31 Jan 2011

New financial authority needs planned powers - Botherway

7:35 am on 31 January 2011

The head of the body setting up the Financial Markets Authority (FMA) says investors are expecting a strong regulator to come down hard on errant firms, and carving out some controversial parts would be a mistake.

The FMA will replace a number of regulatory bodies, but the legislation behind its establishment has been opposed by NZX, the Business Roundtable and Cameron Partners.

In particular, they object to the new regulator taking legal action on behalf of investors, and worry the FMA will scare off investment.

The chairman of the establishment board, former fund manager Simon Botherway, says the criticism of the authority's proposed new powers is surprising, with much of it already endorsed by the Capital Market Development taskforce.

Mr Botherway says the planned powers, and the adequate enforcement funding, are needed to reassure investors.

He says those directors' duties already exist in legislation, so no new offences or penalties are being promoted.

Mr Botherway says there is a deficiency in terms of capacity and incentive, on behalf of shareholders and investors or creditors, to pursue those actions.

He says when it's in the public interest for a regulator to take action on behalf of investors or creditors they should be able to do so.

Mr Botherway says there does not need to be any further Government review.

He says the FMA is awaiting a response to its budget submission, which is greater than the $13 million currently funding the Securities Commission due to the extra functions it will pick up, including licensing financial advisers.