Securities Law Shake-up

Reformation of New Zealand's 30 year-old securities law is now well underway, with the first wave of legislation having come into force on 1 May 2011. The reforms were undertaken as a result of the global financial crisis in 2008, which brought to light the need for better enforcement and the need for one main regulatory agency. Previously, several agencies had overseen financial sector regulation. In June 2010, Hon. Simon Power released a discussion paper “Review of Securities Law: Discussion Paper” revealing the proposed securities law and regulatory changes. The regulatory changes were the subject of the first wave, which included the following Acts: Financial Markets Authority Act 2011, Securities Amendment Act 2011, Securities Markets Amendment Act 2011, Securities Trustees and Statutory Supervisors Act 2011, Financial Advisers Amendment Act 2011 and the Auditor Regulation Act 2011.

Financial Markets Authority (FMA): 
Purpose and Powers

The Financial Markets Authority Act 2011 disestablished the Securities Commission and established the Financial Markets Authority (“FMA”). As of 1 May 2011, the FMA assumed all the powers, duties and functions of the Securities Commission. The purpose or main objective of the FMA “is to promote and facilitate the development of fair, efficient, and transparent financial markets” (s 8).

Some of the FMA’s main functions (s 9) include:

• Issuing warnings, reports, or guidelines, or making comments, about any matter relating to those markets;
• Monitoring compliance with and investigating conduct that constitutes or may constitute a contravention of, and enforce Acts that apply to financial markets participants;
• Monitoring and conducting inquiries and investigations into any matter relating to, financial markets or the activities of financial markets participants;
• Co-operating with law enforcement and other regulators including overseas regulators.

The powers of the FMA in enforcement and information-gathering are significantly more broad than was previously available to the Securities Commission, in particular s 29, which gives the FMA the “power to enter and search place, vehicle or other thing”, including computer files and systems. 

What’s Ahead: Financial Markets Conduct Bill

It is expected the reforms to come will be significant and are to include combining the current Securities Act, Securities Markets Act, Unit Trusts Act, Superannuation Schemes Act, Securities Transfer Act and parts of the KiwiSaver Act into one Act.

The Ministry of Economic Development released as draft copy of the proposed legislation, the draft Financial Markets Conduct Bill, on 9 August 2011, with submissions closing on 6 September 2011, giving less than a month for submissions.

A pdf copy of the draft can be found at: http://www.med.govt.nz/upload/77367/SLR%20-%20Request%20for%20submissions%20(pdf%20version).pdf

The Explanatory Note states that the Bill “has rewritten and modernised [current laws]. It has a more coherent structure, and is closer to the Australian law in some places.” It is expected that the draft Financial Markets Conduct Bill will be introduced before the next election, which may explain the short amount of time given for submissions.