The Securities Trustees and Statutory Supervisors Bill has been reported back by the Commerce Select Committee and has passed its second reading.

The Bill removes the automatic statutory approval for the six trustee corporations and requires all trustees, statutory supervisors, and unit trustees to be licensed by the Securities Commission. The new regime will replace the existing systems of approval under the Securities Act (for trustees and statutory supervisors), the Unit Trusts Act (for unit trustees) and the Retirement Villages Act (for statutory supervisors of retirement villages).

The Bill provides that before granting a licence, the Commission must assess trustees and statutory supervisors against matters including the trustee's or statutory supervisor's monitoring systems and processes, experience and infrastructure, and financial strength. It also provides for the Commission to monitor trustees and statutory supervisors' ongoing compliance with the terms of their licence. The Securities Commission may seek pecuniary penalty and compensatory orders against those who fail to comply.

Amendments made to the Bill, on the recommendation of the Commerce Select Committee, include:

  • Increasing the maximum licence period from five years to eight years;
  • Removing the requirement that a licensee report to the Securities Commission where it believes it is "likely to breach" an obligation and, instead, empowering the Commission to investigate a breach or likely breach, or a material change of circumstances or likely material change of circumstances, on the part of a licensee, and to have them submit an action plan to remedy or avoid such breach;
  • Providing for regulations to be made to set out the matters that the Commission must take into account in making good character assessments of an applicant's directors and senior managers;
  • Changing some of the requirements around the appointment (and terms of appointment) of the Commission's temporary trustee appointee where a licence application is rejected in relation to an existing security (or retirement village).

Although the Bill refers to the Securities Commission as the regulatory body for the new regime, the Committee notes in its report that it is envisaged that the regime will be administered by the new Financial Markets Authority (FMA) once the FMA has begun operating.

The new regime is expected to be in place by mid-2011.