Super regulator gets enforcement powers in new bill

Commerce Minister Simon Power. Photo / Mark Mitchell

The proposed new market "super regulator" will be able to enforce the duties of people involved in financial markets when it's in the public interest, a new power under a bill introduced to Parliament yesterday.

The board setting up the Financial Markets Authority (FMA) requested the new power because it believed there was a gap in the authority's ability to enforce and supervise New Zealand's financial markets, Commerce Minister Simon Power said.

"It has become apparent that there have been situations in which misconduct has occurred, but individual investors do not bring civil cases because of the costs and risks involved or because they have limited legal standing," Power said.

The FMA will be able to exercise a person's right to bring a civil action against a financial markets participant.

The authority would also have more powers to demand that warnings about financial products and providers be included in offer documents.

The new regulator will consolidate the regulatory functions currently split across the Securities Commission, the Ministry of Economic Development, and the NZX. It is expected to be operational by early next year, and will be an independent Crown entity.

"On too many occasions in finance company collapses we heard of investors' money falling to the floor through gaps between regulators."

Also included in yesterday's Financial Markets (Regulators and KiwiSaver) Bill were provisions to improve the governance and management of retail KiwiSaver schemes.

KiwiSaver fund managers will become primarily responsible for the accuracy of their prospectus, investment statement and advertisements. KiwiSaver trustees are currently the technical issuers of the scheme, while fund managers have few direct responsibilities to investors and are less liable for misleading statements.

Trustees will also be responsible for supervising managers and ensuring they comply with trust deeds and other responsibilities. They will have to be licensed by the FMA, and will be brought under the proposed Securities Trustees and Statutory Supervisors Bill currently before Parliament.

Power also introduced a bill requiring the Institute of Chartered Accountants to regulate auditors as a specialist profession, rather than as chartered accountants.

The FMA will also be responsible for independent oversight of the institute's regulatory systems.

- NZPA