for meeting capital requirements and safeguarding client money and assets, and also indicated a lack of robustness in the work undertaken by external reviewers."
Dairy futures are already traded on the NZX, and equity derivatives have been slated for trading in May this year.
The regulator will also monitor property related investments, which "may be higher risk than they seem."
The FMA's predecessor organisation, the Securities Commission, was criticised for not taking action against property investment group Blue Chip claiming it wasn't covered by the Securities Act.
The Supreme Court has since ruled that is was covered by the legislation, and the FMA is still considering whether to pursue Blue Chip.