Investors lose confidence in market regulators
The confidence of investors to entrust their savings to New Zealand’s investment markets is at stake in the slow investigations of company collapses.
This is the view of the New Zealand Shareholder’s Association chairman John Hawkins, who took aim at the Financial Markets Authority (FMA) and Reserve Bank, and has written to Prime Minister Jacinda Ardern.
After nearly two years there had been no result from the FMA’s investigation into the multimillion-dollar collapse of Wynyard Group, nor over the CBL Corporation failure.
The FMA responded by saying that supervising and enforcing financial laws was complex: ‘‘The facts and circumstances drive how long a case takes.’’
But Hawkins had predicted the response and said it wasn’t good enough. ‘‘What if there was some kind of meltdown in KiwiSaver funds? How many years would they take to investigate?’’
Hawkins said confidence had been lost in the Reserve Bank and the FMA investigators because their actions indicated they have not been able to agree on a path that was fair, efficient and transparent to investors, including holders of insurance policies issued by CBL. He said a particular difficulty was the Reserve Bank’s requirement that confidentiality be maintained, which directly contradicted the FMA’s duty to ensure continuous disclosure. ‘‘As a result, for nearly a year we had an uninformed market, followed by a $750 million failure,’’ Hawkins said.
He claimed relevant information about CBL had been given to the FMA years ago, but the information had been discounted.
The number of staff and resources had increased at the FMA but if anything, their performance was worse, he claimed.
The lack of progress in the CBL probe was not helped by the fact that some matters were also being investigated by the Serious Fraud Office (SFO), overseen by another minister, he said.
‘‘Our group is apolitical and in our view a notable part of the problem is public perception that the market regulators are ineffective, and so investment in these productive areas is too risky. No market can respect a system where the boundaries are vague or unknown. Justice delayed is justice denied.’’
In a statement, the FMA said it understood that public confidence in regulators was essential.
‘‘An FMA investigation into CBL is currently running alongside the joint investigation undertaken by the Reserve Bank and the SFO,’’ the authority said.
‘‘We have taken steps where possible to accelerate decision making and provide additional resources. Throughout all this, we are conscious of the evidential standards required by the law.’’