New Zealand's capital markets need overhaul, says taskforce

Commerce Minister Simon Power says he is encouraged with the direction the Capital Markets Development Taskforce is taking. Photo / Mark Mitchell

New Zealand's capital markets are thin, underdeveloped and much of the investment in this country is unproductive, says a report by the Capital Markets Development Taskforce.

Set up by the Labour Government in July last year to look at ways of improving New Zealand's capital markets, the taskforce yesterday released an interim report outlining a long list of areas needing improvement as well as suggestions on how that could happen. It said it had found evidence the capital markets were not functioning as well as they could.

It said "too much investment is unproductive, our public capital markets are thin, and our private capital and derivatives markets are underdeveloped". The taskforce also found many investors had seen negative outcomes from parts of the market, most recently involving some finance companies, and the market for financial advisers did not work well. Companies that issued investment products were also faced with outdated regulations and unnecessary compliance costs.

"The taskforce believes that New Zealand can, and should, do much better than this. While we might be a relatively small country, many of the barriers to better performing capital markets are within our collective control."

Its recommendations include:

* Introducing a regime that requires all firms selling investments to the public to treat customers fairly.
* Placing a clear fiduciary duty on financial advisers.
* Restricting use of the words "independent adviser".
* Making a one or two-page disclosure document mandatory.
* Standardising fee disclosure.
* Having a central website for all disclosure documents.

The taskforce also suggested ways to reduce the costs of collective investment schemes, fund management fees and raising capital for small companies.

Commerce Minister Simon Power said he was encouraged by the direction the taskforce was taking.

"It is clearly focused on identifying steps that will help deepen New Zealand's capital markets at a time when companies are struggling to access capital. They clearly see investor confidence as a critical ingredient for the deepening of markets."

The taskforce is expected to report back again in December.