Chapman Tripp today welcomed the interim recommendations from the Capital Market Development Taskforce as “refreshingly direct”.
Three senior Chapman Tripp lawyers offered “15 modest reform proposals” to a Securities Law Conference in August and are glad to see that the Taskforce has picked up at least five.
The most radical but straightforward is recognition that under the expensive continuous disclosure regime there is little justification for requiring prospectus and investment statements as well. In theory and in practice there should be nothing a prospectus can provide which would surprise the market. We endorse the Taskforce proposal to drop prospectus requirements for issues to existing shareholders.
We were equally concerned about the absurd cost of the Securities Law compliance for private offerings. The rules in New Zealand for risking discretionary wealth and productive investment are far tighter than the rules protecting people against gambling.
The Taskforce has a number of minor technical improvements which we would like to be proceeded with.We also urge that more work go into an equivalent to the Australian 20:12 rule which allows unrestricted offers for up to 20 people in 12 months for an aggregate of A$2m.
Securities Commission objections to this are understandable. The logic of the exception would suggest that most securities offering compliance is superfluous.
Nevertheless, these kinds of small total value exceptions are common around the world and are perhaps the most badly needed change in New Zealand to free up capital for the small to medium enterprises that will maintain employment through a recession.
There may be cause for some concern at the lack of distinction in the Taskforce recommendations between relaxed “best practice” rules, and the rules designed to discourage self-dealing or director or controlling shareholder dishonesty.
We think much more thought should go into eliminating requirements for appraisal reports and threshold restrictions for related party transactions.
Overall, the sooner the better and we look forward to the Securities Commission explaining in simple terms why the Taskforce has felt it necessary to acknowledge potential obstacles from the Commission.