Finance companies should have nothing to fear from greater Securities Commission attention to their disclosure, says an industry body.
Justin Kerr, executive director of the Financial Services Federation, said the commission's report on expectations for disclosure by finance companies was likely to be seen as helpful and should remove uncertainties.
"I can't see anything in there that's a cause for concern," Kerr said. The federation's 47 mainly finance company members hold assets worth more than $14.5 billion.
The commission's report, released last week, said finance companies could improve disclosure to investors.
The companies should spell out their principal activities, main risks to insolvency, credit risks and provide clear information on early withdrawal fees and adjustments to the interest rate on early termination.
"Clear disclosure about company activities is required for investors to be able to understand what their investment money is being used for and to assess the risks involved with the investment," it said.
Kerr said there was a shared interest in putting enough information in investors' hands so they could make informed choices. But if too much detail was provided, investors might not read it.
However, commission general counsel Liam Mason said there was more concern that not enough information was provided.
"It can go too far but for many [companies] there's a long distance before they get there," he said.
Manson said the idea was to give people the key information they needed to make investment decisions and refer them to other documents with more detail, such as prospectuses, trust deeds and credit ratings agency reports.
The commission plans to raise law reform issues for the Government to consider in this year's review of the Securities Act.
These include the lack of detailed financial information in investment statements and modifying advertising regulations so more financial information can be given. The possibility of prudential supervision of finance companies will also be up for consideration.
Mason said a followup review of finance companies' disclosure statements later this year would focus on new documents and the commission would be looking for improvements.
Potential penalties for misleading disclosure include fines of up to $300,000 and maximum jail terms of five years.
