Capital Market Dvlpt Taskforce releases report

MEDIA RELEASE
16 December 2009

Capital Market Development Taskforce releases final report

The final report by the Capital Market Development Taskforce was launched today, containing a comprehensive package of recommendations to address major challenges in our markets.

The report is the culmination of an 18 month industry-led engagement, recognising an urgent need to raise productivity through higher quality investment and raising New Zealand’s low `birth rate’ of large and successful companies.

Major failures in the financial sector, such as finance company collapses since 2006, have caused losses and dented confidence, and as such the Taskforce recommendations focus on improving the information and products for investors. Their focus has also been on improving businesses’ ability to access the capability and capital they need at each stage of their development.

If implemented, the Taskforce believes its recommendations will significantly improve the contribution that capital markets make to New Zealand’s economic growth and New Zealanders’ well-being.

Taskforce chair Rob Cameron says the recommendations in the report reinforce each other and the Government needs to respond comprehensively to the recommendations in order to have a dynamic capital market environment suitable for both investors and business.

``Investors need to know that independent advisers work for them – not product providers,’’ Mr Cameron says. ``They also need to have concise product disclosure that gives them the information they need in a form they can understand.’’

``Businesses are calling for clearer regulatory boundaries between the private and public markets so that unwarranted compliance costs aren’t imposed on private deals.’’

The Taskforce also recommends regulatory and tax environment reforms for capital markets, including reviewing and consolidating regulatory agencies and equipping them with the powers and resources they need.

The Taskforce’s Final Report and Summary Report are available at www.med.govt.nz/cmdtaskforce.

Questions and answers

1. What is the purpose of the Capital Market Development Taskforce?

Capital markets provide crucial tools for ordinary New Zealanders to achieve their financial goals. They are also a major source of funding for our businesses. The Taskforce was set up to develop and launch a blueprint for improving New Zealand’s capital markets.

2. Where did the Taskforce come from?

The Taskforce was first proposed at an Investment Forum on 27 November 2007 at which approximately 60 people, drawn from the business and finance sectors, academics and government debated how best to improve the investment environment for New Zealand firms. A key recurring theme throughout the day was willingness for the private sector to engage with government on this issue. The Taskforce was established in July 2008 by the previous Government.

3. Who are the members?

The taskforce is chaired by Rob Cameron of Cameron Partners, Investment Bankers. The members are: Franceska Banga (NZVIF), Jonathan Ling (Fletcher Building), Rob McLeod (Ernst and Young), Gareth Morgan (Gareth Morgan Investments), Adrian Orr (New Zealand Superannuation Fund), Cathy Quinn (MinterEllisonRuddWatts), Scott St John (First New Zealand Capital), Mark Weldon (NZX), Nigel Williams (ANZ), Mary Holm (Investment writer), and officials from Inland Revenue, the Treasury, the Reserve Bank, and the Ministry of Economic Development.

Members are appointed as experts, and not as representatives of their organisations.

4. Who else did the Taskforce consult with?

The Taskforce has received a huge amount of input and assistance from all parts of the financial services and legal industries. This has included ideas provided through meetings, letters, and discussion papers. The Taskforce released two interim reports that generated significant feedback.

5. What is the Taskforce recommending?

The Taskforce has delivered a mutually reinforcing set of recommendations to create a more healthy market for investors, and raise capital markets’ contribution to economic growth.

For investors, this includes better regulation of disclosure and advice, a greater emphasis on enforcement, and improving the range of quality investment products.

For companies, we are recommending steps to increase the availability of expansion capital, facilitate the development of exchanges more suited to small and medium-sized companies, improve the infrastructure and information in our listed markets, and remove regulatory and tax barriers that make it harder for firms to attract investment. The summary report includes a complete list of the Taskforce’s recommendations.

6. What does this mean for retail investors?

If the Taskforce recommendations are implemented, retail investors will have access to better information and a wider array of choices, allowing them to participate confidently in the market. A more robust regulatory regime and better monitoring and enforcement will reduce the extent to which retail investors are exposed to poor-quality products and end up taking risks they did not anticipate. In consequence, investor outcomes will improve, including through higher returns (adjusted for risk).

7. What does this mean for companies and the economy?

Companies will be able to more easily access the capability and capital they need at each stage of their development. New Zealand should also have a healthy derivatives market, with a focus on agricultural commodities, providing businesses with the risk management tools they need. For the economy, our recommendations mean higher quality investment and faster economic growth.

8. What happens to the Taskforce and its recommendations now?

The Taskforce’s work is now complete and it will no longer meet as a group. The Government has stated that it will respond to the recommendations as a matter of priority in the New Year. One of the Taskforce’s recommendations is that the Institute of Finance Professionals New Zealand (INFINZ) organise a forum to continue the dialog between industry and government. We hope this will sustain the momentum the Taskforce has generated, and evaluate the implementation of its recommendations.

ENDS

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