Good morning and thank you for the welcome and introduction. Thank you also for the opportunity to open this valuable forum.

Your website tells me that one of INFINZ’s objectives is seeking to ensure New Zealand's financial and capital markets are "relevant, efficient, well run and attractive to domestic and international investors and market participant”.

It seems we have a shared vision.

Today I’m going to outline the plan the Government has developed, with the help of industry, for our capital markets.

In the short term, we're working to ensure companies retain access to capital. We're also putting measures in place to restore investor confidence. But we haven’t lost sight of how vital it is to get the long-term regulatory settings right. To that end, we're embarking on a review of the Securities Act.

But first I will start with the context we face – the global financial crisis.

The world is in the middle of the worst international financial crisis for decades.

Though the outlook for our markets is brighter than it was two or three months ago, the recent events of the financial crisis and the global economic downturn have shown a pressing need for governments to shore up financial institutions in response to severe liquidity shortages and a breakdown in lending markets.

However, this Government also recognises the need to ensure that any steps to improve access to capital must be balanced against the interests of investors.

As Minister of Commerce, I regard the rebuilding of confidence and integrity in our financial markets, for all participants, as paramount.  This is a key focus of this government. The role of government in this process is very much a collaborative one. Establishing successful solutions requires input from all those involved.

The global financial crisis has shown that the New Zealand market has some of the flexibility and resilience needed in a capital market. However, it's clear that the levels of indebtedness that were possible in recent years are, in general, no longer sustainable.  This applies to banks and other financial institutions, as well as other businesses.

As a result, debt finance is available on different terms.  It's now harder and more expensive to raise capital directly from offshore.  Much of this is a rational response to the poor economic outlook. Companies are having to ensure their balance sheets are in good shape and can withstand shocks.  They need to look at new ways to access capital.

Debt and equity capital markets play an important role in that.  We have seen a number of companies successfully tap into the retail bond market in recent months.

I’m sure you're aware that capital raising through the local debt market has been exceeding expectations this year. In fact, more than $1.2 billion in debt was raised on the NZDX market for the first three months of this year. This figure was up 8% on last year. Corporates which have recently issued large amounts of debt securities – Fonterra, Telecom, Fletcher Building, Genesis Energy, Auckland International Airport, and Contact Energy – have all closed with their bond offers fully subscribed.

We can, and should, use this shift towards capital-raising via the debt market as an opportunity to deepen our capital markets.  We should take note of how well our capital markets are coming through this crisis.  Now is the time to grasp the opportunities the crisis offers.  It's time to strengthen our markets and rework the framework of regulation to bring success and growth, not only to the finance sector, but to the wider business community.

Discussions around capital-raising, regulatory frameworks, and the government’s role in the market form the basis of the debate on how best to navigate our way out of recession and into a growth economy.

New Zealand companies are the core of any strategy to increase productivity and grow the economy.  That's why I was particularly encouraged when I saw that the topic for this address was “New Zealand Inc: what the new government has planned to assist NZ corporates, and ideas and policy settings for a stronger investment and growth environment in 2009”.

This Government does not pretend to have all the answers. That's why we're encouraging all involved in the finance sector to help us develop our thinking.

With that in mind I would like to thank those of you who have contributed ideas for a stronger investment and growth environment – either directly or indirectly through the Job Summit, through the Capital Market Development Taskforce, or through discussions with officials and Ministers.  INFINZ has been a strong advocate for progressing financial sector regulatory ideas.

The financial crisis has given us an opportunity to reassess the shape of our securities legislation. The crisis has influenced the way we must think about long-term regulatory settings, and has highlighted the importance of getting the regulatory framework right.

Many of you will be aware of some of the work my officials are doing in this area, but I would like to take this opportunity to outline the policy initiatives currently under way.

Access to Capital

The Capital Market Development Taskforce, which was set up by the previous government to develop a blueprint to improve New Zealand's capital markets to benefit the economy, released an interim report last November in response to the financial crisis. The taskforce consulted widely and received significant input on potential regulatory changes to help small companies and to improve investor protection.

Their report made recommendations on how securities law could be improved to increase the availability of capital and reduce the compliance costs of raising capital.

The government has picked up on a number of the recommendations in the first quarter of this year. These have been responded to through changes to legislation, regulations, and the listing rules of NZX.

The Securities Disclosure and Financial Advisers Amendment Bill, which I introduced to Parliament in February, addresses some of the taskforce's recommendations.  The bill mainly provides for a “simplified disclosure prospectus” that may be used by listed issuers who are already subject to continuous-disclosure requirements, but who would otherwise be required to produce a separate disclosure document for each offering. The bill also proposes relatively technical changes to categories of people who are exempt from the disclosure requirements for offers of securities under the Securities Act.  The effect of these changes will be to make it easier for businesses, listed or unlisted, to raise capital.

I'm aware that some people believe the bill doesn't go far enough. But let me assure you we're in the process of a reviewing the key piece of securities legislation – the Securities Act. The objective is a regulatory framework that strikes a balance between protecting the interests of investors and enabling businesses to access capital by reducing compliance costs. I'll speak more on this later.

In response to taskforce recommendations, NZX recently made changes to its listing rules to ease capital-raising requirements for listed issuers.  As Minister of Commerce, I decided to allow these changes, and will watch with interest their effect on the market.

In allowing the changes, I considered not only the integrity and international competitiveness of our markets, but the maintenance of an appropriate level of protection for investors. That was a key consideration, and I am reassured that the rules will be reviewed by NZX after 12 months.

Submissions also recently closed on the discussion document on proposed changes to the securities regulations.  They have been in operation for more than 25 years, and the review is a good opportunity to update those that need it.

Among other things, the proposed amendments will:

• Align the financial information in prospectuses with the requirements of applicable financial reporting standards and generally accepted accounting practice.


• Expand the definition of the term 'borrowing group' for the purposes of disclosure by debt issuers so it includes guaranteeing parent and sister companies, as well as subsidiaries.


• Provide more flexibility for matters that may be included in advertisements.


• Align the requirements around the disclosure of the interests of directors, promoters, and managers across the different types of issuer.

I'm sure some of you will have prepared submissions on these and I look forward to considering them.

The Jobs Summit also identified stimulating the development of New Zealand’s debt market as a near-term, high-priority initiative.  You will have heard of the idea of a ‘supercharged debt market’.  One part of this proposal seeks to reduce the barriers of mid-range companies to enter the market.  The detail of the proposal is being worked on as a matter of high priority by my officials in partnership with a private sector group led by NZX, and I look forward to updating you soon.

Investor Confidence

The Government is working to rebuild confidence in the financial sector. The implementation of the Financial Advisers Act and the Financial Service Providers (Registration and Dispute Resolution) Act are keys to this.

The Financial Advisers Act will help increase the transparency and accountability of those on the front line. It will create minimum standards for financial advisers and place their supervision with the Securities Commission. This will help encourage confidence in the professionalism and integrity of advisers.

The conduct of financial advisers is essential to increasing confidence in the market, and the Act will also make advisers who provide more complex advice subject to a Code of Professional Conduct.

One of the first steps for the implementation of the Financial Advisers Act is the appointment of a Commissioner for Financial Advisers to the Securities Commission.

And I am pleased to be able to announce today that Annabel Cotton will take up that position for a period of up to 12 months, effective from next week.

Ms Cotton, as a current member of the Securities Commission, has a broad understanding of the commission's role in the oversight of financial advisers.

She will assume the role while the Ministry of Economic Development continues its search for a commissioner to be appointed for a full term of five years.

One of her first roles will be to appoint an industry committee to develop the Code of Conduct.

One of the commissioner's first roles will be to appoint an industry committee to develop the code of conduct. The commission is already working with industry on the authorisation processes for advisers and the qualifying financial entity approval processes. I am also developing, with the help of an industry working group, the disclosure requirements for financial advisers.

The Financial Service Providers Act will create a public register of those providing a financial service. Before directors and managers of companies providing financial services can be registered they will need to certify they do not have certain criminal convictions, are not bankrupt, and are not subject to a management ban under company, securities, or consumer law. The register will be run by the Companies Office.

This Act will also create a free dispute resolution service to anyone using a financial service provider. I am working on this with the Minister of Consumer Affairs.

The implementation of these regimes is no small task, and I am committed to ensuring that the result is robust and cost effective. I encourage you to work with the Securities Commission, the Ministry of Consumer Affairs, and the Ministry of Economic Development to ensure the implementation process runs effectively.

Both Acts are due to be implemented by the end of next year. There is a great deal of work to be done between now and implementation.

Long-term regulatory settings

The next big step for the Government is a comprehensive review of New Zealand's key piece of securities legislation – the Securities Act 1978.

This is a piece of legislation more than 30 years old trying to regulate an area that has seen a lot of innovation in that time.  The lessons we are learning from the global financial crisis, along with the recent series of finance company collapses, highlight the need for a modernisation of this area.

The Securities Act review will focus on four key topics: the scope of securities law, supervision of issuers, disclosure by issuers, and the role of regulatory agencies.

Many jurisdictions are working on related issues at the moment. The global financial crisis has highlighted the challenges of ensuring investors receive clear information about the risks they are taking, and ensuring they have the capability to make good choices and manage those risks.

It'll be crucial for us to heed the lessons from overseas. But we'll also have to focus on re-developing a regulatory regime that strikes a balance between protecting the interests of investors and enabling businesses to access capital.

This regime will have to be flexible enough to meet the needs of a relatively small capital market like our own, while providing an attractive destination for offshore investors.

The Securities Act review will also look at the regulation of trustees.

Finance company collapses have raised issues around several aspects of the regulatory framework, one of which is the role and effectiveness of trustees in supervising issuers.

As a starting point, I intend to fast-track the trustee supervisory model proposed by the review of financial products and providers. This may involve the licensing of corporate trustees by the Securities Commission. Among other things, it would require trustees to meet a set of criteria before being licensed.

For example, they would have to meet the required standards for the systems and processes they use to supervise issuers, and they would have to prove to the commission they have the experience, independence, and resources to carry out their role.

I will also be looking at the role of trustees more broadly. In particular, considering means to improve the quality of trust deeds, reviewing the duties and powers of trustees, and looking at improving the accountability of trustees to investors.

I am not interested in cosmetic change in this area.

These measures will together have a major effect on the quality of supervision of trustees, and will, in conjunction with other measures such as the prudential regulation of non-bank deposit takers, greatly strengthen the protections afforded to investors by the legal framework. Careful consideration will also be given to the linkages with the broader review of the Securities Act and the regulation of non-bank deposit takers.

It's a key concern of this government that any regulatory framework we develop or modify through this review does not stifle innovation.  Good rules allow market players the freedom to innovate within clear boundaries.  They should have incentives that motivate them to play and not be constantly seeking to invoke the referee.

Conclusion

This morning I have outlined the plans the Government has to help New Zealand corporates weather the economic storm, and the policy settings being developed to ensure a strong investment and growth environment for the calm that will surely follow.

The Government has responded rapidly to this situation, but there is more to be done.  I am determined to grasp the opportunity that the crisis provides to review the role and scope of government in the regulation financial markets.

Of course, this is not purely a government responsibility.  Success depends ultimately on the shape, ability, and drive of the commercial sector.

Last month I spoke at your awards dinner where we celebrated some of finance’s high achievers.  Such personal and institutional high performance, combined with a cohesive and flexible regulatory structure, will create the robust and dynamic finance sector we all want.

With this in mind, I look forward to reviewing the outcomes of this forum, and seeing how the evidence and experience you collectively bring can be used to help cement a productive path to future growth.

I have pleasure in declaring this forum open.