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26 August 2009

News release

Hon Simon Power, Minister of Commerce

Regime will improve quality of trustees' supervision

The Government has agreed to a new regime for corporate trustees and statutory supervisors who supervise debt issuers and some collective investment schemes, Commerce Minister Simon Power announced today.

The regime, which was decided by Cabinet on Monday, will involve the licensing of trustees by the Securities Commission, and a range of measures to strengthen the quality of supervision provided by trustees.

Mr Power announced the regime in speech to the 5th Annual Securities Law Update in Wellington today.

"The collapse of a large number of finance companies in recent years has raised some fundamental issues around the role of corporate trustees, and in particular the competency and accountability of some trustees.

"These measures will ensure trustees are suitably qualified and have rigorous systems and processes in place to protect the interests of investors."

The regime removes the automatic right for the six statutorily approved trustee corporations to supervise issuers of debt and some collective investment schemes, and require trustees to be licensed by the Securities Commission.

The commission will have the power to tailor licences so trustees have processes in place that are in proportion to the level of risk associated with the issuers they supervise. The commission will take into account matters such as the trustee's competence, systems and processes for supervising issuers, and financial strength.

The regime will have additional measures to improve the quality of supervision provided by trustees, including:

Enhanced powers of enforcement against trustees who fail to comply with their duties.
Greater prescription around matters that must be addressed in trust deeds.
Mandatory reporting to the Securities Commission by trustees when issuers may be nearing default on securities.
Giving the commission the power to direct trustees to take action against issuers.

"These measures will also contribute to ensuring that trustees' supervision of debt issuers and some collective investment schemes is effective and protects investors while not imposing unnecessary compliance costs," Mr Power said.

"Mandatory reporting by trustees to the Securities Commission will help ensure proactive action is taken to protect investors' interests."

Legislation is expected to be ready for introduction to Parliament by the end of the year.

All Simon Powers's media statements and speeches are at www.beehive.govt.nz/minister/simon+power

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