Super regulator board aims to lift confidence

FMA board member Murray Jack. Photo / Mark Mitchell

Commerce Minister Simon Power has named the board members who will oversee the Financial Markets Authority (FMA), the new super regulator charged with restoring confidence to the finance sector after it suffered a series of highly damaging failures between 2006 and 2009, costing investors billions of dollars.

The FMA, which is loosely modelled on the powerful Australian Securities and Investment Commission (ASIC), will be the single regulator for New Zealand's financial markets, taking on the regulatory functions of the Securities Commission, the Ministry of Economic Development and the NZX, when it is up and running next month.

The Government has already announced that the FMA will be led by chairman Simon Allen, who is a former chairman of the NZX and managing director of brokers ABN Amro, and chief executive Sean Hughes, a former executive of the ASIC.

Allen said he was happy with the lineup. "The minister has chosen a broad cross-section of experience and that has given us a couple of things. One is people who are participants, in various forms, in the markets, so there is ongoing knowledge, but also there are people with a lot of historical knowledge," he told the Herald.

The eight board members have a wide range of experience and include lawyer Michael Webb, columnist and lecturer Mary Holm and three current members of the Securities Commission: Murray Jack, Shelley Cave and Mark Verbiest.

NZ Shareholders Association founder Bruce Sheppard is one of three associate members.

Power said the continuity of experience from the outgoing Securities Commission members would help smooth the transition to the new regulator.

The Financial Markets Authority (Regulator and KiwiSaver) Bill, which establishes the FMA, is before Parliament and is expected to pass into law this month. It will usher in major new powers that have not been seen before in the New Zealand finance sector.

The FMA's budget will be announced with the Government's Budget next month, but it is understood to be around $25 million up from the current $19 million used to fund the Securities Commission.

Among the authority's new, far-reaching powers will be its ability to retrospectively sue finance company directors on behalf of out-of-pocket investors in respect of damage and harm that was caused before the FMA was set up, a lawyer at Chapman Tripp, which has been running seminars on the FMA, told the Herald.

"They potentially have got the power to go after directors of those failed finance companies that collapsed a few years ago," Victoria Heine, a litigation partner at Chapman Tripp, said.

"The FMA can also go after trustees and auditors, to the extent that they might have had a role in the failure of a finance company, so that is another potential source of money for investors," she said.

But Heine said it was difficult to tell whether the FMA would help restore confidence to the sector. "It is a significant step forward but it is going to be a long time before people have confidence again in the finance markets."