The Financial Markets Conduct Bill is a wholesale review of the legislation underpinning New Zealand’s financial markets and will have a significant impact on business and the economy, says the New Zealand Law Society.

Given the post-GFC litigation still working its way through the courts, the Law Society believes there should be a review of the new legislation soon after it comes into force. The review would consider whether the legislation is working as intended and ensure that lessons from current court cases can be incorporated.

In its submission on the Bill, the Law Society recommends further work be done on liability and enforcement issues. It is concerned about what it sees as a blurring of the policy decision to move the focus of liability to issuers as a result of retaining directors in the liability framework (albeit with a due diligence defence). 

The Law Society is seriously concerned about the (rebuttable) presumption that materially adverse misstatements have caused a product’s loss in value.

“This provision is novel and unjustified, and is a fundamental departure from civil law norms. The Law Society strongly urges the removal of clause 480 from the Bill,” says Stephen Layburn, Convenor of the Law Society's Commercial & Business Law Committee.

The absence of specific limitation periods for seeking compensatory orders and pecuniary penalties has been noted by the Law Society. It says that shorter limitation periods be carried over from the Fair Trading Act, Securities Act and Securities Markets Act.

The Law Society says it also opposes the potential extension of civil liability for professional advisers in connection with securities offers (such as aiding and abetting provisions), on the basis that this would increase compliance costs and undermine professional relationships.