Statement of the Net Benefit of the Proposal, Including the Total Regulatory Costs (Administrative, Compliance and Economic Costs) and Benefits (Including Non-Quantifiable Benefits) of the Proposal, and Other Feasible Options
Government
The New Zealand government currently maintains a substantial degree of authority over Australia issuers. Under the proposed regime, however, the extent of this authority will be limited, as Australia issuers will be regulated by the securities regulator in Australia (the Australia Securities and Investments Commission). Any reduction in regulatory jurisdiction over Australia issuers, however, is mitigated by the requirement that the issuers will have to comply with the ongoing requirements of the regime.
The proposed regime, and the empowering treaty, will strengthen relations with Australia and facilitate the development of a single economic market in the Trans-Tasman arena. The proposed regime develops a more cohesive and comprehensive regime for the treatment of the Trans Tasman securities offerings when compared to the current regime.
The New Zealand government may incur costs in establishing new systems for the Securities Commission and the Registrar of Companies to deal with the changes created by the new regime. The cost of establishing these systems, however, has not been quantified at present.
The regime will also encourage a greater flow of capital into New Zealand. This may have some fiscal benefits for the government and encourage national economic growth more generally.
Issuers of Securities
There will be compliance cost implications to the issuers, which are detailed in the Business Compliance Cost Statement. Issuers of securities will incur substantially decreased costs under the proposed regime. Offerors from Australia will not have to produce a prospectus or an investment statement that complies with the substantive requirements of New Zealand law, which currently costs issuers in something in the vicinity of A$10,000 to A$50,000. At this stage of the project, however, it is difficult to quantify the difference in costs, as the decisions regarding the costs of lodgement are still outstanding, although early indications is that the reduction in costs are likely to be substantial. Accordingly, it will cost Australian firms less to offer securities to New Zealand investors. It is also likely that similar benefits will flow to New Zealand issuers offering securities in Australia.
Australian issuers will have to submit the offer documents to the Securities Commission on application for entry into the scheme. There will be a cost associated with the lodgement of these documents, although it is not currently clear what this cost will amount to. Section 70A (3) of the Securities Act allows regulations to be made that establish the fees that will be payable to the Securities Commission for the exercise of any power that the Act confers on the Commission. Regulations will have to be passed that will enable the Commission to charge a fee for the lodgement of the offer document. Officials have begun work on developing appropriate lodgement fees and a further RIS will be prepared at this time. The fee for the lodgement of documents in Australia has not been set at present. Officials from both Australia and New Zealand will be meeting to discuss this issue before any decisions are made.
Smaller issuers of securities may also be affected by the increased number of issuers in the market, which may affect these firms' ability to remain competitive. This is mitigated by the fact that New Zealand issuers would have access to a greater number of investors than under the current regime. This is an especially salient benefit for New Zealand issuers given the relatively small pool of investors available in New Zealand relative to the pool of investors that are available in Australia. Issuers from New Zealand would be able to access investors from Australia at a lower cost, which would increase New Zealand issuers' ability to raise capital.
Investors
The proposed regime will result in an increased number of securities that are offered in New Zealand. Investors would benefit by having increased choice for investment and therefore greater scope for risk diversification. A greater number of issuers of securities in New Zealand may also lead to a more efficient allocation of capital to investors, which ultimately will provide more effective and appropriate products to investors. The on-going controls allow investors and the regulator in the host jurisdiction to pursue statutory remedies in their own country.
Back to Top