Monday 17th May, 2004
Imf Report Finds Non-Banking Regulation For Intermediaries Inadequate
Sovereign urges NZ Authorities to adopt Report recommendations Statement made by Simon Swanson, Managing Director
Sovereign
“New Zealand currently lags behind the vast majority of developed countries when it comes to regulation and
accountability of its intermediary industry, and the International Monetary Fund (IMF) Report released earlier in May
reveals the inadequacies of our system.
While the IMF’s New Zealand Financial System Stability Assessment report generally showed that New Zealand’s financial
sector was fundamentally sound, it did highlight gaps in the regulatory system, specifically regarding market
intermediaries.
The report says, “While securities and futures dealers that are exchange members are subject to high entry standards and
ongoing oversight, most other categories of market intermediaries are subject to little or no oversight.”
Sovereign believes that a review of New Zealand’s regulation of intermediaries is essential to provide a transparent and
efficient industry going forward. We endorse the IMF’s report and would wholeheartedly support a more effective
regulatory environment. Such an environment would provide all-round benefits for the consumer, intermediary and
manufacturer of investment, insurance and mortgage products by introducing greater integrity and accountability in the
industry.
The requirements that the report suggests include: (1) minimum entry standards relating to integrity, financial
capacity, competence, operational capability, internal controls; (2) periodic reports to the regulator or self
regulatory organisation; and (3) empowerment for the regulator to take effective enforcement action if these standards
are not met. Sovereign believes these are of critical importance to bringing our industry into line with standards set
internationally.
Sovereign urges Government and its authorities to act quickly to provide New Zealand with an international standard
intermediary regulatory system. The Ministry of Economic Development has included investment advisers in its review of
securities trading law – due for public consultation soon. This is an excellent opportunity for Government to act on the
IMF’s recommendations.
By bringing the intermediary market in line with other parts of our financial service industry we can ensure New Zealand
is well placed with a robust and well regulated environment which will benefit all parties involved.”
ENDS