by Susan Edmunds
The Financial Markets Conduct Act comes into force in two stages this year, one in April and one still to come in December.
It includes an overhaul of the rules around discretionary investment management services (DIMS), which it was suggested were introduced as a response to the Ross Asset Management failure.
Ross ran New Zealand’s largest Ponzi scheme, which cost hundreds of investors their life savings.
Some of his investors have now written to the Government, asking it to address the lack of financial regulation in New Zealand.
Spokesman Bruce Tichbon said: “Financial structures and safeguards in NZ are not sufficiently robust to support a modern economy, and RAM and the many other fraud cases are surely proof of this. Investor confidence is intolerably low and the size of NZ’s financial markets is seriously small compared to the markets of our trading partners.”
Tichbon said the FMCA was “top-of-the-cliff” legislation that was likely to be ineffectual.
Laws that could come into play after the event of a collapse were also needed, he said. “What we desperately need is something better at the bottom of the cliff.”
Regulation in its current form would just encourage fraudsters to change their modus operandi, he said. “In the case of lots of finance company collapses, the companies were audited anyway… these crooks have got so much flexibility they can just move the game and play in a different way.”
Tichbon said he felt very pessimistic about the potential impact of the FMC on the industry. “The top-of-the-cliff legislation will probably be ineffective, particularly when the next big financial crisis comes.”
He said industry participants should be required to have some "skin in the game". "Ross had high-level connections who are still operating in the market as if they're heroes. Once you look into these things, it's quite intolerable."
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