UPDATE: NZ Shareholders' Assn elevates capital market concerns to PM
(Adds FMA comment in 7th and 8th paragraphs, removes ambiguity in 3rd paragraph)
By Paul McBeth
Sept. 19 (BusinessDesk) - The New Zealand Shareholders' Association has elevated its concerns about dwindling confidence in capital markets to the very top - the prime minister.
The retail investor lobby group has already met with Finance Minister Grant Robertson and Commerce Minister Kris Faafoi to convey its worries about declining market confidence. Now it has raised the stakes by writing to Prime Minister Jacinda Ardern.
NZSA chair John Hawkins said the Reserve Bank and Financial Markets Authority's investigation into failed insurer CBL Corp had exacerbated the association's pessimism because it appeared the two organisations couldn't agree on how to pursue the probe. A major issue was over what to disclose to the market, he said.
"For investors to entrust their savings to New Zealand’s capital markets, whether directly or in managed funds (including KiwiSaver), they must have confidence in the systems that protect them," Hawkins wrote. "NZSA is apolitical and in our view, a notable part of the problem is public perception that the market regulators are ineffective, and so investment in these productive areas is too risky."
Hawkins urged the prime minister to take whatever action is required to ensure the regulators cooperate to sort out problems quickly.
The FMA said enforcing laws for financial markets was complex and every investigation different. That determines the length of time a case can take.
"We understand that can be frustrating. We have taken steps where possible to accelerate decision-making and provide additional resources," a spokesman said in an email. "Throughout all this, we are conscious of the evidential standards required by the law."
It also pointed out CBL was subject to multiple investigations.
Hawkins' letter reiterates a number of issues he raised in his speech to the NZSA annual meeting last month. At the time, he said a lack of oversight of the FMA let it drag its heels over some investigations.
The authority FMA rejected those claims at the time, saying it focuses its efforts where it sees greatest risks to investors and market integrity. In the CBL case, the FMA said it was aware at a high level of the RBNZ's concerns over the insurer's prudential requirements, but didn't have information at hand until early February to seek a suspension of trading.
The fact that a listed company is engaging with a regulator isn't necessarily material information or an indication of wrongdoing, it said.
"There are also considerations around the information that can be made public during an investigation, including the necessity for confidentiality to preserve the integrity of an investigation," the FMA said at the time. "Confidentiality also preserves the rights of firms and individuals under investigation."