17 June 2008

News release

Hon Lianne Dalziel, Minister of Commerce, and Senator Nick Sherry

Op ED - Mutual Recognition of Securities Offerings

It's been 25 years since the Closer Economic Relations (CER) agreement between Australia and New Zealand was signed, but today's landmark agreement - the Mutual Recognition of Securities Offerings - proves that the trans-Tasman economic relationship is still growing in breadth and depth.

The new regime, which came into effect on Friday (13 June 2008), allows mutual recognition of securities offerings between New Zealand and Australia. The regime will smooth the way for businesses on both sides of the Tasman to raise capital and increases the choice for investors. It is an unprecedented agreement which marks Australia and New Zealand as global leaders in reducing the cost to businesses of raising capital across an international border.

The regime allows businesses that issue securities in their home country to do so in the other country without having to comply with all of the rules relating to fundraising that impose significant costs on issuers. For example, Australian issuers will not have to produce a different prospectus or an investment statement for New Zealand, which may cost in the vicinity of A$10,000 to A$50,000. And, New Zealand issuers will have access to a greater number of investors than under the current regime. This is especially beneficial as New Zealand has a relatively small pool of investors compared to those in Australia. This greater access to investors would increase the ability for New Zealand businesses to raise capital.

However, the regime does not promote a complete "open-door" policy, nor is it a way to circumvent the laws of either country. Issuers will still need to prove eligibility for entry into the regime when offering securities in the other country, and there are legislative requirements that must be met. The legislation enables the issuers to operate in the other country as long as:

• the entry requirements for the regime are satisfied; and
• the issuer complies with the ongoing requirements of the regime.

One requirement is that issuers must provide investors with a warning statement alerting them to the different regulation that will apply.

Both the Australian and New Zealand regulators will have enforcement responsibilities for offers under the regime. 

This regime relies on having good regulatory frameworks in place in both jurisdictions and good co-ordination and co-operation between the regulators, namely the Australian Securities and Investments Commission (ASIC), the New Zealand Securities Commission (NZSC) and the New Zealand Companies Office (NZCO).

To achieve this, ASIC has memoranda of understanding with both NZCO and NZSC. And both Commissions are signatories to the International Organisation of Securities Commissions' Multilateral Memorandum of Understanding.  In addition to this, ASIC, the NZCO and the NZSC have established specific processes for cooperation between them in administering the mutual recognition regime.

All this has taken an enormous amount of work and goodwill between New Zealand and Australia in the ongoing effort to create a seamless trans-Tasman business environment. That seed was planted with CER which has always been more than just a free trade agreement. As a living, dynamic agreement it helped produce both governments' shared vision of a Single Economic Market and that, in turn, has given us the Mutual Recognition of Securities Offerings regime.  

The Memorandum of Understanding between the Government of New Zealand and the Government of Australia of the Coordination of Business Law (MOU) signed in August 2000 aimed to foster the trans-Tasman commercial environment through increased coordination of business law between the two countries.  The most recent version was signed on 22 February 2006.

A year later work towards a regime co-ordinating business law for the mutual recognition of trans-Tasman securities offerings began. The MOU and the passage of relevant legislation enabled both countries to develop regulations for the implementation of trans-Tasman mutual recognition of securities offerings.

The main aim of this initiative is to reduce the costs of offering securities across the Tasman. But, as part of the wider trans-Tasman picture, it is another important step forward. By reducing transaction costs and behind-the-border barriers to trade and business on both sides of the Tasman, regimes such as this will promote the competitiveness of a trans-Tasman economy and allow greater economies of scale.  That will mean a greater flow of capital into New Zealand bringing fiscal benefits for the government and national economic growth more generally.

The trans-Tasman relationship is significant in a global approach to business law.  Cross-border capital flows have increased dramatically around the world.  It is vital that both our nations secure better links with other well-regulated markets, and ensures that they occur in a way that protects investors.   Increased access to well regulated capital markets is pivotal for a nation's economic well being.

It goes without saying that there is widespread support from the financial industry and issuers of securities for this initiative. But it has also won support - and admiration - internationally.  It truly represents a win-win for Australia and New Zealand businesses and investors alike, and sends a powerful signal to the international marketplace about the level of confidence we have in each other's regulatory frameworks, which are world-class on both sides of the Tasman.

Contact: Elspeth (Ellie) McIntyre, Press Secretary, ph 04 471 9397 cell 021 227 9397
All Lianne Dalziel's media statements and speeches are at www.beehive.govt.nz/dalziel