Crime and punishment in the draft Financial Markets Conduct Bill

A key objective of both the establishment of the Financial Markets Authority (FMA) and the general review of securities law is to persuade retail investors that they can have confidence in the regulatory framework and that misconduct will be punished.

The draft Financial Markets Conduct Bill (the draft Bill) creates an enforcement system which relies primarily on civil remedies, reserving criminal sanctions for egregious conduct and for “knowing” and “reckless” behaviour. The remedies are flexible, calibrated to the severity of breach.

The draft Bill has, however, moved away from the February Cabinet decision to focus liability for product disclosure on the issuer and instead extends onerous disclosure standards to underwriters and a broader range of market participants involved in the issue.

This change could undermine the objective of the Bill to develop New Zealand capital markets.

More information can be found in a full review of the bill.