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2004 Annual Report

ACHIEVEMENTS

INTERNATIONAL

The Commission's goal in this key result area is that New Zealand's markets and regulatory environment are respected internationally, creating a climate for increased investment and good relationships with overseas regulators.

Responsibilities

promote New Zealand as a well-regulated securities market
keep abreast of developments in global standard setting
contribute the Commission's view in an international forum
maintain good relationships with other regulators

Achievements this year

hosted the Asia Pacific Regional Committee (APRC) meeting of IOSCO
was elected Deputy Chairman of APRC
was accepted as a signatory to the IOSCO Multilateral MOU
signed bilateral MOUs with our counterparts in China, Indonesia, and Malaysia
hosted visits by delegations from other securities regulators
took part in New Zealand's assessment in the Financial Sector Assessment Programme
undertook inquiry work in New Zealand on behalf of overseas regulators
the Commission met with the Australian Securities and Investments Commission
the Chairman was elected Chairman of the Executive Committee of IOSCO

14% of expenditure

IOSCO
IOSCO is a global forum for securities regulators and is recognised as the international standard setter for securities regulation. Some 174 regulatory and self-regulatory agencies, regulating over 90 percent of securities markets worldwide, are members of IOSCO.

IOSCO works in five areas:

multi-national disclosure of information including harmonisation of international accounting
and audit standards;
regulation of secondary securities markets including examining the use of the internet and other electronic communications;
regulation of market intermediaries and their products;
enforcement and exchange of information across national borders; and
investment management.

Executive Committee of IOSCO
The Executive Committee is the governing body of IOSCO responsible for achieving the objectives of the organisation. It has 19 members who include the chairmen and deputy chairmen of the four Regional Committees, and the chairmen of the Technical and Emerging Markets Committees, plus members elected at the annual meeting of IOSCO every two years. New Zealand was elected to the Executive Committee two years ago and this year was elected deputy chair of the Asia Pacific Regional Committee. In May 2004 Chairman Jane Diplock was elected to chair the Executive Committee. This is an extremely important post which enables New Zealand to participate in the highest deliberations of IOSCO.

International Cooperation
After intense scrutiny the Commission was accepted as a signatory to the IOSCO multilateral MOU which enables cooperation between signatories to combat international fraud and to effectively enforce securities law.

The Commission signed bilateral MOUs with the China Securities Regulatory Commission, the Indonesian Capital Markets Supervisory Agency, and the Malaysian Securities Commission. We also have MOUs with the Australian Securities and Investments Commission, the United States Commodity Futures Trading Commission, the Hong Kong Securities and Futures Commission, the Chinese Taipei Securities and Futures Commission, the Papua New Guinea Securities Commission and the Securities and Exchange Commission of Sri Lanka. We have an exchange of letters with the United States Securities and Exchange Commission.

International Meetings
The Commission attended three meetings of the Executive Committee held during the year. Discussions covered the implementation of the multilateral MOU, cooperation with international financial institutions, membership criteria and finances. We hosted the annual meetings of the Asia Pacific Regional Committee and APRC Enforcement Directors in February 2004. It was the first time that New Zealand had hosted an IOSCO event. We were very pleased to have the opportunity to host delegates from 22 jurisdictions. The feedback that we received from our colleagues from overseas was very positive. The Commission also hosted delegations from the Securities and Futures Commission of Korea and the China Securities Regulatory Commission. In June the Commission had an historic first meeting with the Australian Securities and Investments Commission. We expect this to result in closer cooperation between the Commissions to facilitate business across the Tasman.

IOSCO Objectives and Principles
Sound principles and practices for the regulation and supervision of securities markets are crucial to the stability of global financial markets. The IOSCO Objectives and Principles of Securities Regulation are one of the international standards and codes regarded as a key to sound financial systems. As a member of the Task Force on implementation of the objectives and principles, we participated in drafting a methodology for assessing implementation of the principles. New Zealand was one of the first countries to be assessed against the methodology.

FSAP
A team of international experts assessed the soundness of New Zealand's financial sector in November 2003. This was part of the Financial Stability Assessment Programme (FSAP) conducted jointly by the International Monetary Fund and World Bank. The assessment focused on significant issues for financial stability and included assessment of securities markets regulation. The IOSCO Objectives and Principles were used as a benchmark for the securities markets assessment. The process was very detailed and demanded much work by the Commission and other agencies. It is pleasing that the FSAP mission's final report has given New Zealand a generally good rating. The report has also usefully identified areas in which our regulatory framework could be strengthened to meet the IOSCO Principles of Securities Regulation. The majority of these are to be addressed in the government's securities trading law reforms.

Cooperation with Overseas Counterparts
We responded to requests for assistance from the Financial Services Authority in London, the United States Commodity Futures Trading Commission in Washington DC, the Australian Securities and Investments Commission, and also the Cook Islands Financial Services Commission. We sought assistance from several of our counterparts overseas.

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