Commencement of the Financial Markets Conduct Act

Good evening,

Thank you all for coming along to mark this important day for New Zealand’s financial markets.

I want to start by welcoming Murray Jack to the role of chair of the FMA in this important period as it implements the second phase of the FMC Act regulations.

And I’d like to thank out-going FMA chair, Simon Allen, for your contribution and commitment over the establishment period.  You led a great team effort.

So here we are, five years after Rob Cameron’s taskforce reported, at the moment when the final tranche of the massive changes to our legislative and regulatory framework for financial markets take effect.

I know the changes wrought by the Financial Markets Conduct Act have meant a huge amount of work and cost for many in this room – some of you will happy about that, some less so. 

And we’ve only just begun. The next two years as we transition into full operation will be busy.

So it’s worth reminding ourselves why we went to all this trouble?

Fundamentally, these reforms have been about two things - increasing investor confidence and improving access to capital for businesses to grow. 

Together they’re important strands of the Government’s Business Growth Agenda, which seeks to increase New Zealand’s international competitiveness. 

You will recall the Cameron Taskforce’s key recommendations were law changes to improve the quality of disclosure to investors; to strengthen the governance of financial products; and to better enable innovative and flexible methods of capital raising.

As the new Minister I feel like I’m coming on to the field a couple of minutes before the full-time whistle.  So I want to acknowledge the efforts of my political fore-runners, Ministers Lianne Dalziel, Simon Power and Craig Foss.

I’ve spent to past six weeks talking to as many participants in the markets as I could, and the feedback I’ve been getting has been broadly positive, that we’ve landed in a good space.

What gives me most confidence is the tales I’ve heard of the extensive engagement across the board between officials at MBIE, the FMA, other agencies and the market participants.

We’ll be hearing later from Jim McElwain of INFINZ, whose team has made a great contribution, as has so many other individuals and companies.

So I want start by thanking everybody, inside and outside of government, who has contributed. 

Consultation with government is often thankless and tedious work – and a time-consuming distraction from your everyday business pressures, but done well it can make a great difference.

That fact that we can engage so fully with active market players in the development of legislation and regulation is a function of our small size and intimacy as a nation.   It is one of New Zealand’s competitive advantages, and it’s good to see in this case we’ve been making the most of it. 

Let me focus on a couple of things the second tranche of FMC regulations sets out to achieve. 

On the side of improving access to capital for business to grow, the Act does several things.

It clarifies and widens the discloser exemptions that previously existed, particularly for smaller firms in the early stages of development.

The regulatory burden for firms wanting to offer employee share schemes is significantly reduced.

It allows for NXT - the new market that the NZX is launching, which the FMA has already licensed.

As you know, NXT will be geared for fast-emerging firms that want to raise capital publicly, but which aren’t large enough to meet the requirements of the main listing board. 

We’re also providing for two new categories of financial services: peer-to-peer lending and equity crowd-funding.

On a bigger scale, we’re providing for firms – whose debt or equity is quoted on the public market – to make same-class offers, with a lighter due diligence process, and without having to produce full disclosure documents.

Those same-class offers are easier and more efficient, so that boards can get an offer to market swiftly and with less cost.

Already, Auckland International Airport has raised $150 million in debt using those same-class arrangements.

For investors, meantime, the Act sets out to improve disclosure so it is easier to make informed investment decisions.

Prospectuses will now be shorter and will be subject to strict page limits from today.

We can’t force investors to read anything, but we can and we should ensure product disclosure statements spell out what investors really need to know about the offer.

And there’s a new online register which is going live this week.

It will provide a central point where analysts, financial advisers, and investors can obtain everything they need to know about offers as they start being made under the provisions in the new Act.

Also to build confidence, financial market service providers will now show through licensing that they meet basic capability requirements. 

More than eleven thousand firms, funds, markets, or professionals are under the FMA’s mandate in some way now.

Frankly, this brings New Zealand into line with internationally expected norms.

On internationalisation, meantime, we’re working on the Asian Region Funds Passport with governments in Australia, Singapore, Korea, Thailand, and the Philippines.

That is part of the change package too – it’ll allow easier cross-recognition of managed funds between those countries.

Today the final set of regulations come into force, but it’s only really the end of the beginning.

The critical thing now is the successful implementation of the Act.

I’ve every confidence that the FMA will do its best to allow, to guide and to encourage our markets to achieve those fundamental results that we’re looking for – increasing investor confidence and improving access to capital for businesses to grow – while being mindful of the costs that regulations impose.

We know that in an ever-changing world the job is never entirely finished.  I’m sure that in time imperfections and rough edges will be identified.

For the Government’s part, we will continue to listen. 

I want to close by expressing the hope that as we continue to implement these changes we’ll see a continuation of the collaboration and consultative approach that has been a hallmark of these reforms so far.

Thank you very much.