The Financial Markets Conduct Act, which came into force
yesterday, is being hailed as a new era.
Marks&Worth principal Sally Peart said the Act was a
significant shake-up in the regulation of New Zealand's
capital markets and would hopefully renew faith in the
financial markets sector, which had been battered by recent
finance company collapses.
''Some of the changes are not effective until December 1,
2014, but a number of the new provisions take effect as of
''One of the more powerful changes is the shift in
responsibility for regulating misleading and deceptive
conduct in relation to financial services and products such
as deposits, shares and derivatives.''
Previously, the Commerce Commission was responsible for
acting in relation to misleading and deceptive conduct, but
it had limited resources to deal with breaches, she said.
The new Financial Markets Authority (FMA) had a much wider
range of tools available to it to intervene at an early stage
to prevent the types of losses experienced by investors in
There were other welcome innovations, such as licensing
investment services, including new forms of capital raising,
such as crowd funding and peer-to-peer funding platforms,
which would enable smaller projects to be funded in a
cost-effective and straightforward manner, Ms Peart said.
Commerce Minister Craig Foss said the once-in-a-generation
reforms made up an integral part of the Government's Business
Growth Agenda to restore confidence to the financial markets.
''Over the past five years, the Government has
comprehensively reviewed and reformed our financial sector
That included establishing the Financial Markets Authority,
bringing the Financial Advisers Act into force and licensing
non-bank deposit takers, auditors and trustees.
The Financial Markets Conduct Act was the last major step of
the reform, he said.
The changes would support confident and informed
participation by businesses, investors and consumers in New
Zealand's financial markets.
''It is important we have clear rules for companies to raise
capital and the right information to support sound investment
decisions,'' Mr Foss said.
Craigs Investment Partners broker Chris Timms welcomed the
rules around equity crowd-funding.
There was no investor cap other than the previously announced
$2 million cap a company could raise through crowd-funding in
a 12-month period.
Many small companies were starved of capital and banks were
sometimes reluctant to lend to them.
The crowd-funding could be a better way of ensuring capital
''This is positive for smaller start-ups who could go on to
employ 20 to hundreds of people in the future,'' Mr McIntyre
The Financial Reporting Act, which also came into force
yesterday, meant medium-sized companies would no longer be
required to produce complex financial statements.
That should mean a substantial reduction in compliance costs
for most companies with annual revenue between $2 million and
The remainder of the Act would come into force on December 1,
when the new disclosure requirements and licensing
obligations would start to take effect.
The new online register system would also be operating,
ensuring information on financial products and managed
investment schemes was easily accessible and comparable.
At a glance
• Making equity crowd-funding possible.
• A new licensing regime.
• Expanding the role of the Financial Markets Authority.
• Changing the Financial Advisers Act 2008.
• Creating a platform for peer-to-peer lending.
• Making employee share schemes possible.