KEY POINTS:
New rules placing stricter requirements on finance companies to report on their financial position are expected to return some confidence into the battered sector.
Nelson-based Finance and Investments became the fifth finance institution in around a fortnight, and the ninth in 16 months, to collapse when it went into receivership on Wednesday owing 370 investors $16 million.
Yesterday changes proposed by the Securities Commission to the rules governing the sector were made public.
Commission acting chairman Colin Beyer said the proposed changes would "ensure that all trust deeds provide trustees with robust powers to get the information they need to carry out their duties in the interests of investors".
The changes would automatically become part of all finance company trust deeds, including existing deeds.
The changes include:
* That finance companies must give trustees monthly reports on liquidity, asset quality, reinvestment rates and any breaches of financing arrangements with third parties;
* A trustee may be able to appoint an independent expert to report on the finance company's true financial position;
* Empowering the trustee to appoint an additional auditor if it is not satisfied the auditor appointed by the company has sufficient experience or capacity.
There were 40 or 50 finance companies and not all their trust deeds were standard, Mr Beyer told Radio New Zealand today.
"We just wanted to ensure that in every case the trustee would have the tools with which to obtain any necessary information."
Some trust deeds were quite old and no longer fitted the bill.
"We've been pretty careful in the way we've approached this, and what it does is ensure that in every trust deed, if the powers are not there already, they'll be there for the trustee to require better and further information on a more timely basis."
Commerce Minister Lianne Dalziel said the advice she had so far was that the proposed changes were a matter of regulation, rather than legislation, meaning they could be implemented relatively quickly, during next month.
"I'm talking about moving heaven and earth to get this into place as quickly as we possibly can," she said.
At the same time, nine pieces of legislation were being drafted as a result of the review of financial products and providers.
"I think that this will put some confidence back into the market in terms of the accuracy and the currency of the information that people can rely on being given to trustees and I think that's a good thing in the situation we're in now," Ms Dalziel said.
Once the proposed regulations went through they would automatically update all existing deeds and would be applied as provisions in all future deeds.
- NZPA
