Published 3 June 2011
Commerce Minister Simon Power announced further Cabinet decisions on the review of securities law yesterday.
a system to regulate securities exchangeslicensing regimes for specific financial sector participants – fund managers, independent trustees of workplace superannuation schemes, derivatives dealers & peer-to-peer lenders, andmore details about penalties under the liability framework in the event of a breach of financial markets laws.
Penalties range from an infringement notice of up to $20,000 for failure to keep registers of security holders, up to 10 years’ jail &/or a fine of up to $1 million for individuals and $5 million for companies for known or reckless inclusion of a false statement in a disclosure document.
Mr Power said that under the liability regime, anyone who makes misleading statements in a product disclosure statement or advertisement would be liable for a civil pecuniary penalty of up to $1 million, and $5 million for companies, plus compensation orders.
"This means celebrities who make false or misleading statements on behalf of providers of regulated financial products or services will be subject to significant liability. They will not, however, be prohibited from endorsing a financial product or face liability if the product fails and they have not made a misleading statement about it.
"Cabinet considered whether or not to introduce specific regulation for celebrity endorsements, but decided that the proposed liability regime will sufficiently penalise celebrities for any misrepresentations they make.
“This is an extremely difficult area to address, and I would welcome submitters’ comments on the proposals once the bill is released for public consultation, and look forward to seeing what the select committee makes of it.”
Earlier Cabinet decisions on securities law in this term of government include regulating financial products, disclosure requirements, exemptions, collective investment schemes and giving Financial Markets Authority with additional powers.
Mr Power said a working draft of the new securities legislation would be released in August for public consultation and a bill would be introduced before the election.
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Attribution: Ministerial release, story written by Bob Dey for the Bob Dey Property Report.