Once in a generation Securities Law changes proposed

Commerce Minister Simon Power has announced Cabinet’s decisions on the comprehensive review of securities law, calling the process “a once-in-a-generation opportunity to modernise our securities law.”

Monday, March 21st 2011, 6:23PM

by Benn Bathgate

"I'm determined to get it right," he said.

The Securities Law Reform paper outlines measures aimed at changing disclosure requirements for issuers, the governance of collective investment schemes and the liability regime.

On issuers disclosure obligations the paper proposes replacing the current requirement for issuers to prepare a prospectus and investment statement with a single product disclosure statement (PDS).

The PDS would be tailored to retail investors and, "the content of the PDS would also be heavily prescribed, and the length of the PDS would be prescribed, where practical."

On collective investment schemes, the paper identified the multiplicity of forms schemes and the resulting inconsistency of governance and legal obligations as one of the key issues.

"The paper proposes creating a single collective investment scheme regime, in effect a statutory overlay, under which schemes would be free to adopt any legal form but would be required to comply with a common set of substantive requirements to ensure an adequate level of investor protection."

Also recommended is the appointment of a supervisor to collective investment schemes with responsibility to oversee the manager. The paper also proposes investors have the power to remove the supervisor when investors holding 75% of the value of interests approve.

On liability the paper proposes making serious breaches of directors' liabilities a criminal liability, and increasing the maximum period for the prohibition of a person from a managing company from five to ten years, "and allowing the High Court to impose orders for an indefinite period."

Also proposed is a regime including some minor regulatory offences "to provide criminal sanctions for behavior that contravenes the regime and is harmful, but is not sufficiently serious to warrant the imposition of the proposed significant criminal charges."

Benn Bathgate is a business reporter for ASSET and Good Returns, email story ideas to benn@goodreturns.co.nz

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