MED releases summaries of submissions received in its Review of Financial Products and Providers

The Ministry of Economic Development (MED) has finished reviewing submissions it received from over 135 organisations in response to the nine discussion documents released as part of the Review of Financial Products and Providers (RFPP). The review includes proposed changes to securities offerings regulated by the Securities Act.

As was previously reported in the Spring 2006 issue of the Commercial Quarterly, the RFPP encompasses the regulation of insurance (health, life and general), superannuation, collective investment schemes, platforms and portfolio management services, non-bank financial institutions (friendly societies, credit unions, building societies, finance companies, industrial and provident societies) and consumer dispute resolution and redress in the financial sector. The review also addresses issues relating to offers of securities “to the public” under the Securities Act 1978.

The discussion document on securities offerings included requests for feedback on whether:

• the scope of the existing exemptions for "relatives and close business associates" and "professional and habitual investors" from the requirements for offers “to the public” required further clarification;

• the current dual offer document approach should revert to a single offer document having a Part A and a Part B where Part A will, like the investment statement, be targeted at retail investors and Part B will, like the prospectus, be targeted at professional investors; 

• a new requirement for educational material should be included as part of the offer document to help improve the financial literacy of the average retail investor in New Zealand; and

• a continuous disclosure regime should be extended beyond listed securities to all securities where there is an established secondary market. 

Submissions received on the last two items indicate little support for changes in these areas. Although the submissions acknowledge that the financial literacy of Kiwi investors is a concern, they do not consider that educational material should be included as part of the offer document. There is more support for this to be addressed at a national level by a government agency. Similarly, there was a generally negative response to the proposal to extend the continuous disclosure regime to unlisted issuers. It was noted that this would place unreasonable compliance costs on issuers and may lead to companies discontinuing their involvement in a secondary market.

There was some support for changes to be made in relation the scope of the existing exemptions for offers and the proposal for a single offer document. However, there appears to be no consensus on what form these changes should take.

MED is now preparing policy recommendations for consideration by Cabinet and the Minister of Commerce, Lianne Dalziel, has indicated that there will be a phased introduction of any proposed legislation over the 2007/2008 period.

The summaries of the submissions on all of the nine discussion documents including the Review of Securities Offerings discussion document are available on the MED's website at www.med.govt.nz. For further information on the submissions received on the financial intermediaries discussion document under this Review, refer to the 2007 Autumn issue of the Financial Services Quarterly.

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For more information on any of the cases, articles and features in Commercial Quarterly, please email Diane Graham or call her on 64 9 916 8849.