New Zealand: Financial Services Update

Financial Services Update
Last Updated: 12 January 2006
Article by Alasdair McBeth, Jacqlin Anthony and Gwen Rashbrooke

Originally published December 2005

Government initiatives for reform of the financial services sector continue to gather momentum. We take this opportunity to update you on the progress of various proposed reforms in the sector.

Alasdair Mcbeth And Tracey Cross Appointed To Advisory Groups

As part of its Review of Financial Products and Providers (Review), the Ministry of Economic Development has recently announced the establishment of new Advisory Groups to focus on the following areas:

  • Superannuation.
  • Collective investment schemes.
  • Insurance.
  • Disclosure.
  • Non-bank deposit taking institutions.
  • Equity and debt.

The purpose of these Advisory Groups is to 'bring together industry and expert perspectives to ensure that policy proposals best meet the needs and circumstances of New Zealand industry and consumers'. Alasdair McBeth has been appointed to the Collective Investment Schemes Advisory Group and Tracey Cross has been appointed to the Superannuation Advisory Group.

The next step in the process will be the release of a discussion paper outlining options for reform – it is expected that consultation on this discussion paper will take place in the first half of 2006. Policy proposals will then be put to cabinet in late 2006, with a view to having new legislation in place in 2008.

The Review will be informed by a number of separate reviews being carried out, including the work of the Financial Intermediaries Taskforce, the review of the Securities Act 1978, the Law Commission's Report on Life Insurance and the review of Credit Unions.

Task Force On Financial Intermediaries – Cabinet Approval For Co-Regulatory Model To Be Sought By Christmas

Recent government announcements indicate it is keen to keep up the momentum on the Task Force's recommendations. The government has said that it supports the proposed co-regulatory model under which a government regulator would work together with industry-led approved professional bodies. It will aim to obtain Cabinet approval to this model before Christmas. This will give certainty to industry that there will be a role for approved industry bodies, and allow officials to work with these bodies in designing the new regime.

The government recognises that there is still a lot of detailed design work to be done, and has said that the Ministry of Economic Development will carry out this detailed design work through to mid-late 2006. This will involve consultation with approved industry bodies, the regulator and other stakeholders. The aim is to have a draft bill presented to Cabinet in the first half of 2007, and legislation implementing the co-regulatory framework in place by 2007/2008.


We have just received confirmation from the Ministry of Economic Development that Cabinet has approved the co-regulatory model proposed by the Financial Intermediaries Task Force. We will be reviewing the Cabinet paper released on 21 December 2005, with a view to providing a further update early in the new year.

Securities Legislation Bill

The Securities Legislation Bill (Bill) was introduced on 30 November 2004. The aim of the Bill is to increase the effectiveness and efficient operation of New Zealand's securities and takeover laws and, as a result, attract investment in New

Zealand's capital markets. Key areas addressed by the Bill include:

  • Insider trading.
  • Market manipulation.
  • Takeovers Code.
  • Investment adviser and broker disclosure.
  • Substantial security holder disclosure.

It had been expected that the Bill would have passed into legislation by now. However, we understand that a Supplementary Order Paper, dealing with a number of outstanding issues, is currently in formation. The SOP will not be publicly available until the new year, meaning that the Bill is not likely to become law until some time in early 2006.

Anti-Money Laundering Update

Best Practice Guidelines

The New Zealand Police Financial Intelligence Unit has released Best Practice Guidelines for Financial Institutions (Guidelines).

The Guidelines aim to assist financial institutions in understanding and complying with the requirements of the Financial Transactions Reporting Act 1996 (Act). They also seek to explain money laundering methods as well as providing ways to identify suspicious transactions.

The Guidelines are applicable to any financial institution involved in accepting or processing money on behalf of members of the public. This includes banks, insurance companies, retail investment companies, casinos, real estate agents and sharebrokers.

Under the Act, the obligations of financial institutions when accepting or processing money include the following:

  • Verification of customer identity.
  • Retention of transaction records and customer verification details.
  • Reporting suspicious transactions.

Financial institutions should review their current compliance processes against the Guidelines to ensure they meet the requirements of the Act. This is important as failure to comply with the requirements of the Act is an offence.

The Guidelines are available at:

Review of legislation

As outlined in our October bulletin, the Act is currently being reviewed by the Ministry of Justice to ensure its consistency with international standards on anti-money laundering and terrorist financing. Our October bulletin can be found at The proposed review timetable aims to have the Financial Transactions Reporting Amendment Bill tabled in the House by April 2006, with the new legislation coming into effect in 2008. More information on the review is available at:


As noted in our May Financial Services Update, it is intended that the new KiwiSaver regime will commence on 1 April 2007. It is becoming increasingly apparent that this represents a very tight timeframe for all the steps yet to be achieved to get the scheme up and running by that date. We understand that a draft bill is to be put before the Minister of Finance before Christmas this year, and a bill introduced into the House in February 2006. This means that the detail of how KiwiSaver is to operate could be determined over the next couple of weeks, and there is concern within the industry that it does not leave much, if any, opportunity for further input from interested parties, particularly the impact it will have on existing superannuation schemes.

Proposed Changes To Taxation Of Investment Income

In June this year, the government released a Discussion Document on possible changes to the taxation of investment income. Proposed changes include new tax rules for collective investment vehicles, as well as new rules for offshore portfolio investment in shares. Phillips Fox was one of a large number of submitters on the Discussion Document. Submissions closed at the end of September, and the IRD is now working through those submissions. It is expected that an internal report will be made by the end of the year, with a view to a further (limited) consultation round taking place in late January or early February next year. However, it is not envisaged that there will be a further discussion document for general circulation.

With government having its foot firmly placed on the accelerator for KiwiSaver, the taxation of collective investment vehicles is in the spotlight. It is evident that the success of KiwiSaver could be dependent on the review on the taxation of collective investment vehicles. This may well see the tax rules for offshore investment in shares put on hold and the review on the taxation of collective investment vehicles brought forward so legislation is in place to take effect from 1 April 2006. This would mean that the policy work would need to be done in the first half of 2006 and the bill introduced by October 2006.

A copy of the government's June Discussion Document is available at:

This publication is intended as a first point of reference and should not be relied on as a substitute for professional advice. Specialist legal advice should always be sought in relation to any particular circumstances and no liability will be accepted for any losses incurred by those relying solely on this publication.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions