KEY POINTS:
Commerce Minister Lianne Dalziel sees the receivership of finance company Bridgecorp as a chance to start improving people's understanding of risk levels in the sector.
Specialist property financier Bridgecorp was placed in receivership on Monday after defaulting on repayments of some term investments due to investors.
In total
about 18,000 investors and $500 million in investments are caught up in the receivership.
Today Ms Dalziel said the failure of Bridgecorp had stimulated public interest in regulation of the sector.
"I'm kind of using this as an opportunity to start the level of education that I think needs to happen to ensure investors know the level of risk that they're taking when they're depositing their hard earned money with one of these finance companies."
Ms Dalziel also said she thought the events surrounding Bridgecorp could have changed the attitudes of some MPs towards regulatory moves announced by the Government a fortnight ago.
"Before the Bridgecorp collapse, I think there was some reluctance on the opposition side of the House to take a pro-active role and we've been splitting hairs as to who's covered by the definition of financial adviser.
"I think everyone's now focused on the need to get this regulatory framework right, so I'm looking forward to support from the opposition," she told Radio New Zealand.
Hopefully legislation would be introduced to Parliament this year, and that the three pieces of law involved would be passed before next year's general election.
Among the proposed new rules were requirements that so-called non-bank deposit-takers would be supervised and licensed by the Reserve Bank.
They would also need to have credit ratings from approved "top-of-the-line" credit rating companies, Ms Dalziel said.
The advantage of credit ratings was that they enabled people to compare companies and products, in terms of whether they were getting the right rate of return for the degree risk being taken, and decide whether they were prepared to take that degree of risk.
Among other proposed new rules, financial advisers would have to be covered by approved professional bodies, and so have to meet professional standards.
Financial service providers would all have to be registered, with negative assurance checks, looking for such things as relevant criminal convictions, carried out on their principals. They would also have to belong to an approved dispute resolution service.
"What we're trying to do is build some assurance for consumers, for investors, particularly those that aren't sophisticated in terms of experience of investing in the marketplace," Ms Dalziel said.
But protection could never be 100 per cent.
"What I want to ensure is that when people are taking a degree of risk, that they know the risk they are taking and that they make a sensible decision based on the degree of appetite that they have for risk."
- NZPA