New Act has 'powerful changes'

Sally Peart.
Sally Peart.
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 today.

''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 recent years.

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 regulations.''

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 was raised.

''This is positive for smaller start-ups who could go on to employ 20 to hundreds of people in the future,'' Mr McIntyre said.

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 $30 million.

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.


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