Business cases are being developed for new venture capital funds and the creation of a "financial hub" project, as part of the government's extensive response to the 60 recommendations of the Capital Markets Development Taskforce.
The response was unveiled today by Commerce Minister Simon Power, and includes the creation of a joint working group involving the Department of Prime Minister and Cabinet, the Ministry of Economic Development, and unnamed external advisers with international capital markets experience, who will report on the financial hub concept by May 31.
The idea centres on positioning Auckland as providing a low-cost, high quality, multi-lingual workforce providing banking "back-office" services to the Asia-Pacific financial community from a law-abiding country with a sound banking system.
Meanwhile, further government support for a public-private partnership approach to venture capital funding will require "a persuasive business case for more capital" and will be addressed in the Budget, on May 20.
And Economic Development Minister Gerry Brownlee is expecting a report in April on the recommendation to replace some business grants with investments of equity, convertible debt, and "other more commercial instruments" delivered by a government agency such as the New Zealand Venture Investment Fund.
Many of the taskforce's detailed recommendations will be wrapped into the review of the Securities Act already under way, with publication of a discussion document in April, and potential reforms in place by October 2011.
Key areas covered by the Securities Act review will include allowing the NZX to run unregistered markets where capital-raising for smaller companies could occur; clearer, broader regulatory exemptions for certain types of sophisticated investor; compulsory annual declaration of duties and restrictions by financial advisers to clients; standardising performance statements from managed funds to make them clear and comparable.
The replacement of investment statements and prospectuses with a new two-part disclosure document "that aids understanding and comparability" and includes a two page summary will also be part of the Securities Act review.
The Securities Act review will also pick up work on to impose a heavier duty on market overseers to enforce regulations and the inclusion of "warning labels" on risky or complex investment offers.
NZX chief executive Mark Weldon has welcomed the government's response.
"New Zealand has a famous history for producing reports and not doing much about it."
He says the report put forward by the Capital Market Development taskforce which he chaired was not about to "sit on the shelf".
Weldon says each of the 60 recommendations has been individually answered by the ministries responsible and that ideas have not been considered in isolation.
However, he says he had hoped legislation would be completed sooner than October 2011, the date issued by the Minister of Commerce.
Weldon says his colleagues and associates are excited about the upcoming development of this action plan, although it means some groups will "get a real squeeze".
"I think inevitably where there is movement, some people are going to be moved around," he says.
Securities Commission chairman Jane Diplock also says she supports the government's action plan and those of the recommendations which will be implemented.
She says she is looking forward to working alongside the government after seeing the Minister of Commerce's commitment to issues such as accountability. The commission has faced criticism for its perceived inaction around the collapse of financial companies.
"The Commission shares the goals to improve information for retail investors and to ensure our regulation is transparent, efficient, cost-effective and serves the needs of all market participants," Diplock says.
"The review of the Securities Act provides a good opportunity to ensure that we have the right regulatory balance to give confidence to investors and certainty and clarity to firms in our markets."
But she says it is too early to say what the proposed changes would mean for the Commission.
One of the recommendations suggested a single body could replace the work of the Companies Office, Securities Commission, and the NZX Disciplinary Tribunal.
Recommendations that would improve the access of agricultural cooperatives to access public capital markets for equity were also kicked for touch, with a review scheduled in 2011 "taking into account Fonterra's capital structure discussions".
However, a report is due in April on whether the absence of foreign-owned banks listed on the NZX is caused by "prudential impediments", while Cabinet decisions are due this month on the recommendation that there be "greater clarity and certainty around the Overseas Investment Office regime to protect property rights".
Meanwhile, changes to Takeovers Act thresholds are supported in principle and will be progressed in the Regulatory Reform Bill to be introduced in August.
However, the government is not yet convinced that the term "independent adviser" should be regulated or that a clear fiduciary duty should be imposed on such advisers, and will wait for a June reportback on a rewrite of the Code of Professional Conduct for financial advisers.
In one of the few recommendations completely kicked for touch is one to direct schools to focus on financial literacy. As self-managing entities, schools could choose to prioritise financial literacy if they chose to and there are educational standards available for this area.
Recommendations that local and central government assets should be partially listed on the local stockmarket were also fended off. That was a matter for the local governments concerned.
Power stressed at a press conference that there would be no state asset sales in this term of Parliament and reiterated that if that policy were to change, it would be campaigned on in the 2011 election.
with NZHERALD STAFF
Govt unveils markets work programme
Commerce Minister Simon Power (L) and NZX CEO Mark Weldon at the December release of the Capital Markets Development Taskforce report. Photo / Mark Mitchell.
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