19. Links to Other Reviews
323. The work on the regulation of financial intermediaries is being considered against the context of other existing projects: the Review of Financial Products and Providers, Domestic Institutional Arrangements and the Financial Action Task Force 40 Recommendations on Anti-Terrorism and Money Laundering. The Ministry's Financial Sector team is either leading or participating in these projects, so is well placed to efficiently make the necessary links and share information.
Review of Financial Products and Providers (RFPP)
324. The RFPP considers the regulation of insurance (health, life and general), superannuation, collective investment schemes (unit trusts, participatory securities, group managed investment schemes, contributory mortgages) non-bank financial institutions (friendly societies, credit unions, building societies, finance companies, industrial and provident societies), futures and derivatives and offerings of securities.
325. There are close links between the work on financial intermediaries and the RFPP as both deal with financial sector market conduct, and because financial intermediaries (which also includes financial institutions) provide advice on financial products, including advice from product providers.
326. The financial intermediary work is proceeding separately to that of the RFPP on the basis that the research and consultation undertaken by the Task Force, and the resulting Task Force recommendations for a co-regulatory model, mean that the work on financial intermediaries is more advanced than the work on each of the areas of the RFPP.
327. Ministry officials are working closely to ensure consistency across these reviews - for example, work on insurance intermediaries is feeding into the work on insurance products and insurance product providers.
328. Discussion documents for the RFPP will be released in July/August 2006 and policy decisions to be made in late 2006 with the intention of legislation being introduced in 2007/2008.
Domestic Institutional Arrangements
329. The work on Domestic Institutional Arrangements (which institutes the Securities Commission as the regulator of market conduct) is progressing consistently with this paper.
Financial Action Task Force Recommendations
330. The Ministry of Justice is leading a government review to ensure that New Zealand is more compliant with the Financial Action Task Force's 40 Recommendations to deter money laundering, and its 9 Special Recommendations to counter the financing of terrorism. To comply with the recommendations, we are intending to place the required fit and proper requirements on people handling investment money. The Ministry is also working closely with the Ministry of Justice on this work to ensure that these requirements are aligned as much as possible with the work on financial intermediaries work to minimise compliance costs.
331. In relation to the Secret Commissions Act 1910 (which seeks to prohibit secret rewards and inducements in agency, principal and third party relationships), Ministry of Justice officials are considering the form of any review of the Act, including whether there should be a separate Secret Commissions Act or not (the offences, for example, could be provided for in the Crimes Act 1961).
332. Cabinet has already approved an increase in the penalties associated with the offences in this Act.
Trans-Tasman Implications
333. The Memorandum of Understanding on Business Law coordination between Australia and New Zealand (MOU) and the Trans-Tasman Mutual Recognition Arrangement (TTMRA) are both relevant to this work.
Memorandum of Understanding of Business Law
334. The MOU (signed in 2000) between the two governments is based on the presumption that we should coordinate our business laws with Australia unless there is a good reason for the law to be different.
335. The Government is aware of concerns about the Australian experience in regulating financial intermediaries and considers that the differences between the two financial intermediary sectors (where most New Zealand financial intermediaries are individuals or small and medium sized businesses, compared with the large dealer groups resulting from Australian legislation) and the costs involved mean that there is good reason for the proposed co-regulatory model to be different.
Trans-Tasman Mutual Recognition Arrangement (TTMRA)
336. The TTMRA, which came into effect in 1998, is an arrangement between New Zealand and Australia, whose strategic objective is to remove regulatory barriers to trans-Tasman trade in goods and the movement of registered professionals either through mutual recognition of our respective regulatory regimes or through harmonisation. It is implemented by way of overarching legislation which provides that mutual recognition in relation to the sale of goods and registration of occupations will apply between all participating jurisdictions, unless specifically excluded.
337. Ministry officials have paid careful consideration to the Australian regime to ensure that equivalent objectives and outcomes to the Australian regime are obtained so that there is the potential to utilise (at least for some intermediaries) the TTMRA. This does not mean that we will be adopting Australian regime, rather this would enable intermediaries to operate in both jurisdictions, remove impediments to cross border activity and move us further towards a single economic market.
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