Hon Simon Power, Minister of Commerce
7 April 2011
Parliament today unanimously passed a bill that plugs gaps that were exposed by the finance company collapses of recent years.
The Securities Trustees and Statutory Supervisors Bill requires all corporate trustees, including those for non-restricted KiwiSaver schemes, to be licensed, along with certain statutory supervisors, including those for retirement villages.
"The licensing regime addresses the performance problems of trustees, which were highlighted in the finance company collapses, and will help to protect investors' interests and enhance market confidence," Mr Power said.
The Financial Markets Authority (FMA), which will be operating from 1 May, will have the power to grant licences, providing applicants satisfy certain conditions, such as having satisfactory monitoring systems, processes, experience, infrastructure, and financial strength.
In addition, directors and senior managers of trustee companies will be assessed against 'good character' requirements.
"This bill will protect the interests of investors by requiring trustees and statutory supervisors to be competent, perform their functions effectively, and be held accountable by the FMA if they fail to meet expected standards.
"The FMA will keep a close eye on trustees, which will have to provide regular reports on their compliance with the terms of their licence. The FMA will also have increased powers to require information from trustees and order them to act in situations when investors' interests are at risk."
The bill allows the FMA to seek redress for breaches of obligations via pecuniary penalties and compensation orders on behalf of investors. Failure to comply with the FMA's directions is an offence under the bill, with penalties of up to $200,000.
"The penalties and compensation orders in the bill go a long way towards ensuring that if a trustee acts negligently, investors will be able to obtain proper redress."
The regime is scheduled to come into force on 1 October.
All public issuers of debt securities and unit trusts are required by law to appoint a trustee, while issuers of participatory securities and retirement villages are required to appoint a statutory supervisor.
The trustee's main role is to monitor the issuer's compliance with the terms of the deed and offer of securities, in order to protect the interests of investors. Statutory supervisors for retirement villages have a broadly similar role, including monitoring the financial position of the village.
All Simon Power's media statements and speeches are at www.beehive.govt.nz/minister/simon+power
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