Govt to fast-track creation of financial super-regulator

Commerce Minister Simon Power has announced the government plans to fast-track legislation to create a new 'super' regulator called the Financial Markets Authority (FMA) by early next year in a move to restore the confidence of 'mum and dad' investors in New Zealand's capital markets. The FMA will pull together the roles carried out by the Securities Commission, the Ministry of Economic Development (Companies Office), including the Government Actuary, and the NZX. The role of current Securities Commission Chairwoman Jane Diplock in the new regulator is unclear. Her current term does not expire until September 2. Power said staff from the Securities Commission, the MED and the NZX would be transferred, but may have different roles, and a new board would be appointed. "This move is at the centre of the Government's drive to restore the confidence of mum and dad investors in our financial markets," Power said in a speech to an awards dinner for the Institute of Finance Professionals New Zealand (INFINZ). Power said the FMA aimed to be visible, proactive, and carry out timely enforcement. The FMA would enforce securities, financial reporting, and company law as they apply to financial services and securities markets. It would also regulate and oversee, trustees, auditors, financial advisers and financial service providers including people who offer investments, he said. "Over the past year, it has become increasingly clear to me that one of the missing pieces in the regulatory landscape is a single regulator focused on proactively monitoring and enforcing securities law," Power said. “On too many occasions in finance company collapses we heard of investors' money falling to the floor through the cracks between regulators. This has damaged investor confidence, and if we are to restore that confidence we need to make changes. “I want to assure mum and dad investors that I'm committed to ensuring that the FMA has both the powers it needs and is encouraged to actively use them. That's the only way we can restore confidence in our financial markets.” A questions and answers guide to the new body is republished below:

When will all this happen? I expect that legislation establishing the FMA will be passed this year, and it will be up and running early in 2011. I will set up an establishment board which will design the structure of the FMA soon. What will happen to Securities Commission staff and current investigations? All staff of the Securities Commission will transfer to the FMA on its establishment. But as the new organisation will have a different structure and roles, there will be a restructure and some positions may change. The FMA will have a new board and a CE will be appointed. The FMA will take over all the work of the Commission. What will happen to MED (including the government actuary) and NZX staff? Where functions are transferred to the FMA, existing staff in MED and NZX may be offered new positions in the FMA. All regulatory functions of the Government Actuary will be transferred to the FMA. How will fast-tracking establishing the FMA affect the review of securities law? Work is continuing on the wider review of securities law, and I expect to release discussion papers soon, and to have a bill before the House in the first half of next year. How will the FMA interact with the Reserve Bank? The FMA will be the financial markets regulator, while the Reserve Bank remains the prudential regulator. This design is similar to the Australia (ASIC and APRA) and is sometimes referred to as the “twin peaks” model. How will the FMA interact with NZX? The FMA will be responsible for approving exchange conduct rules, and may request changes to existing rules. NZX will continue to enforce its own rules, but the functions of the New Zealand Markets Disciplinary Tribunal will be transferred to a new statutory rulings panel serviced by the FMA. The FMA will have the power to require NZX to provide it with information to conduct market surveillance, including real-time trading information. The FMA will conduct an annual oversight review of NZX, based on a report prepared by NZX. The Government will have a power to make market conduct regulations that will replace or be inserted into NZX rules, where desirable to preserve the integrity of the market. The FMA would enforce these regulations through the rulings panel. What will the FMA do in relation to auditors? The FMA will be responsible for the functions that were earlier envisaged to be carried out by the Registrar of Companies or a reconstituted Accounting Standards Review Board, including accreditation of professional accounting bodies, quality review of auditor practices, setting minimum licensing standards, and enforcement functions. The Accounting Standards Review Board will still change its name to the External Reporting Board (XRB), and will be responsible for making Auditing Standards. What will the FMA do in relation to trustees? It is proposed that the FMA will carry out the licensing and oversight of trustees under the regime established by the Securities Trustees and Statutory Supervisors Bill currently before the Commerce Select Committee.