• About
• Publications
• Exemptions
• Notices
• What's new?
• International
• Speeches
• Information for investors
• Contact us
• Site map
• Home

This Statement of Intent

This statement of intent:

• sets out the main objectives the Securities Commission will achieve over the next three years and how those achievements will be measured; and
• presents publicly the Commission's forecast financial statements and forecast statement of service performance for the next 12 months.

Medium-term information

The information in this section relates to the financial years 2008/2009, 2009/2010 and 2009/2011. This section has key background information about the Commission, how it contributes to Government's themes and goals, and the environments in which it operates. It sets out the nature and scope of the Commission's functions and intended operations, the outcomes to which we contribute, the objectives we seek to achieve, and the main measures of achievement.

The Securities Commission

The Commission is New Zealand's main investment regulator. The investments we regulate are securities which include shares, debentures, bonds, term deposits, superannuation schemes, unit trusts and other managed investments, contributory mortgages and futures contracts.
Our purpose is to strengthen investor confidence and foster capital investment in New Zealand by promoting the efficiency, integrity and cost-effective regulation of our securities markets.

The Commission's work contributes to robust and vibrant capital markets in which investors, both domestic and overseas, can have confidence. This in turn is important for New Zealand's sustainable economic development.

Government's themes

Government has three themes for the next ten years - economic transformation, families - young and old, and national identity. The Commission's main contribution to Government's themes is to economic transformation.

We work to achieve a world class regulatory infrastructure for New Zealand's capital markets. We work to enable businesses to meet the expectations of international investors, and to enable firms to be globally competitive by meeting the standards required when dealing internationally. We work to make the New Zealand markets a good place for businesses to raise capital for growth and innovation.

We do this by:

• focussing market surveillance and oversight on areas that have the greatest impact on the integrity and reputation of the New Zealand markets;
• taking enforcement action to maintain confidence in the effectiveness of market regulation;
• advising on law reforms to raise standards while avoiding excessive costs for business;
• using exemption powers to tailor regulation to the needs of the market so that compliance costs are reduced and opportunities for New Zealand investors are increased;
• promoting New Zealand internationally as a well regulated market;
• encouraging closer economic relations with Australia by settling regulatory procedures for trans-Tasman mutual recognition of securities offerings which will provide new opportunities for business and investors;
• providing guidance to market participants about changes to the law to improve understanding of the law and reduce transition and compliance costs.

Other important work, as well as contributing to economic transformation, contributes to Government's families and national identify themes. This includes:

• education and public understanding programmes:
  • sponsoring investment education in schools so that young people can learn about investing;
  • scam and fraud awareness campaigns which enable people to recognise and resist investment fraud;
  • the smart investor campaign which enables people to have knowledge and confidence to make better investment decisions; and
  • publicity targeting investors to alert them to their rights to information about investment advisers and investments.
• international work which promotes New Zealand as a well regulated securities market in which investors can have confidence including:
  • leveraging the Chairman's role as Chair of IOSCO's Executive Committee (IOSCO's governing body) to raise the profile of New Zealand's capital market regulation both within IOSCO's large membership and with other global financial institutions including the World Bank and the International Monetary Fund; and
  • working with Ministry of Foreign Affairs and Trade and New Zealand Trade and Enterprise (NZTE) to create opportunities for the Chairman to meet investor, business and expatriate groups to promote understanding of New Zealand as a well regulated securities market in which investors can have confidence.

The environments we work in

National environment - New Zealand's securities markets

As the main regulator of investments the Commission has oversight of the primary and the secondary securities markets, and of the disclosure obligations of investment advisers and investment brokers.

The primary market covers investments offered to the public for the first time. These include shares, debentures, bonds, term deposits, superannuation schemes, unit trusts and other managed investments, and contributory mortgages. An issuer who offers these securities must do so in offer documents (usually a registered prospectus and an investment statement) which comply with the law. The purpose of the law is to give the prospective investor sufficient information to compare one investment with another and to make an informed decision on whether or not to invest.

The Commission's role relating to the primary markets is:

• to enforce the law regarding offers of securities and advertising for securities; and
• to intervene if an offer is misleading, deceptive, or confusing.

We can:

• request that documents be amended;
• ban offers from the market;
• take court action seeking civil penalties and compensation against directors and promoters who mislead investors;
• refer breaches of the law for prosecution;
• report publicly on behaviour or circumstances we consider investors and market participants should be alerted to.

The secondary market is where securities are traded e.g. on a stock exchange or futures exchange. Participants in these markets have to comply with the rules of the exchange and with the law.

The Commission's role relating to the secondary market is to use its powers:

• to investigate misbehaviour in the secondary markets, including market manipulation and insider trading;
• to enforce securities law including taking legal action where appropriate; and
• to work with and oversee NZX under the statutory co-regulatory framework.

Investment advisers and investment brokers have increased disclosure obligations under new law which came into force on 29 February 2008. This law is an important step to addressing the shortcoming in regulation of financial intermediaries noted by the 2003 Financial Sector Assessment Programme (FSAP) by the IMF. (See FSAP page 11). Investment advisers are not required to be licensed or registered in New Zealand. Sharebrokers must be licensed by the District Court.

The Commission enforces the new disclosure regime. Under this law advisers and brokers are required to have a disclosure statement which tells their clients about themselves, the investments they give advice on, and how they get paid.

The Commission enforces the disclosure rules by using its powers to make prohibition, corrective, disclosure or temporary banning orders. It can go to court for pecuniary penalties or banning orders

Co-regulatory environment

Currently NZX is the only registered stock exchange in New Zealand. The Commission and NZX have co-regulatory roles relating to the exchange under the Securities Markets Act 1988. NZX is the front line regulator concerned with breaches of the rules of the exchange and the Commission is the statutory regulator concerned with breaches of the law.

The Commission gives the Minister of Commerce advice on NZX's rules and oversees NZX's performance of its regulatory role. This co-regulatory regime has addressed the matter of standards for exchanges which are self-regulatory organisations raised by the 2003 FSAP.

A co-regulatory regime has the advantage of giving front line responsibility to those who are closest to the market, and adds public accountability to this by the oversight and statutory enforcement powers of a public regulator.

Legislative environment

Over the last seven years the regulatory framework for securities has changed significantly as the Government has carried out its programme of reforms. These have given the Commission new powers and functions as shown in the table.

The Government is conducting several reviews on the regulatory regime for securities markets. In particular reforms relating to:

• financial intermediaries;
• financial products and providers; and
• Financial Action Task Force recommendations.

Bills are before Parliament proposing reforms to:

• registration of financial service providers, and consumer dispute resolution;
• regulation of non-bank deposit takers (stage 1);
• regulation of financial advisers.

The Government has announced further reforms to address trustee supervision, regulation of non-bank deposit takers (stage 2), collective investment schemes, issuers and securities offerings. The Commission has had extensive input to these reviews and will continue to provide advice to the Ministry of Economic Development on the development of detailed policy and drafting of legislation.

The Commission is also working with the Ministry of Justice on proposed reforms to New Zealand's anti money laundering laws which may see the Commission take on a supervisory role for some parts of the financial sector in relation to money laundering.

It is important that new law is well understood by the market and the Commission, as part of its public understanding function, delivers education programmes so that market participants, and investors, are aware of law reforms. New law that came into force on 29 February 2008 following the passing of the Securities Legislation Bill in October 2006 was publicised through an education programme including a dedicated website, advertising, speeches and a published Guide to New Securities Law. This was well received and enabled market participants to understand the effects of new law on insider trading, market manipulation, substantial security holder disclosure and disclosure by investment advisers.

The Commission will undertake similar campaigns to promote understanding of new law resulting from the Government's future law reforms.