Tighter financial laws delayed

New laws to tighten New Zealand's financial regulation are set to be delayed until 2012, Commerce Minister Simon Power's office has confirmed.

The Economic Development Ministry (MED) is receiving submissions on its 200-page review of New Zealand securities legislation, which raises the prospect of substantial change to enforcement powers, including new powers which could allow regulators to investigate companies proactively.

A new Securities Act was due to be brought into force some time in 2011, although a spokesman for Mr Power has confirmed that the MED now expected the legislation to come into power the following year, after next year's election and the Rugby World Cup.

The spokesman said that while 2011 had been the target for the new legislation "it was always going to be touch and go".

Work to establish the new Financial Markets Authority (FMA) super regulator had pushed back the process, he said.

New Zealand Shareholders Association chairman John Hawkins said delays to the act would be "disappointing".

"We would like to see the changes to the act come through as soon as possible so that the FMA can actually have the necessary tools to do its job in the best possible way."

Securities Commission chairwoman Jane Diplock has blamed a "desert of regulation" in New Zealand for not giving her organisation – which will be subsumed into the FMA – the necessary tools to investigate finance companies properly.

While the commission was frequently told of alleged misdealing in companies, she claimed, it was powerless to act until receivers were called in and it was too late.

In July Ms Diplock warned that New Zealand still does not have the structures in place to prevent the problems experienced in the finance sector in recent years, but the review of the Securities Act had the potential to change that.

Some in the finance sector warn that, without the new powers, the FMA will be largely a public relations exercise.

The FMA, to be chaired by former activist investor Simon Botherway, will unite many of the functions currently done by the Securities Commission, the Registrar of Companies, the Government Actuary, and even the NZX into a single Crown entity.

However, one observer said until the new Securities Act came into force the FMA would simply be carrying out its functions "more enthusiastically".

After his appointment Mr Botherway reportedly said there were "yawning gaps" between what the public expected from regulators and what they could actually do.

Mr Power's spokesman said the market had been calling for a new united regulator to be established as a matter of urgency and so the FMA was fast-tracked ahead of other work.

The FMA would bring an important "cultural change" to regulation, and he hinted that it may have more powers than expected. "I wouldn't make any assumptions about what powers the FMA will have until you see the FMA bill."

- © Fairfax NZ News