The proposed new market regulator will be able to enforce the duties of people involved in financial markets when it's in the public interest, a significant new power under a bill introduced to Parliament today.The board setting up the Financial Markets A
The proposed new market regulator will be able to enforce the duties of people involved in financial markets when it's in the public interest, a significant new power under a bill introduced to Parliament today.
The board setting up the Financial Markets Authority (FMA) requested the new power because it believed there was a gap in the authority's ability to effectively enforce and supervise New Zealand's financial markets, Commerce Minister Simon Power said.
The Securities Commission lacks the ability to publicly enforce the duties of issuers, directors, auditors, trustees and others involved in financial markets.
"It has become apparent that there have been situations in which misconduct has occurred, but individual investors do not bring civil cases because of the costs and risks involved or because they have limited legal standing," Mr Power said.
The FMA will be able to exercise a person's right to bring a civil action against a financial markets participant.
The authority would also have more powers to demand that warnings about financial products and providers be included in offer documents and published by those involved.
The new regulator will consolidate the regulatory functions currently split across the Securities Commission, the Ministry of Economic Development, and the NZX. It is expected to be operational by early next year, and will be an independent Crown entity.
There was a need for a single market regulator providing visible, proactive and timely enforcement, Mr Power said.
"On too many occasions in finance company collapses we heard of investors' money falling to the floor through gaps between regulators.
"This has undoubtedly damaged mum and dad investor confidence, and the FMA has a critical role in rebuilding that confidence."
Also included in today's Financial Markets (Regulators and KiwiSaver) bill were provisions to improve the governance and management of retail KiwiSaver schemes, increasing the responsibilities of both fund managers and trustees.
KiwiSaver fund managers will become primarily responsible for the accuracy of their prospectus, investment statement and advertisements. KiwiSaver trustees are currently the technical issuers of the scheme, while fund managers have few direct responsibilities to investors and are less liable for misleading statements than trustees.
Trustees will also be responsible for supervising managers and ensuring they comply with trust deeds and other responsibilities. They will have to be licensed by the FMA, and will be brought under the proposed Securities Trustees and Statutory Supervisors Bill currently before Parliament.
Around 1.5 million members in the three-year-old KiwiSaver scheme have invested more than $6 billion. The funds are not government-guaranteed, but investors were entitled to information that enabled them to compare schemes easily and make informed choices, Mr Power said.
He also introduced a bill today requiring the Institute of Chartered Accountants to regulate auditors as a specialist profession, rather than as chartered accountants.
The FMA will also be responsible for independent oversight of the institute's regulatory systems. As audit failure had played a part in finance company collapses, self-regulation alone was not working, he said.
