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New requirements for finance company moratorium documents, Trustees by end of year (Update 1)

New requirements for finance company moratorium documents, Trustees by end of year (Update 1)

Commerce Minister Simon Power said the government hoped to have regulations introduced by the end of the year simplifying and clarifying disclosure obligations for finance company moratoria. (Update 1 includes new regime announced for corporate trustees/statutory supervisors.) In a speech to the fifth annual Securities Law Update, Power also announced the introduction of a new regime for corporate trustees and and statutory supervisors who supervise debt issuers and collective investment schemes. A number of high profile finance companies, including Hanover Finance, Strategic Finance and St Laurence are currently operating in moratorium after investors voted for the option over receivership. For more, see our Deep Freeze List. Power said he was concerned that disclosure currently provided by finance companies did not provide investors with the appropriate information to make sound decisions."These regulations will ensure key information is available to investors who are being asked to make significant decisions about their investments based on onerous and highly complex disclosure documents," Power said. "The regulations will require debt issuers to provide clear and concise investment statements about moratoria proposals, along with independent expert advice, the views of the trustees, and the considerations of the company directors," he said. "These regulations will ensure the right information is made available in a transparent and easy-to-understand way." "Moratoria proposals are an important option for investors to understand, and the regulations will help achieve that objective." The new supervision regime will remove the automatic right for the six statutorily approved trustee corporations to supervise issuers of debt and some collective investment schemes, and require trustees to be licensed by the Securities Commission, Power said. "The commission will have the power to tailor licences so trustees have processes in place that are in proportion to the level of risk associated with the issuers they supervise. The commission will take into account matters such as the trustee's competence, systems and processes for supervising issuers, and financial strength," Power said. "¬ĚThe collapse of a large number of finance companies in recent years has raised some fundamental issues around the role of corporate trustees, and in particular the competency and accountability of some trustees."

The regime will have additional measures to improve the quality of supervision provided by trustees, including:
  • Enhanced powers of enforcement against trustees who fail to comply with their duties.
  • Greater prescription around matters that must be addressed in trust deeds.
  • Mandatory reporting to the Securities Commission by trustees when issuers may be nearing default on securities.
  • Giving the commission the power to direct trustees to take action against issuers.

Power said that legislation is expected to be ready for introduction to Parliament by the end of the year.

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