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Investors benefit from new market regulations

Hon Simon Power
Minister of Commerce
19 May 2011

Investors benefit from new market regulations

The Government’s new regulatory framework for financial markets contributes to Budget 2011’s focus on savings and investment.

“Over the past two-and-a-half years, my priority in the Commerce portfolio has been to put in place a regulatory framework that attracts investors back to our capital markets,” Commerce Minister Simon Power says.

“The Government has committed extra resources to ensure investors have access to the information they need to make informed decisions about their investments.

“This includes extra funding of $6.8 million to cover the first period of the Financial Markets Authority’s operating and litigation costs, and new capital investment of $5 million in 2011/12, to cover the cost of office facilities for increased staff numbers and new IT infrastructure and applications.

“New Zealand’s capital markets are the key to improving the financial wellbeing of all New Zealanders by providing a vital source of finance to help our businesses grow.

“Since November 2008, the Government has made significant improvements to the financial landscape to help restore mum and dad investors’ confidence in our markets, as well as making our markets work better for those seeking to raise capital.”

Reform of the financial sector has included:

• Requirements for all financial service providers, including financial advisers, to be registered and belong to a dispute resolution scheme.

• Implementation of the financial adviser regime to encourage public confidence in the industry. This comes fully into force on 1 July.

• Prudential regulation of non-bank deposit takers.

• Licensing of auditors by a professional accounting body.

• A licensing regime for trustees to strengthen the quality of the supervision provided by trustees.

• Changes to securities legislation and regulations, in response to recommendations from the Capital Market Development Taskforce, aimed at making it easier for businesses to raise capital, while ensuring timely and accurate disclosure of information to prospective investors.

• Requiring debt issuers, including finance companies dealing with moratoria, to give investors tailored disclosure documents.

• Improving the governance of KiwiSaver schemes by requiring that KiwiSaver schemes have a designated manager, and providing a regulation-making power for the Government to impose periodic reporting requirements on KiwiSaver issuers.

“These changes have all been important, but the most important has been the establishment of the new one-stop-shop Financial Markets Authority (FMA).”

The FMA is equipped with extra functions, duties, and powers to keep New Zealand’s financial markets working for mum and dad investors, including:

• The power to exercise another person’s right of action against a financial market participant.

• Tools for actively monitoring and enforcing securities law.

• Enhanced warning powers, and a regulation-making power to better regulate unsolicited ‘low-ball’ offers.

• A new oversight regime for registered exchanges, including the ability to undertake real-time surveillance of market activity.

• Enabling regulations to help ensure that financial instruments cannot be structured to avoid securities legislation.

“We’re also working on a once-in-a-generation opportunity to modernise our securities law and I will release an exposure draft of the new legislation later this year,” Mr Power says.


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