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Super-regulator for financial markets will start next year

UPDATED: A new super-regulator will be policing New Zealand's financial markets by as soon as the New Year. The Government has announced the creation of the Financial Markets Authority (FMA) -- bringing together the regulatory powers of the Securities Com

Georgina Bond
Wed, 28 Apr 2010

UPDATED: A new super-regulator will be policing New Zealand’s financial markets by as soon as the New Year.

The Government has announced the creation of the Financial Markets Authority (FMA) -- bringing together the regulatory powers of the Securities Commission, the Ministry of Economic Development, including the Government Actuary and the NZX.

Commerce Minister Simon Power said legislation to set up the FMA will be fast-tracked and passed this year to see the FMA up and running in early 2011.

After much speculation, establishment of the FMA was announced at the Institute of Financial Professionals New Zealand annual awards in Auckland.

Its role will be to enforce securities, financial reporting and
company law as they apply to financial services and securities markets.

It will also regulate and oversee trustees, auditors, financial advisers and financial service providers, including people who offer investments.

The super-regulator is the centre piece in a raft of regulations intended to restore investor confidence in financial markets, damaged in the wake of finance company collapses.

The new regulator would given mum and dad investors confidence their investments were well supervised and the inclusion of auditor oversight meant the entire financial market sector would be overseen by one regulator, Mr Power told Radio New Zealand.

"At the time a number of investors lost money during finance company collapses, effectively as their money hit the floor different regulators from different parts of the economic regulation spectrum stood and stared at each other without any direct responsibility being able to be sheeted home."

The FMA needed to be run by someone with integrity who was prepared to use the new mandate for surveillance and enforcement, Mr Power said.

"It needs to be somebody that when they make a statement the markets take them seriously, they listen to them."

The Minister also used his speech to Infinz to announce changes to improve the government and management of KiwiSaver schemes and an extension to the timeframe for financial advisers to comply with new regulation under the incoming Financial Advisers Act.

Mr Power said the financial services industry faced big challenges and change was urgent across the sector.

“If we can’t deal with these challenges in an effective and timely way, the only place people will feel comfortable putting their money will be under a mattress.

“Over the past year, it has become increasingly clear to me that one of the missing pieces in the regulatory landscape is a single regulator focussed on proactively monitoring and enforcing securities law,” he said.

“On too many occasions in finance company collapses we heard of investors’ money falling to the floor through the cracks between regulators.”

Coordination between regulators and the differences in functions and powers between them had not always been as effective as it could be, he said.

Arrival of the FMA will spell the end of the Securities Commission as it’s currently known, with the larger regulator set to assume its responsibilities immediately.

Securities Commission chair Jane Diplock welcomed the proposed FMA, but confirmed she will not be at its helm. She plans to step down as chair at the end of her term, which coincides with introduction of the FMA early next year.

In the meantime she told NBR she was happy to help with the transition, which will trigger a restructure for the Securities Commission, with some positions expected to change.

“I’m very comfortable to do the work required to get the FMA up and running but I’ll happily hand over to the new chair,” she said.

Ms Diplock will have been at the Securities Commission for almost 10 years when her term ends.

While she was not yet sure what she would do next, she said she still had a lot of "energy and interest" in markets in New Zealand.

The FMA will have a new board and a chief executive will be appointed.

All regulatory functions of the Government Actuary will be transferred to the FMA.

The FMA will be the financial markets regulator while the Reserve Bank remains the prudential regulator.

NZX will continue to enforce its own rules but the functions of the New Zealand Markets Disciplinary Tribunal will be transferred to a new statutory ruling panel serviced by the FMA.

The FMA will have the power to require NZX to provide it with information to conduct market surveillance, including real-time trading information. The new regulator will also conduct an annual oversight review of NZX, based on a report prepared by NZX.

Georgina Bond
Wed, 28 Apr 2010
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Super-regulator for financial markets will start next year