Securities Law Reform Announced

25 Jun 2010

The government this week announced proposals for a complete overhaul of New Zealand's securities laws.

A 200 page discussion paper has been released, containing detailed proposals in key areas, including:

• scope: the types of products regulated;
• exemptions: the types of offers exempted;
• disclosure: mandated disclosure requirements for different products; and
• collective investment schemes: specific proposals for managed funds.

New Zealand's existing securities regime has been in place for over 30 years, and only ad hoc updates have taken place over that time. The time is ripe for a major review, and we welcome this full reconsideration of the regulatory framework.

The discussion document sets out the over-arching principles that should govern law reform in this area:

• investors should be responsible for their decisions, and the law should allow them to be so, rather than remove investment risk;
• appropriate investment transactions should be regulated, and the law should be clear when and how particular transactions are regulated;
• innovation should not be stifled, but the law should ensure there is capacity for new products to be properly regulated;
• similar investments should be treated in the same way;
• disclosures need to be meaningful and useful, and standardised where possible for comparability;
• managed funds (collective investment schemes) need to function with the interests of investors put first, and ideally aligned with international best practice; and
• sanctions must be well understood, in proportion to offences, and imposed on appropriate parties.

These principles make good sense.

There is no quick fix in this area, and a full review will take time. It will be worth New Zealand's while to ensure there is a focus on getting the balance right, and making sure these principles are kept to the forefront.