by Rob Hosking
Commerce Minister Lianne Dalziel’s office was not commenting on the issue, but it is understood the government is looking at changing the law.
It will have to persuade at least one of the minor parties – probably United Future – to back any such change.
Dalziel is understood to be sympathetic to a law change, in the face of some resistance from officials, especially the Securities Commission.
Eight New Zealand fund management firms are believed to be affected – and in some cases the firms stand to lose millions of dollars unless the law is changed.
Under current law, funds that are based offshore can be exempted from issuing a prospectus in New Zealand. That exemption though depends on the necessary documentation being lodged with the Companies Office.
Failure to file that documentation renders the entire offering void: the fund manager has to not only return the money, but pay a penalty of 10% for every year the money has been lodged with them.
The issue arose when Westpac bought BT Funds Management and discovered the necessary documentation had not been filed.
Edinburgh Fund Managers have also fessed up, and six more are understood to be affected.
One of the six was only a day late in filing the documentation, but is reputed to be up for a loss of $700,000 if the current law is applied.
It is the disproportionate size of the penalty which has got the financial services industry on both sides of the Tasman in a lather.
Both the New Zealand Investment Savings and Insurance Association and the Australian Investment and Financial Services Association have made the same point - some penalty is acceptable, but the current rules are draconian, especially when set against the actual harm done.
Rob Hosking is a Wellington-based freelance writer specialising in political, economic and IT related issues.
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