Submissions sought on draft Securities law bill

A draft version of the bill stemming from the government's securities law review has been released and the government is seeking submissions.

“I’m releasing this bill in draft form to ensure that decisions from this once-in-a-generation opportunity to re-write our securities law are enduring for years to come,” Commerce Minister Simon Power said.

“The new legislation will play a crucial role in restoring confidence in our financial markets by providing better protections for mum and dad investors, and clearer rules for companies looking to raise capital. 

“The draft bill takes into account the work of the Capital Market Development Taskforce, the effects of the global financial crisis, and the failure of finance companies, and aims to be a one-stop shop for securities law," Mr Power said.

The Financial Markets (Conduct) Bill reflects Cabinet decisions announced in March and June of this year, which include:

Replacing the requirement for issuers to prepare a prospectus and investment statement with a requirement to prepare a single product disclosure statement tailored to retail investors.

Licensing regimes for specific financial sector participants: fund managers, independent trustees of workplace superannuation schemes, derivatives dealers, and peer-to-peer lenders.

A modified liability framework for breaches of securities law, with reckless and intentional breaches resulting in criminal liability and penalties of up to 10 years’ imprisonment, and fines of up to $1 million for individuals and $5 million for companies.

Civil pecuniary penalties of up to $1 million for individuals and $5 million for companies if they make misleading statements in a product disclosure statement and advertisements. This would include celebrities if they are a party to the contravention. Celebrities will not, however, face any liability if a product fails and they have not made a misleading statement about it.

Increasing the maximum period for prohibition by the FMA or Registrar of Companies of a person from managing a company from five years to 10 years, and allowing the High Court to impose orders for an indefinite period.A new system to regulate securities exchanges.

Other reforms included in the bill cover: defining types of financial products, disclosure requirements, exemptions from the regime, managed investment schemes, and providing the Financial Markets Authority with additional powers

The development of a new securities law regime largely completes the major regulatory reform programme in the financial sector.

That programme has included the establishment of the Financial Markets Authority, the financial adviser regime, auditor regulation, the licensing of trustees and statutory supervisors, and the prudential regulation of non-bank deposit takers.

Copies of the draft bill can be downloaded here. Submissions are due by 6 September.

Mr Power intends to introduce the bill to Parliament before the election.