Securities Law Review to be Delayed
13 September 2010
It has been announced that the introduction of new Securities laws arising from the review of the Securities Act and Securities Markets Act will be delayed until 2012 rather than in 2011.
INFINZ, like many other organizations, has responded to the 200 page MED review of the laws overseeing our securities industry. There was quite a rush to get the response in by the target date of 20 August so the delay is a little disappointing. That said, the delay could actually allow for more targeted consultation on some key aspects of the review.
Perhaps the real point of concern is the impact on the operations of the Financial Markets Authority. INFINZ understands that the legislation giving rise to the FMA will be a large piece of law even after that part of the proposed bill addressing announced changes to the KiwiSaver scheme is stripped out but what are they going to administer. It has been suggested that for the moment the FMA will simply apply the current law more vigourously under the auspices of a broader workload given the many parts of the regulatory pie that will end up under the FMA umbrella.
It will be interesting to see what Simon Botherway says on this topic when he addresses the INFINZ conference on the afternoon of Wednesday 15th September.
One area of further debate that INFINZ has suggested in its submission on the Review of Securities Law is the focus of the law itself, more particularly the focus of disclosure. INFINZ has suggested that disclosure should be based upon delivering meaningful information to the professional analyst and advisers rather than trying to deliver information to the retail investor. INFINZ’ contention is that the professionals can more effectively intermediate when given the right information rather than having retail investors getting rafts of sometimes less than useful information that they can’t interpret. Intermediation is more effective than an assumption of retail analytical ability.
Further, the last thing we need to see is disclosure at such a simplistic level that risk is seemingly stripped out of the equation and is replaced my such shallow metrics as “road signs” as some have suggested. Similarly, effective intermediation will mean that the nirvana of investor financial literacy, which is more properly a generational issue, won’t blindside us into thinking we can disclose more if people only understood what they were looking at. We also don’t really want the new FMA undertaking the role of merit regulation as a panacea to naïve investors or poorly skilled advisers.
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