The Financial Markets Authority says it wants to encourage investors into the sharemarket and business conduct will be important in improving confidence.
Chief executive Rob Everett told the commerce select committee this morning that he was "very comfortable" with the legislative framework the FMA operates under, but the agency's job is to make the industry understand that the law reflects the minimum level of conduct required, and it is aiming higher. The final pieces of the Financial Markets Conduct (FMC) Act came into effect today, having been passed by parliament in late 2013.
"In a lot of our written work and speeches the emphasis is on conduct as opposed to just meeting legal tests," he said. "People might meet the legal tests but their conduct might be poor, we're trying to make sure their conduct is good and that can overcome governance problems."
New Zealand's shallow capital markets are down to locals lacking confidence in the share market, Everett said, with 59 percent of investors surveyed by the FMA in 2016 expressing confidence in the markets, down from 66 percent a year earlier.
"Memories of the '87 market crash are still very fresh in a number of people's minds, compounded by issues in the '90s and the GFC. I think it's fair to say that broad confidence in investment is still relatively fragile," Everett said. "We do think a core part of our mandate is to encourage people to believe they can invest in those markets that are well regulated, that are operating fairly and transparently."
Everett said there was a lack of good directors for smaller companies, particularly unlisted companies, and the FMA sees it as its role to encourage people into governance at those smaller companies. He also said the FMA was concerned by the level of fee disclosure to KiwiSaver customers.
"It's a key issue for funds management globally, clarity of disclosure to retail customers. That's a core area for us to be really driving into in the next couple of years, it's an area of real difficulty," Everett said.