The Watchdog that Didn't Bark? A review of the Securities Commission 1979 - 2011

Abstract

This paper examines the successes and failures of New Zealand’s financial market regulators. It looks at the history of the Securities Commission (the Commission), and identifies the influence policy and market factors had on the allocation of powers to the Commission and how the Commission chose to exercise them. By examining the use of these powers in five sectors (law reform, investigations, issuing exemptions, monitoring advertisements, issuing warnings and investor education, and supervision of NZX) the paper can conclude that given the financial limitations of the organisation, the Commission did on the whole meet everchanging expectations up to the Global Financial Crisis. The paper then shifts focus to the Commission’s replacement – the Financial Markets Authority (FMA) – and asks whether it will be able to use its wider mandate to more effectively regulate the market. The early trends from the FMA indicate that it is more willing to intervene at an earlier stage in instances of suspected misleading conduct, and places more emphasis on investor education than its predecessor. Provided this proactive approach is reflected in future financial markets policy making, the FMA has the potential to be a more effective regulator than the Commission was ever able to be.