Super regulator to get extra powers

18:29, Mar 02 2011

The new market "super regulator" is set to be able to force anyone making unsolicited approaches to buy shares to reveal to investors how much shares are worth on the open market.

Enabling legislation for the Financial Markets Authority (FMA) has been amended by Parliament's commerce select committee to include the power to regulate offers for shares made without the blessing of the issuing company.

The issue hit the headlines over the Christmas period when former bankrupt Bernard Whimp approached shareholders in seven major NZX-listed companies with offers well below market value.

Shareholders in Fletcher Building, Telecom, Nuplex Industries, Guinness Peat Group, Contact Energy, Fisher & Paykel Appliances and Vector were targeted by Mr Whimp, who offered as little as 50 per cent of the shares' value.

While the offer was not illegal, commentators said it targeted vulnerable investors during a time of financial stress when advisers were on holiday.

Following select committee hearings last year, the committee has recommended giving power to the FMA to regulate unsolicited offers, including forcing offerers to disclose the current market price of shares, give notice of the offers to the issuer and regulators, and force a "pause period" for shareholders to consider offers.


Failure to comply with the rules could result in an order preventing the offerer from buying shares through such offers.

Commerce Minister Simon Power said yesterday he had been considering the changes as part of the review of securities legislation, but agreed with the committee that the powers should be brought forward.

New securities legislation is not due to come into force until next year.

The FMA, which is expected to be in force by May, is set to unify regulatory powers currently held by the Securities Commission and parts of the Economic Development Ministry.

The commerce committee, chaired by former commerce minister Lianne Dalziel, stepped back from letting the regulator take up an individual's cause of action at their expense.

It recommended the FMA be allowed to pursue cases in the public good, which would be an "important addition to the FMA's regulatory toolbox". Still, any action by the regulator could be opposed by an individual.

"This bill will remove the final excuse there's not enough power" for the regulator to do its job, said Roger Wallis, a partner at Chapman Tripp. He said the committee had moderated its stance on several disputed aspects of the bill.

The report also recommended easing back proposed regulatory burdens on the NZX, which chief executive Mark Weldon claimed would put it at a disadvantage to overseas rivals.

The committee decided to keep the provision to fund the FMA through an industry levy.