Capital Markets: Let's love financial markets

Commerce and Consumer Affairs Minister Paul Goldsmith. Photo / Janna Dixon

Vibrant capital markets are essential for businesses to grow, innovate, export and create jobs. Commerce and Consumer Affairs Minister Paul Goldsmith outlines recent developments that give people confidence to invest and businesses the capital they need.

New Zealand has had a long love affair with residential property. Considering our past experiences with capital markets, it's easy to see why.

In recent memory, mum and dad investors have experienced several upheavals in the market. Each time, many families have lost their savings. Bricks and mortar, by contrast, seem so much safer. So the focus of government policy in capital markets is to increase levels of investor confidence in the conduct of financial markets, so that more New Zealanders will include them in their savings plans.

We also know that strong capital markets are central to any productive and competitive economy - businesses need access to capital to grow. When these markets operate well they help drive growth, create jobs and increase incomes.

New Zealand's capital markets have recently been through massive regulatory reforms, culminating in the Financial Markets Conduct Act. I know that while some aspects of the new regime will reduce costs, overall the transition has been costly for industry to implement.

Our judgment remains those changes were necessary. The Act aims to promote growth through the confident and informed participation of businesses, investors and consumers in the financial market.

These new laws will improve the quality of disclosure documents for investors, strengthen the governance of financial products, and enable better innovating and flexible methods for firms to raise capital.

Sound, accessible and impartial financial advice leads to more people saving, investing in our financial markets and better financial outcomes for all New Zealanders.

Paul Goldsmith

The changes are being phased in over the next year or so, and my attention will be on the implementation of these changes and keeping in contact with all players to ensure the new regime is effective in delivering fair, efficient and transparent financial markets.

To improve access to capital so businesses can grow, we have made it possible for start-ups and other small and medium enterprises to access innovative, flexible methods of raising capital, such as crowd-funding and peer-to-peer lending.

New regulations also allow NZX to operate a market with rules targeted specifically at small and medium sized firms. Meantime, we have made some important changes that will protect New Zealand's reputation as a good place to do business by amending the legislation that underpins our company registration system and how we enforce it.

New requirements in the Companies Amendment Act will make it a lot harder for overseas shell companies to misuse our system for their own criminal gain.

From May 1 this year, companies in New Zealand will be more accountable and transparent and the Registrar of Companies will have greater enforcement powers.

For example, companies filing annual returns after July 1 will need to provide the date and place of birth of all directors and details of any ultimate holding company, if they have one.

Another priority is ensuring New Zealanders have access to high-quality financial advice to support investment decisions. Sound, accessible and impartial financial advice leads to more people saving, investing in our financial markets and better financial outcomes for all New Zealanders.

In March the Government kicked off a review of the legislation that governs how financial advice is provided. The Financial Advisers Act and the Financial Service Providers (Registration and Dispute Resolution) Act were designed to help consumers make informed decisions and ensure our capital markets function well.

These Acts sought to increase the professional standards of financial advisers, and promote greater participation in capital markets.

It is now time to review these Acts, make sure they are working well and identify areas where New Zealand can do better.

It's important that we understand the industry's perspective along with the needs and expectations of consumers when seeking financial advice.

An issues paper will soon be released for public consultation. I strongly encourage people to participate and comment on the questions identified. We have an opportunity to see if we can make the regime less complex and more effective for the investing public.

Among other things, we are interested in hearing whether people understand how advisers are regulated and whether regulatory requirements and compliance costs reduce people's access to financial advice. This review is also an opportunity to consider the long-term future of New Zealand's market for financial advice.

It's worth mentioning that many New Zealanders presently have little opportunity to engage in capital markets. We want more New Zealanders to build up financial assets, and improving financial literacy has to be part of the mix.