Address to New Zealand Shareholders Association Conference and AGM

  • Simon Power

Good morning.

Thank you for the invitation to speak here today.

First I'd like to apologise for stealing your founder and chairman Bruce Sheppard away from you.

Earlier this year when I was brainstorming just who we would put on the establishment board for the new Financial Markets Authority - Bruce's name was one of those which popped into my head.

It seemed to me we needed a mix of skills if we were to get this right, and for me Bruce was a necessary ingredient in that important mix.

He isn't afraid to speak his mind, he has the interests of everyday investors at heart and he's worked tirelessly to keep companies honest.

As you will be aware, my overriding focus in the commerce portfolio is to restore mum and dad investor confidence in our capital markets after the global financial crisis and the collapse of finance companies.

Having such a strong investor advocate in Bruce on the establishment board is an important component to getting the regulator right.

And, I'm pleased with the vigour with which Bruce took up the role.

To quote a media article, Bruce said the appointment felt like 1945 after the end of World War II.

"It's Berlin, I'm General Patton and for the last 10 years I've been happy to kill everything in my path. But the war is over and now I have to work out how to rebuild the economy."

It's much the same way that I felt after spending nine long years in opposition.

But I won't dwell on those long dark days - there's too much work to be done.

The FMA establishment board has now been up and running for two months and has recently begun advertising to find the FMA's chief executive.

I've met this board once and reports I'm receiving is that it is making very good progress in getting the regulator established by the first quarter of next year.

We've fast-tracked it because we need to make changes as soon as possible. Over the past 20 months it's become clear to me that what was missing was a single regulator with a clear focus on visible, proactive, and timely enforcement to help protect investors and therefore our capital markets.

On too many occasions in the finance company collapses we heard of investors' money falling to the floor while the regulators looked at each other.

This damaged investor confidence.

The FMA has a critical role in rebuilding that confidence.

It will consolidate all the functions fragmented across the Securities Commission, the Ministry of Economic Development, including the Government Actuary, and the NZX.

And make no mistake - it will have some grunt.

It will have sole responsibility for enforcing securities, financial reporting, and company laws as they apply to financial services and securities markets.

It will regulate and oversee trustees, auditors, financial service providers, and financial advisers.

Further, and this is very important, it will have the power to bring products into its scope so we can avoid the type of problems we saw with products such as Blue Chip, which the Securities Commission was unable to regulate because they were structured to be outside the Securities Act.

Some have said the FMA needs new powers, including allowing for public enforcement of directors' duties.

I believe the FMA will have the powers it needs to do the job. But we are consulting on this as part of the review of securities law, and let me assure you today that if further powers are required then the FMA will get them.

We want to get this right.

This is a good point for me to make a plea to you to make sure you are part of the law review process.

I encourage you to read the Securities Act review discussion document and make your views heard, because it is organisations such as yours that have much to contribute to this issue.

The document looks at the types of financial products regulated, exemptions for offers to specific classes of investors, disclosure documents, and collective investment schemes.

And the final chapters discuss a wide range of matters which I'm sure you will be interested in, including the possible public enforcement of director duties.

Another big piece of work I know you will be interested in is improving financial literacy.

I'm working with agencies to better co-ordinate our financial education efforts and target them to where they will have the best effect. 

I'm sure you will agree with me when I say the importance of financial literacy cannot be underestimated.

Getting investors to feel more confident about putting their savings into the capital markets comes by way of giving them the basics of investment and providing advice they can trust to make informed choices.

As an aside to this, I know that the Shareholders Association has worked with MED officials on proposals to amend the Companies Act to allow companies to opt in to using electronic shareholder participation for company decisions.

I can announce today that it's my intention to include this in the Regulatory Reform (Omnibus) Bill 2010 which is currently being drafted and I thank the association for its input into this.

I'm sure we agree that anything that results in an increase in shareholder participation in corporate decisions is welcome.

Work is also continuing on the Government's response to the Capital Market Development Taskforce, with some of that work being fast-tracked, including improving regulations around KiwiSaver.

As with all investment, KiwiSaver is not guaranteed by the Government, and investors need to take responsibility for their own investment decisions.

But the Government does have a role to play to ensure investors get the information they need to make sound choices.

The Government also has a critical role to play in creating the right regulatory environment, which is where the Financial Markets Authority comes in.

Ladies and gentlemen, it's an exciting time to be involved in the financial market space and an exciting time for the Shareholders Association.

I see that after morning tea your new chairman John Hawkins is outlining his vision for the future.

John, I'm sorry I can't stay to hear what you have to say, but I look forward to getting a copy of your speech.

I'm sure you will bring your own style and gravitas to the role and I look forward to working with you.

Thank you for the work the association does to promote confidence in our financial markets and those who invest in them.

Thank you.