Support for regulation of financial services sector

Two separate, but related, reviews of financial sector law are underway in New Zealand, as we have discussed in previous issues of Financial Services Quarterly.  They are the review of financial products and providers (RFPP) being led by the Ministry of Economic Development, and the review of financial intermediaries led by the Financial Intermediaries Task Force.

More than 135 organisations made submissions on the nine discussion documents comprising the RFPP, and some 140 submissions were made on the financial intermediaries discussion document.  A list of submitters and copies of the submissions are being made available on the Ministry of Economic Development’s website.

Summaries of submissions have been released by the Commerce Minister, who says that the clear thread running through them is for better regulation of the financial services sector.

Review of financial products and providers

The cornerstone concepts of the RFPP are:

• registration of all financial services providers;
  
  
• enhanced disclosure; and
  
  
• a co-regulatory model involving the Securities Commission and approved industry bodies.

These concepts were all broadly supported by the submissions.

However, the Minister reported that submissions on the proposals for a two-tier regulatory model for non-bank organisations (such as finance companies and credit unions) were more contentious – necessitating an evaluation of alternatives.

Review of financial intermediaries

The proposals for the regulation of intermediaries and the co-regulatory relationship between the Securities Commission and industry-approved bodies received general support.

However, some submissions highlighted concerns about the proposal to apply different obligations to different classes of intermediaries – particularly around issues of possible confusion and unnecessary compliance costs.  The Minister has indicated that these issues will be considered further.

Implementation

Proposals on both reviews are being considered by Cabinet.

The introduction of legislation will follow – the priority being legislative amendments to financial advisers and services registration.

It is expected that legislation will be introduced in the following phases:

Phase 1 – 2007/2008

Introduction and passage of legislation around regulation of financial advisers, financial service providers registration, supervision of issuers and dispute resolution.

Phase 2 - 2008

Introduction of:

• trust deed requirements for debt issuers and collective investment schemes, including changes relating to non-bank deposit takers and mutuals;
  
  
• insurance regulation changes; and
  
  
• requirements for platforms, which are computerised services that act as financial adviser, custodian and administrator, and portfolio management services, which act as financial adviser and custodian for investors.

Bell Gully seminars

Once Cabinet has announced its policy for this proposed legislation (expected to be in the third quarter of this year), Bell Gully will begin a series of seminars in Auckland, Wellington and Sydney tracking the development of this significant new law.  We expect that, after the initial seminar, there would be follow-up seminars every few months outlining the progress of the legislation and its implications for financial sector participants.   If you are interested in attending our seminars, please click here to register your interest.

Summaries of the submissions are available at www.med.govt.nz.

Enquiries and information

For more information on any of the cases, articles and features in Financial Services Quarterly, please email Rachel Gowing or call on 64 9 916 8825.