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2008 Annual Report

Exemptions and authorisations

Exemptions from the law reduce costs for issuers bringing new and overseas investment products to the New Zealand markets. All exemptions are based on the policy of the law and conditions are imposed so that issuers comply with the spirit of the law.

It is more cost-effective for issuers to rely on class exemptions, but where this is not possible individual exemptions can be granted. Where an application for exemption raises policy questions the public is usually consulted.

Authorisations by the Commission are required by certain market participants including trustees and statutory supervisors, and futures dealers who cannot rely on a class authorisation granted to futures and options participants on the NZX and the Sydney Futures Exchange.

Review of class exemptions

The Commission reviewed its class exemption notices in 2007 to make sure they were current, useful and consistent with Commission policy. Comments were sought on some 50 class exemptions. Most exemptions were renewed on the same terms with minor changes. However, the Commission decided that more substantive changes were required to the following exemption notices:

The Securities Act (Building Societies) Exemption Notice 2002 was amended to allow a prospectus relating to building society shares to contain similar disclosures to those required in a short form prospectus for equity securities
Clause 10 of the Securities Act (Overseas Employee Share Purchase Schemes) Exemption Notice 2002, which required a report to be provided to the Commission each year relating to securities offered under an issuer's employee share purchase scheme, has been revoked.

A new class exemption was created for public offerings made by companies listed, or applying to be listed, on markets operated by New Zealand Exchange Limited. The Commission also made substantive changes to its class exemptions on residential property developments, real property proportionate ownership schemes, and rights, options, and convertible securities.

Exemptions from the Financial Reporting Act

Changes to the Financial Reporting Act, which came into force on 18 June 2007, gave the Commission exemption powers relating to financial reporting by overseas issuers. They aim to ease compliance costs for overseas issuers where financial reporting requirements of their home jurisdictions are sufficiently robust that New Zealand investors would not be prejudiced if the issuer filed its overseas accounts in New Zealand, instead of financial statements that comply with the Financial Reporting Act. One class exemption and five individual exemptions from certain requirements of the Financial Reporting Act have been granted.

International cooperation and recognition

The Commission's international work has three main components:

contributing to strengthening the international investment environment by raising the standard and consistency of regulation and cross-border cooperation at the global level
enforcement of New Zealand securities law where cross-border breaches and fraud are suspected
contributing towards a single economic market between New Zealand and Australia and facilitating mutual recognition of securities offerings.

Contributing to the international investment environment

The Commission makes a significant contribution to strengthening the international investment environment through its active participation in the International Organisation of Securities Commissions (IOSCO). IOSCO is the international standards setter for securities regulation. It aims for the world's securities markets to be regulated on explicit and sound principles and standards, and for regulators to effectively enforce securities law through cooperation and information exchange.

The Commission is a member of IOSCO's governing body, the Executive Committee, and is also Vice-Chair of its Asia Pacific Regional Committee. In May 2008, Jane Diplock was re-elected to chair the Executive Committee for an unprecedented third two-year term.

Considerable progress was made towards IOSCO's strategic direction adopted under Jane Diplock's chairmanship in 2005, and this has involved an increasingly operational approach. The Chairman led the process to appoint a new IOSCO Secretary General who took up his role in January 2008. At its meeting in February 2008 the Executive Committee endorsed Action Plans to provide operational support to the achievement of its strategic goals, including meeting its self-imposed target of having all member jurisdictions signed onto the IOSCO Multilateral Memorandum of Understanding Concerning Consultation and Cooperation and the Exchange of Information (IOSCO MMOU) by 2010. Cross-border enforcement cooperation between regulators has improved with 63 member jurisdictions, representing more than half the IOSCO members, now either signed on in full or committed to making the necessary changes to sign onto the IOSCO MMOU. The Commission is on the IOSCO Screening Group which reviews applications to join the IOSCO MMOU.

Progress was also made in facilitating members to implement in full the IOSCO Objectives and Principles of Securities Regulation (IOSCO Principles) which are the benchmark for securities regulation that protects investors, ensures markets are fair, efficient and transparent, and reduces systemic risk.

The Commission provided assistance with the moderation of decisions submitted to the database set up by IOSCO to enable regulators to share information on applying International Financial Reporting Standards (IFRS). IOSCO monitors the database and refers any interpretation issues to the International Accounting Standards Board or the International Financial Reporting Interpretations Committee.

The Commission's and Chairman's roles within IOSCO assist in raising New Zealand's profile in the international financial community and provide opportunities to promote New Zealand as a well-regulated securities market. While undertaking her IOSCO commitments, the Chairman shared IOSCO's priorities and perspectives, and promoted New Zealand's well-regulated securities market, at a range of international fora.

The Commission also worked with the Ministry of Foreign Affairs and Trade and New Zealand Trade and Enterprise to create opportunities for the Chairman, while on IOSCO business, to promote New Zealand as an attractive investment destination to business audiences.

Enforcement of securities law in cross-border cases

The Commission used the IOSCO MMOU five times for enforcement inquiries over the past year. In addition to participating as a signatory to the IOSCO MMOU, the Commission maintains a number of bilateral agreements and this year signed bilateral Memoranda of Understanding with the Emirates Securities and Commodities Authority and the Jordan Securities Commission, bringing the total number of such agreements to 14.

Assisting overseas counterparts contributes to global and domestic investment environments in which investors can have confidence. The Commission gave priority to requests for assistance from other regulators, and provided responses to five enforcement requests from overseas regulatory bodies within the agreed timeframes.

Contributing to a single economic market with Australia

The Commission met with the Australian Securities and Investments Commission (ASIC) twice during the year to discuss trans-Tasman regulatory and enforcement issues, including the mutual recognition of securities offerings regime which came into force on 13 June 2008. Commission staff work regularly with ASIC counterparts on operational matters. As usual, several senior staff attended the ASIC Summer School.

The Chairman took part in the Australia New Zealand Leadership Forum and the Trans-Tasman Business Circle.

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