Public Enforcement of Directors' Duties: A Critical Assessment of the Financial Markets Authority's New and Porposed Powers

Abstract

This thesis critically examines two powers of the Financial Markets Authority (one new and one proposed) to enforce directors' duties. The Financial Markets Authority's substantial new power under s 34 of the Financial Markets Authority Act 2011 to enforce directors' duties by seeking civil remedies against directors on behalf of investors and issuers is examined in detail. Section 34's scope, limitations, and potential problems are analysed and discussed in light of Australia's experience with a similar provision in s 50 of their Australian Securities and Investments Commission Act 2001. Despite a number of differences between New Zealand's s 34 provision and Australia's corresponding s 50 provision, I conclude that Australian case law, commentary, and regulatory guidelines are nevertheless a valuable aid for predicting when the FMA will consider there to be sufficient public interest to exercise its s 34 power. Although our public interest criteria may be harder to satisfy than Australia's, the unavailability in New Zealand of investor class actions or civil pecuniary penalties for breaches of directors' duties may mean that the FMA uses its s 34 power more than ASIC has used their corresponding power. A presently proposed, complementary, power of the Financial Markets Authority to enforce certain core directors' duties by bringing criminal actions against directors is then briefly examined. A new criminal offence provision for intentional breaches of the directors' duties in ss 131 and 135 of the Companies Act 1993 has been proposed. I conclude that because only intentional misconduct is targeted; the proposed provision will deter egregious breaches of duties by directors, without discouraging too many individuals from taking up directorships or making directors overly risk-averse.