Statement of the Nature and Magnitude of the Problem and the Need for Government Action
The New Zealand and Australian governments are committed to working towards a single economic market. Regulatory arrangements in areas such as the supply of goods and occupational registrations have progressed. The requirements around securities offerings between the two jurisdictions have not kept pace with developments in these areas, thereby inhibiting the development of a single economic market between New Zealand and Australia.
The current regulatory regime for trans-Tasman offerings of securities generates high costs for issuers in both jurisdictions, which provides a disincentive to fundraise cross border. The problem is that issuers in one jurisdiction are generally unable to use the same offer documents for the offering of securities in the other jurisdiction. The resulting duplication of the offer documents increases costs for issuers wanting to offer securities across the Tasman. It is estimated that the costs imposed by the current regulatory arrangement, for Australian firms providing offer documents to New Zealand investors, may range from A$10,000 to A$50,000 per securities offering, inclusive of legal costs. There is no clear indication of the costs to New Zealand issuers wanting to offer securities in Australia, although it is conceivable that these costs would be proportionately similar. It should also be noted that the cost of offering securities across the Tasman would vary from issuer to issuer, depending on whether they fall within current exemptions. There are general exemptions in both jurisdictions that permit qualifying issuers from the home jurisdiction to offer securities without complying with some of the requirements of the host jurisdiction, which reduce some of the costs that arise from Trans-Tasman offerings of securities. Nonetheless, the current position continues to impose substantial costs on issuers wanting to offer securities in both Australia and New Zealand.
In submissions on the discussion document entitled Trans-Tasman Mutual Recognition of Offers of Securities and Managed Investment Scheme Interests (May 2004), members of the public confirmed that these costs discouraged the offerings of securities across the Tasman. These high costs have restricted offerings between the two countries and have limited competition in the domestic capital markets of both jurisdictions. This has had the ultimate effect of reducing overall investor choice. It should be noted that there is no comprehensive quantification of the extent to which the costs has disincentivised cross border offerings of securities.
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