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6 September 2007

News release

Hon Lianne Dalziel, Minister of Commerce

Securities Commission advice to Minister of Commerce

Commerce Minister Lianne Dalziel has welcomed changes to regulations governing finance companies proposed by the Securities Commission today.

The proposals will ensure trustees have all the tools they need to supervise the activities of finance companies on behalf of investors.

"When I met with the Securities Commission two weeks ago, one of the things I asked them to do was to call the Trustee Companies together to determine whether the terms of the trust deeds through which they supervise finance companies needed to be strengthened.

"The advice I have received today says that changes need to be made to ensure that best practice becomes standard practice," Lianne Dalziel said.

"While the changes will not eliminate risk, they will ensure that investors can have confidence in the accuracy and currency of the information provided to trustees. Given the importance of the trustees' role, we will work with the Securities Commission to deliver the changes as soon as we can," says Ms Dalziel.

The proposed changes focus on:

• Reporting: Requiring best practice reporting by issuers to trustees including monthly reports on liquidity, asset quality, reinvestment rates and any breaches of financing arrangements with third parties.
• Verification: Enabling the trustee to engage (at the finance company's expense) an expert to report on the company's true financial position.
• Audit: Empowering the trustee to appoint an additional auditor if it is not satisfied that the auditor appointed by the company has sufficient experience or capacity.

The amended requirements would automatically become part of every existing trust deed, and every new trust deed, and would therefore apply to all finance companies operating in New Zealand.

Lianne Dalziel said she was pleased the Securities Commission had acted so promptly within existing frameworks to promote best practice across the sector.

"This is an excellent result. In the meantime, the Labour-led government is continuing to work on its programme of financial product and provider reforms which will enhance transparency and accountability in the sector," Lianne Dalziel said.