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2006 Annual Report

ACHIEVEMENTS 2006 - 2007 cntd.

LAW AND PRACTICE REFORM

The Commission’s goal in this key result area is that the regulatory environment is relevant and effective.

Responsibilities

make recommendations for law reform
review and comment on securities law and practice

Achievements this year

made submissions on
- proposed regulations under the Securities Legislation Bill
- government review of financial products and providers
- government review of the regulation of financial intermediaries
- New Zealand equivalents to International Financial Reporting Standards
- reform of the Financial Reporting Act 1993

5% of expenditure

Securities Legislation Bill
The Securities Legislation Bill is before Parliament, having been reported back from select committee on 15 June 2005. This Bill introduces reforms relating to

insider trading;
market manipulation;
investment advisers;
substantial security holder disclosure;
application of securities trading law; and
penalties and remedies.

The Commission has worked with government officials on amendments that may be needed to this Bill before it is passed. Meanwhile the Commission worked with officials and commented on a discussion document proposing regulations to be made under this Bill once it is passed.

Financial Sector Review - Review of Financial Products and Providers
In late May 2005 the Minister of Commerce announced a review of regulation in the financial sector. This is a wide-ranging review that considers the current regulation of securities offerings, collective investment schemes, superannuation, life insurance, and the regulation of non-bank financial institutions such as finance companies, credit unions, friendly societies, and building societies.

The Commission was represented on a working group which assisted the Ministry of Economic Development with the first stage of this review, to report to the Minister of Commerce with options for reform in late 2005. Following this the Ministry of Economic Development established industry working groups, including Commission representation, to provide them with advice and expertise on options development, costs and benefits of various proposals and implementation. These advisory groups have met on a regular basis during the first six months of 2006.

The Commission understands that public discussion documents relating to this review will be released by the Ministry of Economic Development in August 2006.

Financial intermediaries
The Financial Intermediaries Taskforce reported in August 2005. It recommended a regulatory framework under which industry bodies ("approved professional bodies") and the government (through legislation and government entities such as a Minister and a regulator) set standards, rules and obligations for financial intermediaries and carry out dispute resolution and disciplinary functions. On 12 December 2005, Cabinet agreed to the Taskforce’s proposed co-regulatory framework under which industry-led approved professional bodies and the Securities Commission (as the public regulator) would work together to regulate financial intermediaries. The Commission has been involved in ongoing discussions with officials of the Ministry of Economic Development and with industry on the design of the intended regime. A discussion paper will be released in July 2006.

International Financial Reporting Standards and New Zealand Financial Reporting and Auditing Standards
The Commission commented on six exposure drafts issued by the Financial Reporting Standards Board and the International Accounting Standards Board.

Financial Reporting Act 1993
The Commission commented on proposed changes to the Financial Reporting Act 1993.

Securities Regulations
Our ongoing project to review the Securities Regulations 1983 remains on hold pending the enactment of the Securities Legislation Bill.

Other matters
The Commission also:

worked with government departments and agencies on recommendations arising from the Financial Action Task Force’s inspection of New Zealand’s anti-money laundering and anti-terrorist financing laws;
participated in a working group on domestic institutional arrangements for financial sector regulation;
assisted officials of various departments on securities law aspects of the Kiwisaver legislation and the implementation of that legislation;
provided comment to the Ministry of Economic Development on reforms to the credit union legislation and the proposal for trans-Tasman mutual recognition of securities offerings;
assisted Treasury and other departments on matters arising from the Crown Entities Act affecting offerings of debt securities by Crown entities; and
participated in a working group reviewing the financial reporting standard for prospective financial information.

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