The bill establishing the ‘super-regulator' Financial Markets Authority (FMA) risks doing more harm than good if it is rushed through in its current form.The commerce select committee, chaired by Labour MP Lianne Dalziel, met yesterday to hear oral
The bill establishing the ‘super-regulator’ Financial Markets Authority (FMA) risks doing more harm than good if it is rushed through in its current form.
The commerce select committee, chaired by Labour MP Lianne Dalziel, met yesterday to hear oral submissions on the Financial Markets (Regulators and Kiwisaver) Bill, due to be passed into law early next year.
Submitters yesterday included the NZX, Cameron Partners, Business Roundtable, NZ Bankers’ Association, NZICA and several leading law firms.
Repeat calls were made for the bill to be stripped back to only what is necessary to pass the FMA, to avoid pre-empting next year's major securities law review.
Rob Cameron, chair of the Capital Markets Development Taskforce, backed up NZX’s view that the bill would undermine its ability to compete with foreign exchanges - particularly the ASX - offering services in NZ.
Of particular concern are the FMA’s proposed powers to demand data and relevant documentation and its ability to set market integrity rules.
“I haven’t seen the argument from the other side, from the FMA, that would justify what look to me to be draconian powers... there needs to be a balance struck here and we’re not there yet.”
Mr Cameron said that the chance to properly design NZ's capital markets is a "once in 50 years" opportunity. "I just encourage everyone to take their time".
Securities Commission 'could have done more'
Bell Gully chairman Roger Patridge, on behalf of the NZ Business Roundtable, queried the FMA’s proposed ability to take civil action on behalf of investors.
He accepted that the power itself is not a problem - “the Commerce Commission currently has that for breaches of the Fair Trading Act” – but wants to ensure that investors’ consent is a required part of the process.
Speaking more broadly, Mr Patridge said that the “perceived regulatory failure” in relation to finance companies does not mean more laws are needed – rather than existing laws were not adequately enforced by regulators.
He noted that the Securities Commission is already able to suspend or cancel prospectuses, prohibit advertisements in relation to securities, summon evidence, and bring criminal charges for non-compliance.
In early 2005, he said, the Commission reviewed finance companies’ disclosure and reported concerns with related party transactions and non-disclosure in investment statements.
While the Commission has a difficult job, it appears to have “nodded off” in pursuing these concerns further and taking enforcement action.
“The regulators have had all the powers they’ve needed to address the concerns in relation to finance company prospectuses, certainly for the last decade."
Speaking to Radio NZ today, Mr Patridge clarified that he was not referring to a failure of leadership within the Commission – simply that it “didn’t dig deep enough” during a period when companies were borrowing billions of dollars.
The Commission has argued it had insufficient resources and powers to act.
'Strong case' for bill redraft
Mr Patridge continued to support the establishment of the FMA as sector ‘super-regulator’ from 1 April 2011 – a view shared by the majority of submitters.
The Financial Markets (Regulators and Kiwisaver) Bill is unlikely to be sent back for a full re-write and further consultation before this deadline.
But commerce select committee chair Lianne Dalziel yesterday acknowledged the strong case for “carving off” parts of the bill to be considered later as part of the Securities Act review.
“I think that’s been a pretty consistent set of submissions before the select committee”, she told submitters.
The committee is due to report back to government on the bill by March next year.
