8 March, 2012
A bill that is critical to restoring investor confidence in New Zealand's financial markets passed its first reading in Parliament today.
Commerce Minister Craig Foss says the Financial Markets Conduct Bill provides a once-in-a-generation opportunity to make New Zealand's financial markets more efficient.
The Bill is the result of a comprehensive review of securities law and builds on recommendations from the Capital Markets Taskforce, effects of the global financial crisis, and the failure of finance companies.
"Vibrant financial markets that work for all market participants are crucial to the nation's prosperity," says Mr Foss.
"This Bill will play a key role in restoring investor confidence by providing better information and protections for investors, as well as setting clearer rules for companies wishing to raise capital."
Key proposals in the Bill include:
• Replacing the requirement for issuers to prepare a prospectus and investment statement and replacing it with a requirement to prepare a single product disclosure statement tailored to retail investors.
• Introducing civil pecuniary penalties of up to $1 million for individuals and $5 million for companies if they make misleading statements in product disclosure statements and advertisements.
• Modifying the liability framework for breaches of securities law. The Bill proposes a system of escalating liability from infringement notices for minor breaches, through to criminal penalties of up to 10 years imprisonment and fines of up to $1 million for individuals, and $5 million for companies for the most egregious conduct.
• Increasing the maximum period for prohibition by the Financial Markets Authority or the 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.
• Establishing licensing regimes for specific financial sector participants: fund managers, independent trustees of workplace superannuation schemes, derivatives dealers, and peer-to-peer lenders.
• Introducing stricter requirements for managed investment schemes, including new duties on fund managers and supervisors and stronger governance requirements.
• A new system to regulate securities exchanges.