Fix financial 'black holes' says Weldon

Mark Weldon. Photo / Mark Mitchell

NZX chief executive Mark Weldon believes that fixing "black holes" in the regulation of financial products in New Zealand could usher in a new era for capital markets.

"2010 could be an absolute banner year if the Government is of a mind to make some meaningful structural change and they will be completely supported," Weldon said.

He said the financial adviser sector needed an overhaul and he was hopeful that the tax working group would put forward ideas that would be positive for equalising investment between companies and property.

He said there was also a "massive hole" in regulation in that finance companies and others could employ "regulatory arbitrage" or effectively opt out of regulation by not being listed on the NZX.

They were able to sell products to the public but faced no ongoing monitoring, whereas companies listed on the NZX faced ongoing market discipline.

"We have a broken Securities Act which allows a dark cave where people can hide in what I would call the unlisted public sector."

The Securities Act was all about allowing capital raising but not ongoing information.

"This allows the companies to opt out from providing information, or they go into moratorium and they haven't got a regulator at all."

Proper regulation of all financial products and all institutions that raise money from the public was needed.

He noted that Hanover Group was not listed but it was hard for casual investors to identify a company like it as listed on a market or not.

- NZPA