Celebrities who plug investment products might face stiff penalties under new laws if they are found to have misled mum and dad investors.

Commerce Minister Simon Power yesterday announced key Cabinet decisions on his major rewrite of investment laws.

This was driven at least partly by the collapse of the finance company sector and the global financial crisis.

"The new legislation will be better for mum and dad investors as well as for companies looking to raise capital," said Mr Power.

Among measures likely to find their way into law by the end of the year are moves to tackle celebrity endorsements of financial products.

In Cabinet papers released yesterday, Mr Power said collapses in recent years had highlighted the issue.

"In at least one case, a celebrity specifically endorsed the strength of a finance company," Mr Power said in what appears to be a thinly veiled reference to All Black legend Sir Colin Meads' endorsement of Provincial Finance as "solid as". Provincial failed in 2006, owing investors $300 million.

"In another instance the person may have been used because their primary employment created a sense of integrity," Mr Power said in a likely reference to Richard Long, who fronted One News between 1988 and 2003.

He promoted Hanover Finance, which in 2008 froze repayments to investors owed $554 million.

That happened just a month after the Advertising Standards Authority had upheld a complaint against an ad that featured Long saying Hanover had "the size and strength to withstand any conditions".

Mr Power said that "advertisements of this nature can have a strong influence on the decision-making process of investors when they are assessing investment options".

He had asked officials for options to tackle celebrity endorsements including "the possibility of celebrities being liable to investors for untrue statements" in the same way investment "experts" already are.

The law relating to untrue statements already allows for financial penalties, as well as compensation for anyone who loses money on an investment made on the strength of an expert's advice.

Long told the Herald that had such a regime been in force when he was asked to front Hanover's advertising he would not have done it. He believed celebrities would now shy away from such work. "If that's the intent then probably it will work."

However, he believed it was "a bit unfair" to hold celebrities responsible for investment losses on products they endorsed when it was unlikely they would ever know exactly how sound the company they were endorsing was.

Meanwhile, other issues to be tackled in the overhaul of key finance market legislation include the laws relating to collective investment schemes such as KiwiSaver and other managed funds typically used by people to save for their retirement.

Problems identified in the existing regime for these schemes include inadequate supervision of their managers, who are not sufficiently accountable to investors, and a lack of standardised information about the performance and value of funds and difficulties for investors who want to withdraw their money.

The law changes will also replace the often difficult-to-read prospectuses and investment statements issued by finance companies and other financial product providers with a two-page "product disclosure statement" tailored to retail investors.