Growing New Zealand’s Capital Markets 2029
MEDIA RELEASE FROM THE CAPITAL MARKETS 2029 STEERING COMMITTEE
09 September 2019
Growing New Zealand’s Capital Markets 2029: A vision and growth agenda to
promote stronger capital markets for all New Zealanders.
Broader participation by New Zealanders, greater access to growth capital for New
Zealand enterprises, and more choices for investors drive the recommendations in
the Capital Markets 2029 report released today.
The report lists 42 recommendations to unlock stronger capital markets for all New
Zealanders of which 18 recommendations have been prioritised. The
recommendations canvas topics such as KiwiSaver, regulation, public sector assets
and infrastructure, promotion of public markets, tax, new products and the impact
of technology.
The report’s recommendations are designed to improve capital markets in one or
more of the following ways:
• Raise the level of individual participation and engagement in capital markets
• Offer more choice of investment for individuals, both within KiwiSaver and
more generally
• Grow the base of companies that can access the public capital market,
reduce the barriers to listing where possible and increase motivation for public
companies to remain listed
• Grow the private capital ecosystem in New Zealand
• Use the capital markets to fund infrastructure in New Zealand
• Create greater wealth for New Zealanders.
Capital Markets 2029 Chair Martin Stearne said some of the changes
recommended to KiwiSaver, for example, are focused on stimulating more New
Zealanders to become engaged investors.
“Many of the recommendations are also designed to create larger pools of capital
for funding New Zealand enterprises, including infrastructure, via public or private
markets.
“Additionally, the recommendations recognise the growing role of private markets,
and therefore seek to provide greater access to them for more New Zealanders,”
said Mr Stearne.
The report also summarises some of the key trends in New Zealand that could
undermine the effectiveness of capital markets and have long-term consequences
for the country’s wealth if left unaddressed. These include:
• A KiwiSaver regime that encourages saving, but fosters investment
predominantly in lower growth assets and has limited exposure to private
markets
• A large number of New Zealanders who are not actively participating in
KiwiSaver
• A two-tier public market that is working well for the larger companies, but is
less liquid and effective for smaller companies
• A public market that is struggling to attract new listings
• Private markets that are working well and growing, but not necessarily serving
the full range of New Zealand investors, nor the full range of investment stages
• A sound regulatory regime, albeit with areas which could be improved to
assist the flow of capital.
The review, sponsored by NZX and the Financial Markets Authority, and report
produced by EY as secretariat, involved many people and organisations across New
Zealand, as well as offshore investors.
“We believe this report is a mandate from the industry for the recommendations
which are aimed at seeing more capital flowing more efficiently to New Zealand
enterprises, as well as providing more investment opportunities for a greater number
of Kiwi investors,” said Mr Stearne.
“The steering committee took a 10-year view as it identified practical ways of
addressing these issues.
“There is a lot of research and evidence of the role successful capital markets fulfil in
benefiting New Zealanders, by way of employment, use of the products and
services of companies funded by capital markets, or by direct or indirect
investment.”
Mr Stearne said that next steps will include formal responses from NZX and FMA, as
well as from certain other parties to whom recommendations have been made. NZX
has offered to report on the progress made by all parties in implementing the
recommendations, with a first assessment in 18 months.
“The industry has identified these changes and is ready and willing to follow through
with action in order to achieve the vision and ambitions for stronger capital markets
for all New Zealanders, as outlined in the report.”
Click https://www.ey.com/nz/cm2029 to read the Capital Markets 2029 report.
ENDS
Contact for enquiries
Piet de Jong
Baldwin Boyle Group
+ 64 21 812 766
---
Growing
New Zealand’s
Capital Markets
2029
A vision and growth agenda to
promote stronger capital markets
for all New Zealanders
Foreword 3
Vision and ambitions for 2029 5
Executive summary 9
1. Market overview 15
2. KiwiSaver and financial capability 23
3. Regulation 33
4. Public sector assets and infrastructure 47
5. New Zealand economy
and market development 53
6. Promoting public markets 61
7. Tax 71
8. New products 79
9. Technological considerations 85
Appendix One: Acknowledgements 93
Appendix Two: Glossary / definitions 97
Appendix Three: References 101
Contents
Nāu te rourou, nāku te rourou, ka ora ai te iwi
With your contribution and mine, our people will prosper
1
Disclaimer
This report is the work of the Steering Committee and EY as Secretariat and does not necessarily represent the views of the organisations for
which any of the individuals are otherwise involved.
Neither the Steering Committee nor EY as Secretariat have sought to audit or verify any of the information sourced for this report. Neither the
Steering Committee nor EY make any representation or warranty as to the accuracy or completeness of the information contained in this report.
Capital Markets 2029 | 3
Welcome to the report of Capital Markets 2029. We are an
industry-led group, sponsored by NZX and the FMA, formed
to identify ideas to improve and grow New Zealand’s capital
markets, taking a 10-year view.
2
We have sought to maintain a focus on the end users of the capital markets
by generating ideas that will see more capital flowing, more efficiently, to
New Zealand enterprises and ideas that will provide more investment opportunities
for a greater number of New Zealand investors. There are many components to
capital markets and our focus is not limited to the listed market. We have also
looked at private markets, including crowdfunding, angel investment, venture
capital and private equity.
Capital markets are important to a well-functioning economy. The efficient
allocation of capital to the highest value projects and the economic returns
provided to risk takers is at the heart of this purpose. There is extensive
research and evidence of the role capital markets fulfil spanning productivity
and the wellbeing of citizens.
3
Our process has included dialogue with many organisations and people across
New Zealand and with offshore investors. With the support of EY, we have also
researched and noted the thematic issues that capital markets are experiencing
globally. Our work confirmed many global themes which are impacting
New Zealand. We did not expect to find ‘silver bullets’ to materially enhance
capital markets. Indeed, in some cases, all we have done is more accurately
identify the source of a constraint. However, we believe there are many specific
actions that can and should be taken to improve capital markets.
We believe the broad level of involvement and input enables us to position
this report as a mandate from the industry for the recommendations.
We are excited for the opportunities that stronger and more vibrant capital
markets can contribute to our country as we strive to enhance the wellbeing
and productivity of our economy.
I would like to recognise the important and special contributions of the members
of the Steering Committee and EY, the people who have supported us on specific
workstreams and the many people and organisations who have contributed to
this process. Without exception, people willingly supplied their time and insights.
Appendix One acknowledges, records and thanks these contributors.
On a personal note, thank you to both the FMA and the NZX for having the
foresight to commission this report and for the opportunity to be involved.
Foreword
Martin Stearne,
Chair of Capital Markets 2029
Capital Markets 2029 | 5
for 2029
Vision and
ambitions
6 | Capital Markets 2029
New Zealanders benefit in many ways from
the impact of successful capital markets,
by way of employment, use of the products
and services of companies funded by capital
markets or by direct and indirect investment
in capital markets themselves.
One of our objectives is to lift the level of engagement and
interest New Zealanders have in the investment side of
the capital markets so that more New Zealanders actively
participate to create personal wealth. The changes we
have recommended to KiwiSaver are largely focused
on this objective. Over time, KiwiSaver accounts will
become the predominant pool of retirement savings.
We believe our KiwiSaver recommendations will retain
direct personal participation in the capital markets, open
access to alternative investments and, more importantly,
act as a catalyst for greater innovation from existing and
new KiwiSaver providers. Incentives for KiwiSaver entrants
to make an active choice on the type of KiwiSaver fund to
join and our recommendations on financial literacy should
promote better long-term outcomes for New Zealand.
For users of capital, we envision a greater availability of
capital across the spectrum of investment stages.
This will provide companies choice within a New Zealand-
centric system to meet their capital needs. These need
to be accompanied by a regulatory system that retains
its goal of fair, efficient, and transparent capital markets,
while adapting to the increase in private market activity,
both primary and secondary.
Lastly, it is incumbent on the industry itself to use the
recommended changes for the benefit of both the users
and the providers of capital. For the reasons above, we
commend everyone to embrace these recommendations
such that the benefits of stronger capital markets benefit
all New Zealanders.
We have developed a series of visions and ambitions for
the industry and the country to identify what ‘success’
might look like across the capital market ecosystem and
against which future assessments can be made. These are
presented on the following page.
Capital Markets 2029 | 7
A single responsible
organisation driving
the collective efforts
of Government and
industry to achieve
financial capability
and literacy for all
New Zealanders.
KiwiSaver
A stock exchange
that is a prominent
voice in New Zealand’s
capital markets promoting
the benefits of listing
and raising capital in
New Zealand.
NZX
A KiwiSaver
platform
which provides
New Zealanders
with choice and
growth and a
material pool of
investible funds
which can support
and stimulate the
New Zealand economy.
Financial
capability
A stable tax environment
which encourages and
promotes investments
in capital markets.
Ta x
Regulators
that regulate
consistently with
well-trained and
experienced people
and are responsive
to innovations in
the capital market.
Regulators
The market capitalisation
of New Zealand’s equity
capital markets grows as
a stronger ratio of
New Zealand’s GDP.
Market
capitalisation &
representation
of NZX Main
Board
Technology
A technology environment
which solves for
New Zealand’s lack of
scale by using efficient
technology platforms
across the operation
of capital markets.
Market
development
Debt markets which
respond to changing
market conditions to meet
the needs of issuers and
investors as an alternate
source of funding.
Debt markets
An infrastructure funding gap that
is materially closed by a range of
innovative capital market solutions that
support New Zealand’s infrastructure
needs and provide New Zealand
investors an opportunity to participate.
Infrastructure
New listings
A regulatory environment
that appropriately balances
investor protection with
access to capital.
New Zealand companies
accessing public markets to
fund growth and to transfer
ownership of assets with greater
direct and indirect participation
by New Zealanders.
Growth capital and
expertise available to
support New Zealand
companies to grow
at each stage of their
development.
Regulation
Growing
New Zealand’s
Capital Markets
2029
Capital Markets 2029 | 9
Executive
summary
10 | Capital Markets 2029
New Zealand’s broad capital markets industry
has been highly supportive of this review.
This executive summary provides an overview
of the process and key recommendations
which we believe will have a higher impact on
the New Zealand capital markets ecosystem
in the coming decade.
Process
Independently of the FMA and NZX, we engaged with a
wide array of capital markets participants to identify and
understand aspects which have been working well, areas
which are struggling, and where changes are needed.
We have performed this review in three distinct phases.
In the first phase, we held interviews directly with capital
market participants: investors, issuers, privately held
companies, intermediaries, advisors, central and local
government, industry bodies and associations, institutions,
iwi, banks and members of the public.
The second phase summarised the interviews, from
which we collated preliminary observations into a public
consultation document.
4
All interested parties were
encouraged to submit their feedback to help ensure
our final recommendations reflected a breadth of
New Zealanders’ views.
The third phase then considered the results of the public
consultation, and interviews, together with research
completed by EY and global research publications (which
addressed complementary topics). The Steering Committee
formed the recommendations in this report by evaluating
these results.
Capital Markets 2029 | 11
Key trends in New Zealand Capital Markets
We have observed a number of trends that could
undermine the effectiveness of capital markets and
have long-term consequences for the country’s wealth
if left unaddressed:
• A KiwiSaver regime that encourages saving, but fosters
investment predominantly in lower-growth assets and
has limited exposure to private markets.
• A large number of New Zealanders who are not actively
participating in KiwiSaver.
• A two-tier public market that is working well for the
larger companies, but is less liquid and effective for
smaller companies.
• A public market that is struggling to attract new listings.
• Private markets that are working well and growing, but
not necessarily serving the full range of New Zealand
investors, nor the full range of investment stages.
• A sound regulatory regime, albeit with areas which
could be improved to assist the flow of capital.
Recommendations
Each of our recommendations is designed to improve
capital markets in one or more of the following ways:
• Raise the level of individual participation and
engagement in capital markets.
• Offer more choice of investment for individuals,
both within KiwiSaver and more generally.
• Grow the base of companies that can access the public
capital market, reduce the barriers to listing where
possible and increase motivation for public companies
to remain listed.
• Grow the private capital ecosystem in New Zealand.
• Use the capital markets to fund infrastructure in
New Zealand.
• Create greater wealth for New Zealanders.
12 | Capital Markets 2029
Vision and AmbitionRecommendation
Central
Government
NZXFMAIndustry
KiwiSaver
Allow members to self-direct and invest
with multiple providers.
✓
✓ ✓
Mandate employers’ contributions and a
stepped contribution rate option for low
income earners.
✓
✓ ✓
Withdraw KiwiSaver default - provider
status and replace with default funds.
✓
✓ ✓
Reinstate a kickstart payment for members
over 18 years old and link with an active
choice on fund.
✓✓
Financial capability
Implement an online financial capability and
literacy course for young people as part of
NCEA, including clear accountability for its
implementation.
✓
Regulation
Simplify disclosure requirements for
regulated offers.
✓ ✓
✓✓
Remove requirement to provide prospective
financial information for first regulated
offers (IPOs).
✓✓
Undertake a review of continuous
disclosure liability settings.
✓✓✓
Exclude New Zealand listed bodies
corporate from the definition of “overseas
person” if no one overseas person (and
any associate) holds more than 25% of
the shares in the New Zealand listed entity.
✓
Establish a centralised process for
compliance on anti-money laundering
which market participants can rely on
across Australasian capital markets.
✓✓✓
The recommendations in this report should be viewed and considered together as they are interdependent.
This report canvasses a broad range of visions and ambitions. Only the higher-impact recommendations are
included in the table below (which also identifies the capital markets participant(s) best placed to lead further
investigation and drive implementation).
Capital Markets 2029 | 13
Vision and AmbitionRecommendation
Central
Government
NZXFMAIndustry
Public sector assets
and infrastructure
Review Crown contribution to capital
markets which balances Crown control with
the opportunity for broader ownership.
✓
✓ ✓
Consider local government reform by
central Government to ensure local
councils assess all funding options
for necessary infrastructure.
✓
✓ ✓
Encourage the Infrastructure Commission
upon its formation to engage in proactive
dialogue to accelerate solutions for funding
infrastructure projects in New Zealand.
✓
✓ ✓
Market development
Increase development of growth capital
industry in New Zealand.
✓✓
New listings
Greater promotion and education of the
alternative pathways to the listed market
supported by a range of secondary
recommendations.
✓
Ta x
Move New Zealand’s KiwiSaver regime
from a TtE to an EET approach, providing
impetus to improve our saving culture.
✓✓
Apply the PIE taxation regime rates and
exemption from tax on trading to all direct
listed share investments.
✓✓
Technology
Develop a collaborative capital markets
ICT plan.
✓✓✓✓
Implementation and follow up
Upon release of this report, we expect formal responses from our sponsors (NZX and the FMA) and from other parties
to whom we have made recommendations. As one of the sponsors of this report, NZX has offered to report on progress
made in respect of all recommendations, with a first assessment in 18 months’ time.
Implementation of the recommendations alone is unlikely to drive the success of our capital markets. The many
participants within our industry must also work more effectively to serve the needs of both users and providers of capital.
overview
Market
Capital Markets 2029 — Section 1 | 15
Global trends
1.4.
5.
2.
3.
Shrinking public markets are an obvious trend in
developed global equity markets. There has been a
halving of the number of listed companies in countries
such as the UK and US since the mid-1990s; new
listings have decreased substantially (by around two
thirds) and the amount of capital raised on stock
markets has more than halved. Listed companies
are getting larger, on average. This is shown by the
increase in median market cap of listed US companies
from US$2 billion to US$6 billion over a similar period.
IPOs of companies are occurring later in a company’s
life and are also growing in average size.
There has been increased use of the IPO market to
sell existing shares, and a decrease in its use to raise
primary capital. Some markets are experiencing
de-equitisation, where flows from the equity market
(dividends, buybacks and takeovers) are greater
than flows into the market (new listings and other
primary raises).
Since the 1990s, changes in technology have allowed
particular companies that rely on network effects to
grow rapidly with relatively small amounts of capital,
while building huge value in intangible assets. These
companies have then bought a great number of other
companies that may otherwise themselves have listed.
Companies are facing greater pressure from many
investors to deliver short-term results at the expense
of longer-term growth. A number of factors have
arguably shifted the main role of exchanges towards
the secondary side of the market at the expense of
new issues. This has particularly impacted smaller
companies. These factors include increased share
buybacks, huge growth in trading volumes, technology
developments, more complex market infrastructure
and the shift in most exchanges’ underlying business
models from mutual to for-profit companies.
The rise in passive investment in conjunction with
the increased scale and complexity of the financial
services industry has changed the economics of the
industry. This has helped create a highly efficient
market for capital raising and trading for the larger
companies and had the opposite effect for smaller
companies. Trading commissions have declined and
broker research coverage is generally declining.
We have analysed the key trends within global capital markets rather than confining our review
to New Zealand’s capital markets only. Some important themes from this work are directly
applicable to New Zealand and have supported this review. These include:
5
16 | Capital Markets 2029 — Section 1
7.
8.
6.
The rapid growth of private capital over the past
25 years provides an alternative source of funding.
This has negatively impacted public markets but has
positively impacted other elements of the capital
markets with private equity funds, pension funds
and sovereign wealth funds offering funding.
This phenomenon is seen as a mix of systemic and
cyclical, with the cyclical effects largely driven by
lower global interest rates.
The cost and burden of listing is perceived as high
due to disclosure requirements and liability settings,
corporate governance obligations (and expectations),
and greater intervention from shareholders and media
scrutiny. Over and above this, regulatory settings are
variable between public and private markets.
Overseas jurisdictions are embracing and
implementing new and emerging technologies
Capital Markets 2029 — Section 1 | 17
• Over the last ten years, the New Zealand listed equity
market has outperformed key global equity markets
in growth in size (11.2% pa) and returns (7.2% pa)
(by reference to the benchmark S&P/NZX 50 index).
6
This has mainly been driven by the low interest rate
environment and the yield offered by many of the
larger stocks.
• We have continued to develop an efficient listed
secondary market, particularly for larger companies.
The adoption of the Financial Markets Conduct Act
(FMCA) and related regulations has resulted in ‘same
class offers’ allowing existing listed issuers to raise
capital quickly and efficiently.
• New Zealand debt markets have grown in depth, with
corporate debt offerings well subscribed. The total value
of debt listed on the NZX Debt Market (NZDX) only
increased from $12.4 billion in January 2009 to
$13.5 billion in October 2015. However, the rate of
growth then accelerated with the value of debt listed
on the NZDX growing at a CAGR of 27.6% from October
2015 to May 2019.
7
Since June 2018, the NZDX has
seen two new types of debt products added: green
bonds and wholesale bonds.
• KiwiSaver has successfully created a pool of domestic
savings. Since inception, it has given virtually all
participants positive investment returns and there have
been some encouraging recent developments in reducing
fees and innovating products.
• The FMCA was an outcome of law reform that replaced
most of New Zealand’s previous securities and financial
markets conduct law. It enabled new capital raising
options, streamlined the disclosure regime and provided
a new governance framework for financial products.
• The MOM programme has been successful. The partial
sell down and public listing of Mighty River Power (now
Mercury NZ), Meridian Energy and Genesis Energy
has seen them grow earnings and dividends against a
market backdrop of increased competition and minimal
demand growth. Furthermore, the value of the Crown’s
cornerstone ownership interest in these entities is
worth more today than the whole value of the entities
when listed.
8
• New Zealand’s technology sector is growing rapidly.
Revenue of TIN200 technology companies grew by
11% from 2017 to reach $11.1 billion for 2018.
9
The success of New Zealand-founded technology
companies such as Rocket Lab, Pushpay, Xero,
Datacom and Fisher & Paykel Healthcare has
highlighted the growing capabilities of the sector.
• New Zealand’s capital markets have benefited from
innovations and disruptions from new entrants.
There have been recent advances in crowdfunding,
peer-to-peer lending, robotic / AI advice, equity research
and fractionalisation of investment opportunities.
KiwiSaver providers and alternative asset exchanges
have provided further investment opportunities for a
greater number of domestic investors.
• New Zealand’s private capital market (spanning private
equity, venture capital and angel investment) has
developed significantly in the last decade. There are
now more fund managers here, all with larger investible
funds. This trend is consistent with global themes which
many see as systemic rather than cyclical change.
What’s working well in New Zealand?
We have sought to find out,
in a New Zealand context,
why more companies are not
successfully listing
18 | Capital Markets 2029 — Section 1
What’s not working well in New Zealand?
• The recent lack of IPOs in New Zealand is a more extreme version of
trends in many other developed markets. We have sought to find out,
in a New Zealand context, why more companies are not listing
successfully. We have assessed the supply of entities that could potentially
list, and the role played by various parties in the listing process.
• On the other hand, private market assets such as private equity and
other unlisted investments have grown significantly in recent years.
However, these are less accessible to individual investors. Again, this
is a global trend, although New Zealand’s capital pool is shallower than
larger markets.
• We have heard from many submitters about the so-called ‘funding gap’,
being the difficulty New Zealand businesses have in raising capital from
in the region of $2 million to $10 million.
• Over the longer term, KiwiSaver will likely become the biggest single
savings asset of most New Zealanders. Although KiwiSaver has many
positive features, most managers focus almost solely on liquid assets due
to transferability by members between schemes and daily unit pricing.
Globally, pension funds are significant investors in illiquid asset classes.
Without changes, KiwiSaver members will be unlikely to gain exposure
to this growing asset class.
• Many participants in the industry have interpreted the regulations for
advising retail investors in the capital markets more conservatively than
perhaps was intended by the regulator. This resulted in a focus on stocks
covered by research, typically larger stocks. Unless this changes, the
smaller end of the listed market may stagnate over the longer term,
making it less attractive or feasible for smaller companies to list.
While these regulations have lifted the standard of advice, they have
also reduced the availability of investment advice.
Many of the challenges identified above can be attributed to one or a
combination of fundamental causes: New Zealand being a small market,
a globally rising tide of regulation, and undue conservatism for risk taking.
Capital Markets 2029 — Section 1 | 19
Local capital markets are important
Although hardly surprising, almost all respondents and submitters cited numerous
reasons for our country to retain the capital markets within a New Zealand-centric
system, including our public capital markets. Despite some points being driven by self-
interest, we endorse the common themes in the reasons cited as to why local capital
markets are important, including:
These themes are similar to those found by NZIER
in their report commissioned by NZX.
10
Retaining local
access to capital
for potential issuers
Retaining local
investment
research on
local companies
Retaining business
activity and
employment
within the capital
market ecosystem
Enabling the
Government,
regulators
and other
policy makers
to maintain a
greater degree
of sovereignty
over the capital
markets
Maintaining domestic
economic activity and a
domestic tax base, both of
which would be undermined if
entities were more inclined to
base themselves offshore
Having capital markets
that operate under
local corporate and
securities laws and in
local currency
Maintaining the
ability to attract
offshore capital
directly into
New Zealand
Maintaining local
investment choices
for domestic
investors, especially
New Zealand’s
comparatively larger
base of retail investors
20 | Capital Markets 2029 — Section 1
Basis of
recommendations
To provide context, we have prefaced
our recommendations with visions
and ambitions for 2029.
We have weighted each
recommendation according to our
view of its potential positive impact
on New Zealand’s capital markets
over a 10-year view to have more
capital flowing more efficiently to
New Zealand enterprises, and
to provide increased investment
opportunities for a greater number
of New Zealand investors. We have
also identified which capital markets
participant(s) are best placed to
investigate the matter further and
drive its implementation.
Sustainability
The United Nations Sustainable Development Goals (SDG)
and the Paris Agreement represent a significant change
in the way we manage our environment, societies and
economies. Governments, corporates and communities
are aligning their policies with the SDG and Paris
Agreement targets.
The Sustainable Finance Forum, set up under the Aotearoa
Circle, is working on a roadmap to shift New Zealand’s
financial system to one which supports sustainable social,
environmental and economic wellbeing in the long term.
The work of the Sustainable Finance Forum is on changing
how decisions are made by actors within the financial
system to incorporate long-term sustainable outcomes.
The recommendations from this report will create the
market environment to support many of the Sustainable
Finance Forum’s aims.
Multi-cultural society of New Zealand
New Zealand is a diverse country comprising many
ethnicities and cultures. This review considers it
important to recognise the evolution of the country and
remind ourselves that as our ethnicity mix varies so will
the capital markets’ response to the opportunities and
challenges that emerge. We note the Superdiversity
Stocktake published in November 2015 which provides
a comprehensive overview of the state of New Zealand
and its challenges.
11
As the recommendations from this report are further
considered and evaluated, we encourage the industry
to ensure that the diversity of the population is reflected
and given careful consideration.
Recommendation is
highly likely to improve
New Zealand’s capital markets
strongly in the next 10 years
and beyond.
Recommendation is likely to improve
New Zealand’s capital markets in the
next 10 years and beyond.
Recommendations
may help improve
New Zealand’s capital
markets and/or the
benefits may be
beyond a 10-year
timeframe.
H
i
g
h
e
r
M
e
d
i
u
m
L
o
w
e
r
Capital Markets 2029 — Section 1 | 21
Capital Markets 2029 — Section 2 | 23
KiwiSaver and
capability
financial
KiwiSaver is the most common interaction New Zealanders
have with our capital markets. KiwiSaver’s strong brand and
Government contributions have encouraged New Zealanders
to have retirement savings. There are now over 2.9 million
members enrolled in KiwiSaver.
12
Participants have in turn reaped the
rewards of KiwiSaver due to positive
market performance since the global
financial crisis. Contributors to this
report have praised the ability to
transfer between providers and Inland
Revenue’s central management as
outstanding features. There are also
signals that fees may have started to
fall due to the impact of new entrants
and the increasing commentary on
fees and their visibility.
Feedback (both evidence-based
and from anecdotal commentary)
highlighted key areas for
improvement:
• Over 389,000 members have
not made an active choice about
their fund or fund provider.
13
Such members may be in
lower-risk funds by default
despite having long-term
investment horizons.
• 1.2 million members were not
making contributions to their
KiwiSaver as at March 2018.
14
• There has been little innovation
from large or incumbent providers.
• There is no consistent disclosure
of KiwiSaver fund holdings.
We envision KiwiSaver will become
the main way individuals save
for their retirement. As these savings
grow, it will be the largest pool
of capital available for domestic
investment. For this review, we
believe there may be up to $200
billion in KiwiSaver by 2030.
15
As such, it is important to improve
the outcomes of KiwiSaver for
participating New Zealanders.
24 | Capital Markets 2029 — Section 2
Recommendations
Allow members to self-direct
and invest with multiple
providers
KiwiSaver members have little or
no access to unlisted asset classes
common in overseas retirement
savings plans.
There is a significant mismatch
between the liquidity of investments
owned by members and the expected
investment duration of KiwiSaver.
Most providers have highly liquid
portfolios (generally concentrated in
cash, bonds and listed equities).
Only a handful of managers we spoke
to have funds that invest in illiquid
assets and such assets are a small
portion of those funds. There is a
need to maintain some liquidity
because members can change
providers with 20 days’ notice, but
the majority of members in growth
funds are unlikely to gain access to
private market assets under current
settings and existing approaches by
investment managers.
There is a significant
mismatch between the liquidity
of investments owned by
members and the expected
investment duration of KiwiSaver
I
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Capital Markets 2029 — Section 2 | 25
We recommend that all KiwiSaver
members have the ability to invest
with more than one KiwiSaver
provider. This will allow for greater
product innovation as well as
competition amongst KiwiSaver
providers under this proposal.
KiwiSaver members looking for a
wider range of specialist investment
options should have the ability
to choose and allocate a certain
contribution or balance to a second
KiwiSaver provider who may
offer greater access to a range of
Recommendation
Impact
Owners
Allow members
to self-direct and
invest with multiple
providers
Mandate employers’
contributions and
create a stepped
contribution rate
option for lower
income earners
Withdraw default-
provider status for
KiwiSaver and replace
with default funds
Reinstate a kickstart
payment for members
over 18 years old and
link with an active
choice on fund
Require regular
disclosure of underlying
investments
Collect a full,
anonymised dataset
Require savers to seek
financial advice upon
certain age milestones
and intended withdrawal
Communicate
KiwiSaver’s advantages
when first-home
withdrawals made and
possible life stages
Develop a common
industry standard
calculator
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investments, including illiquid investments where liquidity risk would sit with the
member rather than the provider for a fixed period of time. This gives investors
greater flexibility and choice without having to switch all of their investment
from one provider to another.
We also recommend a full, self-directed KiwiSaver option where members
choose their own investments and registered providers hold the chosen
investments in a custodian-type arrangement for each specific member.
Under this model, the KiwiSaver member would bear the liquidity risk of their
investments, rather than the provider, as is the case under the current model.
We are aware of at least one fund where members can choose their underlying
investments from a given list. However, in this case, liquidity risk still sits with
the provider and the investment choices are generally liquid assets. Moving to a
self-directed model would allow members to invest in less-liquid assets such as
private equity and other funds. This gives members greater choice and control
over their investments and creates a more diverse market. It also maintains
direct retail investor participation in the market.
We are not suggesting that self-directed KiwiSaver investment will suit all
members or that adoption will be significant. Even if only a small fraction of
members moved to this model, it would increase diversity in New Zealand’s
capital markets and encourage further innovation from existing and new
KiwiSaver providers in investing in unlisted and less-liquid assets.
We do not support a self-management option where members manage their
own KiwiSaver funds outside a registered KiwiSaver provider. This option has led
to worse outcomes in Australia, particularly for accounts with smaller balances.
Mandate employers’
contributions and a stepped
contribution option for
low-income earners
Currently, it is compulsory for
employers to contribute to their
employees’ KiwiSaver accounts,
unless the following circumstances
apply: the employee has opted out,
has signed a contract that accounts
for their total employment cost
(including employer contributions), is
on a savings suspension or is over 65
years old. The changing composition
of our workforce does not allow
contract workers the same access to
employer contributions. This needs
to be researched to see the extent of
the issue and amendments made to
ensure all New Zealanders are getting
the best opportunity to get the most
out of their KiwiSaver scheme. We
recommend mandating employer
contributions regardless of employees’
26 | Capital Markets 2029 — Section 2
employment contract and decisions to
opt out or go on a savings suspension.
Additionally, we recommend
requiring employers to continue 3%
contributions for low-wage earners
who have elected a lower contribution
rate (or have suspended their
contribution) of their salary or wages.
Capital market participants noted the
difficulty of saving for low-income
households with little disposable
income. However, we recognise
the importance of instilling a habit
of saving and wish to encourage
it, particularly in people who are
currently struggling financially.
We suggest the employees’ lower
contribution rate could start at 1% and
then gradually increase, with stepped
contribution path implemented and
set at the time of joining.
This recommendation will encourage
broader participation in KiwiSaver.
Withdraw KiwiSaver default-
provider status and replace
with default funds
We have heard that the default-
provider scheme has limited
competition and innovation and,
despite mandated requirements,
many default providers have not made
contact with many default clients.
On 7 August 2019, MBIE released
its discussion document paper
“Review of the KiwiSaver Default
Provider Arrangements”. CM2029
plans to make a submission on
certain points upon which MBIE has
sought feedback. Our overarching
recommendations and observations
are outlined below.
We recommend the withdrawal
of default providers and that an
appropriate default fund setting be
implemented (that considers price,
Capital Markets 2029 — Section 2 | 27
asset allocation, financial education
and support), and allow all KiwiSaver
providers to opt in to meet the default
fund requirements.
This should provide greater
competition by all providers interested
in building their scheme by offering a
default fund. There will be providers
who choose not to offer a default fund
because those new members are not
their target market. This will allow
smaller KiwiSaver providers to grow,
and allow more personal contact to
ensure every new KiwiSaver member
is getting the best possible service and
support.
The Inland Revenue model would still
allocate members by way of carousel,
the allocation numbers would just
be higher. Clients of current default
providers who have not been able to
connect with their default members
to encourage an active choice should
also be reallocated to the new
providers who offer a default fund.
With regard to those in default funds,
if after, say, three years they haven’t
made an active decision to stay in the
default fund, all future contributions
could be directed to a balanced fund
(assuming default funds retain their
conservative setting).
We do not favour the specific mandate
that default funds be used for capital
markets’ development. Although this
may seem counter intuitive given the
purpose of this report, we think our
other recommendations are capable
of achieving market development
via commercial means and investor
choice rather than a mandate imposed
upon the default funds and their
members. Indeed, this view extends
to imposing any market allocation or
asset allocation criteria on KiwiSaver
generally.
28 | Capital Markets 2029 — Section 2
Reinstate a kickstart payment for members over 18 years old and
link with an active choice on fund
Many KiwiSaver members are not contributing, or remain in default funds which
may not be the right risk profile for them.
We recommend reinstating a kickstart payment for members over 18 years old
joining KiwiSaver. This payment should be conditional on the member making an
active choice on their risk category and fund. This will encourage more people
to join KiwiSaver and also drive them to make an active choice in line with their
risk profile. This will have flow-on benefits for our capital markets, such as
improved financial literacy as people become more accustomed to investing
and learn about risk.
Regular disclosure of underlying investments
Disclosure of underlying investments in KiwiSaver varies between provider.
Given the benefit of being a registered KiwiSaver provider, we recommend
greater disclosure obligations to ensure transparency of investments and
operations.
We recommend, each quarter, funds must disclose:
• Top 20 material exposures, looking through interposing funds.
• Percentage of equity exposure by market, percentage level of cash, statement
on hedging policy, fixed interest and other holdings (by holdings) by currency
exposure.
We also recommend each fund discloses to the FMA quarterly, for publication
on their website:
• For funds with an equity component, the Active Share of the equity
component against the benchmark index, and equity portfolio make-up by
market (such as NZX, ASX).
• Nature and value of any funds invested (directly or indirectly) in a deposit in,
or debt or equity of, a related party of the provider. If applicable, the disclosure
should include the terms of that investment, and an affirmation from the
directors or trustees that the decision to invest in the related party is in the
interests of the members.
• Any related parties providing services and their terms and a positive
affirmation from the directors/trustees that the decision to use the related
party is in the interests of the members.
This data should be available online for transparency on active management
and exposure of potential conflicts and concentrations of risk. Disclosure of this
information should be public for media and analysts to scrutinise.
Collect a full, anonymised dataset
The lack of aggregated Government data on KiwiSaver was surprising to this
review. We believe Inland Revenue should collect a full and anonymised dataset
down to individual accounts of inflows and balances. Inland Revenue should also
maintain all KiwiSaver aggregated data in one place. This would be a very useful
set of data for Inland Revenue, FMA, CFFC, MBIE and the Treasury, among
others.
Require financial advice at certain life stage milestones
We recommend requiring KiwiSaver providers to assist members with some
level of financial advice at different life stages of their members, from getting
them into the right fund when they start, to buying their first home, and
planning for retirement. Members should not be left waiting until they reach 65
to decide what they should do, as is the case for many today. Getting into an
appropriate fund when first joining KiwiSaver can make a significant difference
to a KiwiSaver’s outcome in the long term. More effort from providers to offer a
range of advice services is essential.
The CFFC and FMA are well positioned to support the development of
educational tools and provide regulatory direction to ensure all providers deliver
consistently high-quality information. With both organisations working more
closely together, and not duplicating activity, they are in a very good position
to provide guidance and resources. These resources should be shared with
providers, given the material is of a high standard and independent of their own
KiwiSaver proposition.
Changing regulations have definitely improved the quality of advice to retail
investors but have reduced access to that advice. In general, average KiwiSaver
balances are yet to reach the point where it is economic for an AFA to provide
bespoke advice to the average member. The emergence of robotic advice may
increase access, but there is still an issue regarding independence of platforms
and the range of products offered.
Communicate KiwiSaver’s advantages when first-home withdrawals
are made
KiwiSaver members may withdraw part of their balance for the purchase of a
first home. When members make a first-home withdrawal, they should receive
communications highlighting the benefit of staying in KiwiSaver. One such
benefit is that continued contributions to KiwiSaver lead to continued employer
contributions and the Government’s annual Member Tax Credit. Members should
also be given information about the long-term benefits of growth funds. Another
option is to offer such members a life stages product which puts their KiwiSaver
into funds with the appropriate risk settings to match their age. We also note
that a life stages product does not necessarily need to move to a cash setting at
age 65, given overall life expectancy of another 20 years.
The lack of aggregated
Government data on KiwiSaver
was surprising to this review
Capital Markets 2029 — Section 2 | 29
Develop a common industry
standard calculator
We are aware many KiwiSaver
providers have developed their own
online calculators to demonstrate how
choice of fund, contribution rate and
other inputs affect a saver’s future
balance. However, these calculators
are often inconsistent, particularly
in relation to returns, fees, tax and
inflation.
We recommend the FMA creates a
common industry-standard calculator
for all KiwiSaver providers. In the first
instance, it should allow the user to
input their own assumptions to arrive
at point estimates of their own future
balances. Secondly, there should be
a version containing a standard set
of risk and return benchmarks (based
on the fund’s risk setting). This will
allow outcomes to be ranges rather
than point estimates and will show the
effects of factors such as performance
fees and tax. A common industry-
standard calculator will enable people
to make like-for-like comparisons of
KiwiSaver products and understand
better the range of outcomes possible.
Recommendation
Recommendation
Impact
Owners
Implement an online
financial capability
and literacy course for
young people as part
of NCEA including clear
accountability for its
implementation
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Improve financial capability
Finally, we consider that financial
capability and literacy (both
knowledge and how it is applied) is
very important, although its impacts
are longer term. Our savings culture
remains a fundamental challenge in
New Zealand and many commentators
and economists have commented
over the years that it contributes
to relatively high household debt.
Although not necessarily a high
impact in a 10-year time horizon,
we consider there is a need to act
on this fundamental feature of the
New Zealand ecosystem now.
A number of capital market
participants provided feedback
that financial literacy is generally
poor in this country. In contrast,
New Zealand was 6th out of 29
countries in the 2016 OECD /
INFE financial competency report.
Despite this, we agree there is still a
wide scope to improve the financial
capability of New Zealanders. This is
a difficult problem to fix. The CFFC
and the FMA are well positioned to
help this cause. They both need to
work out their respective areas of
responsibility so there is no crossover
and duplication of duties and to
ensure resources are used efficiently.
30 | Capital Markets 2029 — Section 2
There is a strong need to build financial capability and literacy in schools
to mitigate the problems of future generations when it comes to managing
money. Teachers, too, need this support and, as a minimum, a financial
capability course should be part of final-year training for teachers.
New Zealand’s savings culture has improved with the introduction of
KiwiSaver, but there is still some way to go. Such a shift in society and culture
can only be achieved through gradual changes over time in how people behave
and think. We believe that the KiwiSaver recommendations in this report may
also help with this.
We recommend establishing an online course aimed at young people,
13 years old onwards, to offer NCEA achievement standard credits.
This will improve financial knowledge and literacy before these students
enter KiwiSaver. An additional financial incentive, such as a KiwiSaver kickstart
payment conditional on completion, could encourage students to study the
course. Some banks are either beginning to deliver financial literacy courses
themselves or sponsoring other organisations that do. However, we believe
there should be one source of truth with the capability and independence to
ensure students get the best possible support and information when entering
their next stage of life — whether entering the workforce or seeking a tertiary
qualification. We are aware the CFFC has established the Sorted in Schools
programme. It is still only halfway through its trial but, if successful, it should
be rolled out across the country. CFFC should also work with other digital
providers like Banqer that offer primary school children a great introduction
to money in a fun and interactive way.
Capital Markets 2029 — Section 2 | 31
Regulation
Capital Markets 2029 — Section 3 | 33
Feedback from capital market participants is that our
securities regulations are now much improved and that
the FMCA has had a positive impact on capital markets.
However, the feedback identified several unintended
consequences or areas whether further thought and
refinement are needed, particularly certain instances
where the industry has applied the FMCA more
conservatively than intended. Our recommendations
below seek to address these views.
Coinciding with the Capital Markets 2029 review, there
have been several other regulatory reviews to assess the
effectiveness and appropriateness of settings against
current capital markets conditions. These include The
Treasury’s reform proposals for the Overseas Investment
Act (OIA) and the current review of bank capital by the
Reserve Bank of New Zealand (RBNZ).
Following the global financial crisis, there has been a rising tide of regulatory reform across
the world’s capital markets. Regulatory reforms have attempted to reduce the likelihood
and extent of loss and disruption within capital markets and the corresponding significant
economic and social costs. As discussed earlier, the FMCA replaced most of New Zealand’s
previous securities laws. It enabled new capital-raising options (crowdfunding and peer-to-
peer lending), streamlined the disclosure regime (through the introduction of same class
offers and the PDS) and provided a new governance framework for financial products.
Revised regulations have been
applied more conservatively
than intended
34 | Capital Markets 2029 — Section 3
Simplify disclosure requirements for regulated
offers
The FMCA significantly revised the disclosure requirements
for all offers of financial products. It brought a focus on
clear, concise and effective disclosure for retail investors
and comparability of financial product offerings. For an
IPO of equity securities, disclosure requirements are split
between: (i) a product disclosure statement (PDS), which
has a highly prescribed content and length and which
must be provided to every investor taking up the offer
of financial products, and (ii) an entry on the Disclose
Register maintained by MBIE (Offer Register). The Offer
Register contains certain prescribed information in respect
of the issuer or the offer (such as full financial statements
for the issuer) and any other material information not
contained in the PDS, which investors may access should
they wish and that is cross referred to in the PDS.
The PDS is much better than the lengthy combined
investment statements and prospectuses required under
the previous legislation. However, feedback indicates
that they are still unnecessarily long and complex for
retail audiences for IPOs of equity securities. Market
Recommendations
Recommendation
Impact
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Simplify disclosure
requirements for
regulated offers
Remove requirement
to provide prospective
financial information
for first regulated
offers (IPOs)
Undertake a review of
continuous disclosure
liability settings
Establish a centralised process
for complying with anti-money
laundering which market
participants can rely on across
Australasian capital markets
Align liability
settings for public
and private capital
markets
Revise the
definition of
wholesale investor
to allow for self-
certification with
acknowledgement
of risk of loss
rather than
significance of
experience
Establish advisory
group to support
capital market
regulation
FMA to issue
guidance in respect
of Code of Conduct
Remove requirement
for Court to approve
schemes of arrangement
for returns of capital
Allow ability to creep
between 20% and 50%
ownership in specific
circumstances
Amend the definition
of ‘overseas person’
in the OIA
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Capital Markets 2029 — Section 3 | 35
F
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Owners
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participants also observed that the PDS is designed for a
retail audience, yet it is generally advisors and institutions
making investment decisions. This is not optimal given that
almost all IPOs in New Zealand over the last 10 years have
not featured a general ‘public pool’ to allow retail investors
without a broker to invest, with the notable exception of
the MOM IPOs. Furthermore, disclosure requirements
for retail investors are inconsistent between the public
and private capital markets. Higher-risk investments in
the private capital market have no legislated disclosure
obligations.
Feedback from market participants indicates that many
retail investors prefer to review simplified fact sheets
distributed to them by their broker or made available on
offer websites, rather than the full PDS. The simplified
fact sheets draw their contents from the PDS and refer
investors to the full PDS and Offer Register. However, the
FMCA still requires that every investor receives a PDS
before subscribing for shares in an IPO. The full PDS and
Offer Register contents are used by analysts, advisors and
institutional investors and, of course, some retail investors
do use this information.
We recommend a review to determine the level of
information required within the PDS versus that which
can be made available to investors on the Offer Register.
It seems feasible that only the information currently
presented in the Key Information Summary of the current
PDS regime be distributed to potential investors, with
the balance of information made available on the Offer
Register to any investor who wishes to access it. This would
reflect better the way retail fact sheets (backed with access
to the full disclosure materials) are used in practice.
The IPO timetable is lengthy.
16
We recommend the FMA
use its power to waive the waiting period to allow listing
aspirants to remove a week from the timetable where the
FMA has actively engaged with the potential issuer on their
disclosure documentation for IPOs.
Remove requirement to provide prospective
financial information for first regulated offers
(IPOs)
The FMCA requires issuers of a first regulated offer (an IPO)
to provide prospective financial information (PFI) for the
next two financial years unless the issuer considers, after
having made reasonable endeavours to obtain all relevant
information, that PFI for that period (or part of that
period) would be likely to deceive or mislead (for example,
because it is not practicable to formulate reasonable
assumptions on which to base the PFI).
17
It has been noted
by various market participants and some prospective
issuers that preparing PFI is onerous and costly. PFI is not a
requirement for IPOs in other major jurisdictions, including
the USA and United Kingdom, nor is it a requirement for
listing on many European exchanges.
We recommend removing the requirement to provide
PFI, rather than retaining the current opt-out framework.
Issuers would still be able to provide PFI to investors should
they choose, in which case the fair dealing standard in Part
2 of the FMCA would apply to that information.
18
We expect
larger, more mature issuers will continue to provide PFI at
the time of IPO, while other issuers may look to provide
simplified guidance to future performance in a similar
format to the earnings guidance that the issuer intends to
provide once listed.
For compliance listings, the NZX Listing Rules state that
an applicant for listing must prepare a profile document
which contains the information required in a PDS as if
the offer was regulated under the FMCA, unless NZX
determines otherwise.
19
We understand that, in practice,
this has meant that issuers seeking to compliance list
have had to prepare PFI, which is a significant deterrent to
accessing the public capital markets when no new capital
is being raised. Removal of the requirement to present
PFI is therefore expected to make compliance listing more
attractive as an alternative pathway to public capital
markets. (See also page 62 for our recommendations on
promoting the public markets).
Undertake a review of continuous disclosure
liability settings
Continuous disclosure principles are an important
component of public markets and are a common feature
of the listed environment in all comparable jurisdictions.
However, market participants have noted that liability for a
breach of the continuous disclosure regime in New Zealand
is much stricter than many other prominent listed markets,
except for Australia. Of relevance, the Australian Law
Reform Commission (ALRC) has recently recommended
that Australia’s continuous disclosure liability regime be
reviewed and noted that its current liability regime appears
to have been arrived at unintentionally.
20
We recommend that the NZX
Regulation and FMA review
the liability settings for
continuous disclosure
36 | Capital Markets 2029 — Section 3
An issuer who breaches the continuous disclosure regime
in New Zealand faces a range of civil sanctions. NZX may
impose a penalty for breach of the NZX Listing Rules
and the issuer also faces civil liability under the FMCA
(which may give rise to a pecuniary penalty or payment of
damages to affected investors). Importantly, there is no
requirement to establish dishonesty or recklessness (or
any other state of mind on the part of the issuer) to find
a breach of the continuous disclosure regime. The ALRC
reported that a leading US class action expert observed
that the lack of a fault element was a particularly plaintiff-
friendly aspect of Australia’s continuous disclosure laws.
In our view, the same could be said of New Zealand.
Although directors do not face primary liability for a breach
of the continuous disclosure regime, they may be liable as
accessories to any breach by the issuer (or may otherwise
be liable where directors’ duties have not been complied
with, and so on).
Market participants have noted that the current continuous
disclosure settings are giving rise to various negative
consequences, or will certainly do so if left unabated.
These include (1) an increase in class actions driven by
litigation funders (as seen in Australia), (2) limiting the
interest of companies in listing, (3) dissuading quality
individuals from taking up directorship roles for public
companies, (4) significant increases in directors’ and
officers’ insurance costs (as seen in Australia and now
being experienced by some New Zealand issuers with
recent increases in premiums of more than 300% reported
by S&P/NZX 50 issuers), and (5) an undue focus by the
board and management on continuous disclosure issues
rather than strategy.
We recommend that MBIE review the liability settings
for continuous disclosure to assess whether or not the
current ‘no fault’ regime remains appropriate, given the
negative consequences noted above. MBIE should seek
FMA and NZX feedback and, as part of that review, we
also recommend that NZX Regulation and FMA more
clearly delineate their responsibilities for investigating
and prosecuting potential continuous disclosure breaches.
Market participants have observed that the current
system, where they receive inquiries from both FMA
and NZX Regulation, results in higher compliance costs
and duplication of effort in responding to the same, or
overlapping, inquiries.
Capital Markets 2029 — Section 3 | 37
We also note that the New Zealand Law Commission
is expected shortly to resume a review of class actions
and litigation funding in New Zealand. The Australian
experience of class actions and litigation funding in relation
to alleged continuous disclosure breaches highlights the
importance of having both fit-for-purpose continuous
disclosure laws and an appropriate class action regime
under which investors may seek redress for a breach.
Market participants have noted that the balance in
Australia appears to have tilted too far in the direction of
imposing liability on issuers and their directors. As such,
we suggest the New Zealand Law Commission not to go
down the same track as the Australian regime in relation
to shareholder actions. In our view, a more appropriate
balance would be served by an ‘opt in’ regime for class
actions, rather than the current ‘opt out’ approach taken
by Australia.
Amend the definition of ‘overseas person’
in the OIA
The Treasury has identified numerous issues with the
current definition of overseas person in the Overseas
Investment Act (as it applies to listed bodies corporate).
21
We agree with their analysis. Numerous listed bodies
corporate in New Zealand are categorised as overseas
persons under the current definition in the Act.
However, most New Zealand listed entities have their
‘centre of gravity’ in New Zealand, with local incorporation,
a large proportion of New Zealand ownership, New Zealand
headquarters and boards and senior management located
in New Zealand and comprising primarily New Zealand
employees. Furthermore, being listed entities,
New Zealanders can acquire interests in the entity
at any time by buying shares on market.
The current definition of ‘overseas person’ imposes
significant regulatory and commercial burdens on
New Zealand listed entities. A sensible definition of
‘overseas person’ that excludes New Zealand listed
entities with a genuine New Zealand presence is required.
This would result in far fewer New Zealand listed entities
being caught by the overseas investment regime, delivering
the following benefits for public capital markets: (i) removal
of the compliance burden and significant commercial
disadvantage borne by listed entities having to obtain
consent; (ii) greater certainty for listed entities and
investors as to when consent is required; and (iii) attracting
more companies to the public capital markets due to a
more streamlined approach to OIO matters.
38 | Capital Markets 2029 — Section 3
We have submitted our view on The Treasury’s consultation
document.
22
In summary, our recommendation is to
exclude New Zealand listed bodies corporate from the
definition of overseas person if no one overseas person
(including any associates) holds more than 25% of the
shares in the New Zealand listed entity.
Establish a centralised process for AML
There is no central process for customer onboarding
under the general know-your-client (KYC) procedures and
the Anti-Money Laundering and Countering Financing of
Terrorism Act. Instead, each capital market participant
must undertake its own onboarding process for a new
customer, with duplication of effort and inefficient use
of resources. There are also inconsistencies in the
approach taken to customer onboarding by institutions
(for example, as to whether scanned copies of documents
are suitable or whether originals must be presented).
Onerous customer onboarding processes cause two
negative impacts for capital markets. First, they discourage
customers from signing up to new service providers, or
switching between them. Second, the high compliance
costs involved in running such processes act as a barrier
to entry for new service providers in what is already a
highly concentrated market.
We recommend that MBIE and DIA further investigate
the centralisation of AML onboarding by using existing
databases or by requiring appropriate regulators to
conduct this onboarding. The goal should be to avoid
duplication of effort and inefficient use of resources and
enable investors to complete this onboarding process once,
rather than having to repeat it for each interaction with a
new capital market participant. Repeating the onboarding
process may discourage investors from switching between
banks, share brokers, managed fund providers or other
aspects of the capital markets where doing so would give
rise to further paperwork.
In addition, given the close ties between the New Zealand
and Australian financial markets and capital market
participants, we recommend reciprocity for customer
onboarding with AUSTRAC, the Australian AML CFT
regulator, is explored by MBIE. This will encourage
greater access to services for both New Zealand and
Australian residents. Alongside these initiatives, any
customer onboarding that is required to be undertaken
by capital market participants should be streamlined and
proportionate to remove unnecessary compliance costs.
Removing duplication of AML onboarding, bringing in
trans-Tasman reciprocity and streamlining onboarding
processes for new customers would create greater
efficiency (by reducing costs for investors and institutions)
and promote competition between financial market
participants by reducing the barriers that otherwise
‘lock in’ investors to a certain provider.
Align liability settings for public and private
capital markets
Under the FMCA, the directors of the issuer are deemed
to have civil liability for any misstatement in a regulated
disclosure document (ie the PDS and the Offer Register
entry). In contrast, there is no such deemed liability for
directors in relation to a misstatement contained in other
non-regulated collateral (such as investor presentations or
fact sheets) or for non-regulated offers (such as secondary
capital raisings conducted under the same class exemption
or crowdfunding offers).
23
The available defences also
differ for both the issuer and its directors, depending
on whether a misstatement is included in a regulated
disclosure document.
24
In addition, differing degrees of
potential criminal liability attach to documents under the
FMCA, depending on whether they are regulated disclosure
documents required for the purposes of the FMCA or other
documents.
25
These inconsistencies may lead to unintended behaviour.
For example, including investor presentations or fact
sheets on the Offer Register to access more meaningful
defences or only including the minimum content required
in regulated disclosure documents and placing additional
content in non-regulated disclosure documents.
The inconsistency in disclosure standards between the
public and private markets is appropriate. However,
we recommend that the liability settings be aligned by
removing deemed liability for directors for regulated
disclosure documents and re-examining the criminal
liability standards and available defences to civil liability to
ensure consistency across the various types of documents
used to raise capital in New Zealand.
Capital Markets 2029 — Section 3 | 39
Revise the definition of wholesale investor
As outlined elsewhere in this report, there has been a
global rise in the importance of private markets compared
with public markets. This means many investment
opportunities are only available to investors who can
participate without needing to receive regulated disclosure
documents, and many investors have had comparatively
limited access to investment opportunities. In New Zealand,
the FMCA sets out various tests for wholesale investors to
access these private investment opportunities through the
criteria set out in Schedule 1 of the FMCA, and provides
for ‘safe harbour’ certificates to be provided (which are
generally optional, but on which the issuer may rely, unless
they know the certificate is wrong).
One of these types of wholesale investor is an ‘eligible
investor’ who, unlike other types of wholesale investors,
requires an eligibility certificate.
26
The current criteria
are subjective and there may be differing interpretations
as to the extent of experience required to be considered
an eligible investor (for example, whether investment
experience in the exact type of financial product is
required, or whether general experience in investing is
sufficient).
We recommend the introduction of a further avenue to
eligibility. This would provide an alternative to the current
requirement for eligible investors to certify their experience
in acquiring or disposing of financial products that enables
them to make the investment without the full regulated
offer provisions applying. Under the alternative, eligible
investors should be able to certify that they do not require
the usual information that would be available to them for a
regulated offer, that they acknowledge there is a risk they
may lose some or all of their money, that they understand
that there may not be liquidity or regular disclosure, and
that there are risks in concentrating their investment in any
one investment or type of financial product.
The procedural requirements in clause 42 to 47 of Part
3 of Schedule 1 of the FMCA should generally continue
to apply. However, an eligible investor certificate (to the
effect outlined above) should be required for each new
investment that relies on these new criteria, rather than
being a standing certificate for each eligible investor. The
authorised financial adviser, qualified statutory accountant
or lawyer providing written confirmation of the certification
in accordance with clause 43 of Part 3 of Schedule 1 of the
FMCA should not be allowed to do so if they are receiving
any financial compensation (other than a fee for signing
the certificate) in relation to the investment (such as a
commission or referral fee).
A broader self-certification regime, as suggested, would
give all New Zealand investors increased access to private
investment opportunities. All investors would be able to
participate in these opportunities, so long as they certified
they were willing to bear the heightened risk of doing so.
If thought necessary, monetary limits could be applied to
the amount of capital to be raised from an eligible investor
in this manner, with this monetary limit also applied on an
investment-by-investment basis.
Establish an advisory group to support capital
market regulatory consultation
There has been a tremendous wave of regulatory change
globally and locally over recent years, which shows
no sign of abating. We received strong feedback from
participants that the current volume of regulatory reform
and associated consultation obligations is overbearing.
Participants also questioned the depth of market-facing
resources of local regulators. They perceive a widening gap
between consultation and the enactment of reform and
reported experiences of inconsistent views presented by
regulators (including within the same regulator) on similar
issues.
We recommend greater co-ordination between regulators
on their regulatory change agendas to better manage
change and consultation expectations for participants.
We also recommend the formation of an advisory group
of market participants which will be able to be utilised by
regulators as additional resource for regulator-initiated
consultations, if requested, prior to public or targeted
consultation processes. This proposed advisory group
would provide regulators with practical and expert industry
knowledge at the early stages of reform consultation,
enabling more robust proposals to go forward to public
consultation. Any such group should be transparent and
open to a wide range of industry participants to minimise
the risk or perception of self-interest or bias. It should
not be seen as a goal to achieve unanimity amongst
participants. There are divergent and strongly held
views on some topics, meaning it is appropriate for the
regulator or Parliament to make the final decision as to
which view should be favoured. The group would not be
a regulatory body or have any power to make or enforce
law or regulations. Instead, its role would be to provide
40 | Capital Markets 2029 — Section 3
regulators with access to additional industry expertise
when developing proposals for reform and consultation on
the same.
We recommend that regulators investigate alternative
models to enable them to act more effectively and provide
additional resources. In this respect, we note the Takeovers
Panel and NZMDT both draw on the expertise of market
participants to provide support and oversight to the staff
employed by the relevant regulator.
FMA to issue guidance in respect of the Code of
Conduct
Financial advisors are hesitant to recommend equity
products where research is not readily available, even
though this was not the intention of the current legislation.
This means that many small market capitalisation stocks
receive limited focus by the broking community.
New financial advice rules were introduced in December
2010, primarily in reaction to the meltdown of the finance
company sector and the consequences for retail investors
who were in many cases poorly advised by conflicted and
compromised advisors. The new regulations have been
effective in upskilling advisors. Within the advisors that
specialise in capital markets, closer attention to asset
allocation and portfolio construction for retail investors has
been a focus.
Additionally, the introduced regulations required
advisors to have ‘reasonable grounds’ to recommend a
financial product. In general, this has been interpreted
and implemented by broking firms quite conservatively,
requiring in-house research, produced by analysts with the
institutional research divisions of their firms, in order for
an advisor to recommend a security. Broking firms reached
this conclusion in order to mitigate risk for their firms,
for their advisors and ultimately for their clients. As a
result, to varying degrees, retail advisors and broking firm
wealth managers have concentrated on larger, more liquid
financial products that are covered by research analysts.
The FMA has, in some forums, stated that reasonable
grounds does not necessarily mean research must be
available, and published a guidance note on this and other
points in December 2011. However, this guidance note was
largely ignored, and with a subsequent change in the code
of conduct in 2014 this specific guidance note, “Standard-
6(d) Analysis before recommendation”, was withdrawn.
The industry response to these regulations has, in effect,
led to the emergence of a two-tier local equity market.
There is a concentration of retail investors in larger stocks
and reduced interest and liquidity of smaller stocks. It can
be argued that advised retail investors have not been,
in the circumstances, harmed by the implementation of
the advice regime. However, it has had some opportunity
cost: (1) it has reduced the number of New Zealanders
who have access to advice, both generally and within the
capital markets, thereby reducing direct retail investor
participation, (2) it has created significantly lower levels of
interest and liquidity in smaller stocks, (3) it has affected
the productivity of advisors.
Another consequence is that it is much more difficult to
achieve IPOs of smaller companies. Advisors are generally
more reluctant to recommend clients to participate in
IPOs if their firm is not providing research, or due to
the likelihood of the lower liquidity of shares of smaller
IPOs, and the fact research coverage, if any, may not be
enduring. The mixed performances of IPOs launched in
2014–16 has also done little to shift this reluctance.
In May 2019, the Minister of Commerce released a new
Code of Conduct for financial advisers to be implemented
in stages through to 2021. The new code focusses on
fairness, integrity, suitability and understanding of financial
advice. The code is intentionally high level in order to
cover many products, including mortgages and insurance
products. However, its application to investment advisors
within capital markets could be made much clearer by the
issuance of formal guidance notes.
Capital Markets 2029 — Section 3 | 41
We recommend the FMA, members of the Code Committee
and the SIA jointly work to form new guidance, using the
2011 guidance as a base, with a targeted release date of
31 March 2020. The objective of this guidance will be to
broaden the range of financial products upon which advice
can be received (noting, however, that not all advisors will
need or want to go outside current internal guidelines).
Key principles of this guidance note could include:
• An acknowledgement from the FMA that asset allocation
and diversification are important principles of wealth
management advice and individual security selection
will be viewed within this context.
• That ‘reasonable grounds’ for introducing a particular
stock to a portfolio would include an advisor forming
a reasoned positive view on the basis of receiving and
understanding the materials provided by an issuer
subject to continuous disclosure (including, but not
limited to, presentations by management).
• That advisors within the same advisory entity can rely
on internally produced analysis and assessment of a
financial product of an issuer subject to continuous
disclosure, by someone with the relevant experience
and capability to do so, and who acts in accordance
with Part 2 of the Code.
• Any other actions or information that provide reasonable
grounds for a recommendation.
It would then be the broking industry’s responsibility to
adapt their internal policies accordingly.
Further, we note the FMA has taken very few actions
against advisors in the past five years, and those cases
where it has acted have been with particularly egregious
circumstances.
Additionally, listed companies with low or no research
coverage could consider issuing earnings guidance. In the
absence of research, a track record of issuing (and ideally
meeting) earnings guidance may assist advisors in forming
reasonable grounds to recommend a particular stock.
Remove court approval of capital returns via
schemes of arrangement
Companies seeking to return capital to investors can
do so by paying a dividend, buying back shares, or by
undertaking a pro rata cancellation of shares through
a scheme of arrangement. Each of these methods has
positives and negatives.
Paying a dividend is administratively straightforward but
it is not tax efficient to return large amounts of ‘capital’
(as distinct from ‘income’) if insufficient imputation credits
are available (as resident withholding tax must be applied
to the dividend at 33%, whereas the return of capital
should, generally, not be taxable). A buy back can be
more tax efficient but is generally voluntary — so only the
shareholders who take up the offer receive the capital.
For these reasons, to return capital, many companies turn
to a court-approved scheme of arrangement under Part 15
of the Companies Act 1993.
A scheme of arrangement requires the approval of both
the court, and shareholders. The company typically obtains
initial orders directing a meeting of shareholders to be held
(and addressing certain other procedural matters), holds a
meeting of shareholders, and then returns to court seeking
final orders to implement the scheme.
While the court approval mechanism continues to be
appropriate where a company is seeking to implement a
takeover by way of a scheme of arrangement, or some
other more exotic transaction, the approval of the court
should not be required for a straightforward pro rata return
of capital.
27
Presently, documents for such transactions
need to be reviewed by NZX (if the company is listed),
the transaction approved by shareholders and the court,
and a ruling is sought from Inland Revenue as to the tax
consequences of the scheme.
The costs and timing consequences of involving the court
are significant. There is limited additional protection
provided to shareholders by doing this, given shareholders
are required to vote on and approve the return of capital
and such a return is pro rata by nature.
We recommend the Companies Act be amended to
introduce a mechanism for companies to return capital to
shareholders through a pro rata, compulsory cancellation
of shares with shareholder approval, but without court
approval. This would be consistent with the approach
taken in several other jurisdictions, such as Australia.
New Zealand companies would thus be able to return
capital to their shareholders more rapidly and with lower
transaction costs.
NZX has a greater
regulatory role than
exchanges in other markets
42 | Capital Markets 2029 — Section 3
Capital Markets 2029 — Section 3 | 43
44 | Capital Markets 2029 — Section 3
Allow ability to creep between 20% and 50% in
specific circumstances
At present, the Takeovers Code does not allow a person
who holds or controls more than 20% but less than 50%
of the voting rights in a code company to increase their
shareholding in the absence of a full or partial takeover,
shareholder approval or reliance upon an exemption.
In contrast, once a shareholder holds or controls more
than 50% but less than 90% of a code company, that
person may increase their shareholding percentage by
5% per annum (referred to as the ability for a shareholder
to ‘creep’).
We recommend the Takeovers Panel explore whether
shareholders within the current ‘no fly’ zone of 20% to
50% be permitted to creep their shareholding percentage,
in certain circumstances. We recommend this be applicable
to capital raises undertaken by the code company where
new equity is being raised. This would allow cornerstone
shareholders more flexibility to support such capital
raisings where they are not being undertaken on a pro
rata basis or there is a pro rata subscription shortfall.
The appropriate shareholding creep percentage should
be considered by the Takeovers Panel. In Australia, this
is 3% per annum.
To protect shareholders against the increased
concentration of voting rights, a restriction could be
imposed so that the shareholder relying on an ability to
creep between 20% and 50% cannot cast votes on those
shares acquired by creeping until shareholder approval
is obtained.
Observation
NZX as an operator, regulator and commercial
entity
Various capital markets participants have commented on
NZX’s role as a front-line regulator, as well as being the
market operator and owner of commercial operations.
Some of the views with regard to regulation included:
• NZX has a greater regulatory role than exchanges in
other markets, especially in regard to trading. This is
unusual in an international context, but there was no
strong view that this regulatory division constrains
participation in New Zealand’s listed market or that
changes to the split of regulatory responsibilities
between the NZX and the FMA would benefit the
capital market overall.
• The NZX’s regulatory capability has improved since the
introduction of the FMCA according to FMA reports.
• NZX is best placed to monitor market participants and we
sense it is desirable to have just one entity responsible to
monitor continuous disclosure (with the FMA responsible
for bringing enforcement action under the FMCA).
• There is some external confusion around NZX’s dual
role. Some third parties such as investors and listed
companies are unaware of the strict separation and
roles performed by NZX and NZX Regulation. Often, they
are both viewed as just being NZX, which is a frustration
for the commercial activities and personnel of NZX.
With regard to commercial operations, some participants
commented on the commercial tension that such
ownership may create. This review concluded that this
was something market participants should raise directly
with the NZX and was not material to the objectives of
this review.
Capital Markets 2029 — Section 3 | 45
Public sector
assets and
infrastructure
Capital Markets 2029 — Section 4 | 47
In 2009, the Capital Markets Development Taskforce
encouraged the Government to list certain assets on
the NZX. The resulting MOM programme saw the listing
of Mighty River Power (now Mercury NZ), Meridian Energy
and Genesis Energy.
New Zealand has a significant need
for infrastructure — estimated at
$129 billion over the coming
10 years.
29
The recent Construction
Accord and formation of the
Infrastructure Commission (including
most recently its Chair and Board)
aim to add clarity and transparency
to the New Zealand infrastructure
pipeline so that the private sector
can increasingly understand and help
develop infrastructure. In the context
of this review, many submitters made
the point that the capital markets
can be enabled to play a greater
supporting role in infrastructure
investment if the relevant charging
models are considered so that the
infrastructure is investible.
48 | Capital Markets 2029 — Section 4
The listings saw the government
maintain majority ownership of the
companies, whilst the companies
themselves significantly increased
dividends and generally lowered
capital expenditure post listing.
This process also introduced many
new investors to public markets
alongside the participation of
KiwiSaver funds. In addition, ACC
and NZ Superannuation Fund also
participated in the share offers.
Anecdotally, it is worth noting that
a number of other IPOs occurred at
around the same time and the MOM
programme resulted in a period of
market stimulation.
Recently, the New Zealand
Productivity Commission has
completed some work on local
government funding and financing.
28
Local government plays an important
role in the New Zealand economy.
As of June 2016, it owned $112
billion of fixed assets, employing
25,000 people with an annual
operating income of $8.9 billion and
an annual operating expenditure base
of $9.3 billion. This review considers
the link to capital markets and what
more could be done.
Recommendations
Recommendation
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Review Crown
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Consider local
government reform
to ensure local
councils assess all
funding options
for necessary
infrastructure
Encourage proactive
dialogue to accelerate
solutions for funding
infrastructure
projects in
New Zealand
Capital Markets 2029 — Section 4 | 49
Review Crown contribution
to capital markets
The MOM to date has clearly
demonstrated to New Zealanders
how such a model might benefit
the country. Both the taxpayer (as
reflected by the Crown) and investor
have significantly appreciated their
asset holdings. Some contributors
also argue that the companies have
made more efficient capital allocation
decisions, as the disciplines of being
listed and in the public domain have
taken hold. There remain a number of
assets that we believe would benefit
from such a model, existing SOEs (or
assets held within existing SOEs) but
also some assets currently inside local
council balance sheets. We have not
considered an exhaustive list but in
our view, this is something that could
be considered in greater depth on
behalf of Government. We encourage
Government and local councils to
consider the benefits of utilising the
equity and debt capital markets to
unlock capital for other purposes.
Control and related issues are
frequently raised as barriers to such
activity. However, we assert there
is usually a range of solutions to
accommodate these concerns. It is
time to review and acknowledge that
legislative reform may be required
in some circumstances to create the
catalyst for a different approach.
New Zealand has a significant
need for infrastructure which has
been estimated as being $129bn
over the coming 10 years
Consider local government
reform to ensure local councils
assess all funding options for
necessary infrastructure
Currently, this part of our economy
is funded by rates, levies and charges.
We see it as a lost opportunity for
local councils to utilise the capital
markets and a missed opportunity for
New Zealanders to invest in their local
communities. For this to occur we
think central Government intervention
is needed to require local councils to
consider the capital markets as an
option for raising funds, as opposed to
rates or levy mechanisms.
This reform may also extend to
the question of capital recycling
whereby councils are required, as
a responsibility to their ratepayers,
to consider the question of using
their asset portfolios to fund much-
needed infrastructure (for example)
far faster. Furthermore, capital market
participants have suggested potential
rationalisation of ownership (and
contestability of ownership) for asset
classes such as infrastructure for
water, ports and energy distribution
as it could improve economic
performance and effectiveness of
governance. This is based on the
performance of the MOM assets
highlighted earlier in this report.
This is not a new topic and it is well
known that local councils have been
presented with myriad capital markets
ideas over the years.
We have noted (see page over) the recent consultation by the Hawke’s Bay
Regional Council and subsequent IPO of the Napier Port to raise capital to fund
their future development while maintaining control of the asset. This is an
excellent example of the sort of activity which might follow from change within
the funding and financing model for local government in New Zealand.
Notwithstanding the IPO of Napier Port, there would likely be little change from
local government without a firm catalyst to operate differently, which is why a
review and reform of legislative settings is required.
To provide greater comfort to local councils and ratepayers that it is possible to
maintain control of the assets, we recommend the Local Government Act 2002
be amended to include a new part that mirrors the provisions applying to MOM
companies under Part 5A of the Public Finance Act 1989. In summary, these
provisions would prohibit a reduction in local councils’ control below 51% and
introduce a 10% holding limit. While it is possible to achieve these goals through
provisions in the constitution of the relevant company, a legislative framework
would provide greater alignment between local authorities and statutory
backing to underpin such restrictions.
To help maintain flexibility and local decision-making rights, we recommend
empowering local authorities to designate a council-controlled organisation
as being subject to the provisions suggested above (or to revoke such a
designation).
Encourage proactive dialogue to accelerate solutions for funding
infrastructure projects in New Zealand
Acknowledging the infrastructure gap and challenge in New Zealand is a
necessary starting point, as is establishing a single delivery organisation for
infrastructure in New Zealand. Solving the infrastructure funding gap has many
facets beyond the scope of this report. Equally though, when considering how to
strengthen the ecosystem of the capital markets in New Zealand there must be
a greater role for the capital markets to play, either via equity-like or debt-like
instruments which will also bring new opportunities to New Zealand investors.
The Infrastructure Commission is in progress and expected to be in place this
year. We would recommend their first assignment is to accelerate infrastructure
delivery and start consulting with the industry immediately on how this needs to
be enabled.
50 | Capital Markets 2029 — Section 4
Case study: Napier Port IPO
On 20 August 2019 Napier Port Holdings Limited listed on
the main board of the NZX, in a transaction initiated by its
100% owner, the Hawke’s Bay Regional Council.
Napier Port raised $234 million of equity capital in this
transaction, part of which will assist the funding of the
development of a substantial new wharf. The regional
council retains a 55% interest in the company.
The IPO prioritised the interests of local iwi, ratepayers and
port staff by inclusion of a priority offer. Some 20% of the
shares were sold in this component of the offer, with over
7,500 local ratepayers and 97% of port staff participating.
The offer was priced at the top of the indicative price range
and resulted in Hawke’s Bay Regional Investment Company
receiving ~$108 million in cash, about $25 million more
than indicated during the consultation process.
Rex Graham, Chair of Hawke’s Bay Regional Council says
from the stage of initial consultation to the listing was a
process of about two years.
“The capital raising and listing transaction clearly achieved
each of our five goals:
• The company is now able to build its new wharf which will
contribute to our local economy.
• We protected ratepayers (many of whom have fixed
incomes), from the costs of Port development.
• We have retained majority community ownership and
control of Napier Port for the benefit of all Hawke’s Bay
residents.
• Locals who could afford the investment were prioritised
in the IPO and this has been a great success, with almost
90% of local applicants getting all of the shares they
requested.
• We have protected and grown our balance sheet
to enable us to focus on our core environmental
responsibilities and prepare for the inevitabilities
of climate change.
Hawke’s Bay Regional Council are delighted with the
outcome. It shows what a determined council can achieve
by setting out the facts for ratepayers, giving them clear
information and choices and working with all its key
stakeholders”.
Napier Port CEO, Todd Dawson, was equally pleased with
the outcome: “The IPO has given us the funds to develop
the port while retaining the stability that majority council
ownership provides. We can now build our capability to
serve the needs of local importers and exporters — it has
really set us up to deliver for the region”.
Capital Markets 2029 — Section 4 | 51
New Zealand
economy and
market
development
Capital Markets 2029 — Section 5 | 53
Many capital markets participants have observed that there
has been a significant step-up in capital availability from
sources such as private capital (both globally and locally) and
angel investment (locally). However, they note there seems to
be a disproportionate gap in the area of venture capital raises
in the region of $2 million – $10 million.
This means that some companies
have either not accessed capital
or have needed to access equity
capital outside of the New Zealand
capital markets. One suggested
cause of this gap is that New Zealand
has developed a very active angel
investment community over the last
10 years, providing a large pipeline of
companies seeking funding. Another
suggested cause is a lack of venture
capital managers who have been able
to attract capital to invest, perhaps
driven by the lack of track record of
returns for the sector in New Zealand
and the challenges of raising a fund
in which management fees are
sufficient to cover operating costs.
That said, there is plenty of evidence
that a number of companies are still
successfully raising money in this
range, and at this stage.
We are encouraged by the
Government’s market development
initiative to commit $300 million to
assist New Zealand firms expand
beyond the early start-up phase
The Government has announced,
as part of the 2019 Budget, it will
establish a new $300 million fund
to help New Zealand firms expand
beyond the early start-up phase.
30
The $300 million fund will use
$240 million of contributions that
would otherwise have been allocated
to the New Zealand Superannuation
Fund between 2018 and 2022, and
$60 million from the New Zealand
Venture Investment Fund’s (NZVIF’s)
existing assets. It is anticipated
this funding will be committed to
qualifying funds on a matched basis.
We are encouraged by the
Government’s market development
initiative to commit $300 million to
assist New Zealand firms expand
beyond the early start-up phase but
caution that it will take time to deploy
the funds, and longer to see evidence
of investment outcomes.
54 | Capital Markets 2029 — Section 5
Recommendation
Recommendation
Impact
Owners
Increase development of
growth capital industry in
New Zealand
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Capital Markets 2029 — Section 5 | 55
Increase development of growth
capital industry in New Zealand
Around the world and locally, many
companies are electing to raise
additional growth capital from
private markets rather than public
markets. Capital markets participants
note that private capital also offers
investee companies access to
strategic networks and relationships.
With the additional source of funds
available, we would encourage NZVIF
to collaborate with relevant industry
bodies and existing funds to grow the
industry. This would promote further
benefits for the end users of capital
and increase the number of growth
funds locally, subsequently raising the
available pool of growth capital for
companies looking to expand beyond
their early start-up phase.
The institutionalisation of this sector
and other recommendations within
this report, such as the choice of
self-directed KiwiSaver funds and
easier certification to invest in non-
registered offers, should increase
access of individuals to these type
of funds, and private funds more
generally. In the longer term, a more
active growth capital sector based in
New Zealand may increase the pool of
companies that could consider a move
to the local public markets.
56 | Capital Markets 2029 — Section 5
Capital Markets 2029 — Section 5 | 57
Observations
Banking sector and bank capital
The RBNZ has recently proposed an increase to the
minimum capital requirements of New Zealand registered
banks which they see as a way to better protect depositors
and consistent with their goals of soundness and efficiency.
The RBNZ has acknowledged the downsides as being a
potential increase in interest rates for borrowers and lower
equity returns for shareholders. We acknowledge that an
in-depth review of systemic risk and weighting of relative
merits of the RBNZ proposals is not within the scope of this
review. However, we think the following points are relevant
for the capital markets in the event that the proposals are
implemented:
• Many respondents to the RBNZ consultation paper
have cited that the downside risk of funding for the
New Zealand economy is disproportionately higher for
certain important sectors of the economy, notably dairy
and SMEs.
31
It is likely that capital allocation of banks will
be reviewed (particularly for foreign owned banks) which
may result in less capital being available, most likely
resulting in a materially higher cost of borrowing for
some. Although these observations are not necessarily
evidence-based, they do speak to the importance of
bank funding across the New Zealand economy. We
note that, for reasons of scale, listed capital markets are
generally not feasible funding substitutes for most of the
businesses within the sectors most likely to be affected.
• We have a strong sense that the capital market would
welcome it if the New Zealand banking industry could
provide equity or debt instruments in which both
domestic and offshore investors could participate.
Many have noted the previous investor demand,
particularly from retail investors, for capital instruments
issued by banks in New Zealand — either AT1 or T2
instruments. Under the RBNZ capital proposals, some
have observed there would be limited incentive to
continue to issue AT1 or T2 instruments. However,
instruments that qualify for T2 capital in Australia could
be directly issued in New Zealand by Australian-based
banks. Additionally, the RBNZ could consider allowing
T2 instruments as part of a regulatory capital base,
albeit with reduced weighting. This would allow domestic
banks to keep issuing these instruments, and at lower
cost to the issuer compared with their cost of equity
(which they generally claim in their submissions to the
RBNZ is somewhat invariant to the level of capital held).
We suggest the RBNZ looks for ways to retain AT1
and T2 instruments that meet their objectives and the
needs of investors. Allowing greater use of AT1 and T2
instruments may also assist mutually owned domestic
banks to grow their capital bases.
• The RBNZ proposals may, however, promote greater
use of the public markets by corporates as an alternative
source of funding and, if implemented, we would expect
to see growth in both non-bank lenders and private
credit funds.
Iwi businesses are likely to
be at the forefront of the
changing nature of our
capital markets
Iwi and the Māori economy
The size of the Māori economy has been estimated at $50 billion.
32
In 2015,
the Māori economy contributed $12 billion to New Zealand’s GDP.
33
Assets remain largely concentrated in the primary industries, although there
is increased diversification into other areas, such as geothermal, digital,
services, education, tourism and housing. There is increased adoption of
tikanga (Māori protocols) in a commercial context and increased commercial
collaboration among Māori-owned entities.
Iwi and other Māori businesses continue to operate in the economy with a
distinct conviction: inter-generational, social, cultural, environmental and
economic value creation for their people. Value is predominantly generated in
three ways: the skills, careers and livelihoods that tribal and Māori businesses
provide through employment, growing significant commercial assets to
provide long-term source of income and the social, cultural and environmental
programmes they fund and deliver.
34
Further growth in the Māori economy is anticipated, including growth in
iwi investment capital as a result of further Treaty settlement, which would
result in more active participation from iwi in the country’s mergers and
acquisitions market.
The formation of Te Pūia Tāpapa Investment Fund (Te Pūia Tāpapa) is evidence
of collectivisation. Twenty-six iwi and Māori entities collaborated to form the
first scale iwi/Māori direct investment fund. Te Pūia Tāpapa is a preferred
partner of NZ Superannuation Fund. The purpose of Te Pūia Tāpapa is to
protect, grow and diversify the asset base of the Te Pūia Tāpapa whānau
(family) consistent with their intergenerational wealth aspirations.
Iwi and other Māori entities have been specifically accommodated in a number
of share offers, including the three generators in the MOM programme, and
the IPOs of NZ King Salmon and Napier Port. They are also investors in private
assets such as private equity funds and property ventures. We encourage
industry bodies to continue to reach out and engage with Māori investors
for opportunities that yield mutual benefit. This may facilitate more Māori
investment into New Zealand’s capital markets.
This report does not have any recommendation per se regarding the Māori
economy, however, we do think it is very important to recognise the continued
importance of the Māori economy to the capital markets in New Zealand and
would reasonably expect an increasing contribution to 2029 and beyond.
The Māori economy will continue to grow, and its presence is only going to
become greater. We anticipate it will be another positive contributor to our
capital markets. Given the emerging themes of environmental and responsible
investment, iwi businesses are also likely to be at the forefront of the changing
nature of our capital markets.
Other sectors
Certain sectors of the New Zealand
economy are under-represented
within the equity capital markets,
most notably banking and agriculture.
In the case of banking, this is a
function of Australian ownership of
the four largest banks, Government
control of another and mutual/co-op
type ownership of smaller banks. Only
one domestic bank is listed locally.
Within agriculture, there is a greater
representation within public markets
than 10 years ago. Examples
include the listings of firms such
as Scales, NZ King Salmon and
Synlait, and the success of A2 Milk,
however many assets are owned
by individuals (eg farmers) or are in
co-operative structures (eg entities
in dairy processing and export, meat
processing and export and fertiliser).
We believe investors would generally
welcome a broader ability to invest in
these two sectors. The OIA submission
by the Steering Committee referenced
earlier in this report would also
assist in enabling the investment in
agricultural businesses to be more
feasible.
58 | Capital Markets 2029 — Section 5
Capital Markets 2029 — Section 5 | 59
Promoting
public markets
Capital Markets 2029 — Section 6 | 61
Primary equity market
Globally and locally, numbers of IPOs
are at low levels. In larger markets,
companies are staying private for
longer, and the average IPO size is
increasing. Private equity funds have
significant levels of capital available
for deployment. At the same time,
the extended periods of low interest
rates have given companies relatively
easy access to capital outside of public
equity markets. We have sought to
find out why more companies are not
successfully listing in New Zealand.
As part of these observations we have
assessed the pipeline of entities that
could potentially list and analysed the
role various parties play in the listing
process.
Potential issuers
We have outlined below feedback
received from potential issuers with
respect to listing in New Zealand.
For convenience we have grouped
them into several categories.
Our exercise cannot be considered
a formal survey, and has some
selection bias, however we think
there are consistent themes within
each of the groups.
Early stage, high growth companies with global ambitions
These companies are typically founder-led and have sourced their preliminary
funding from family and friends as well as the angel investment networks.
Due to their focus on product development and building scale quickly, these
entities are generally not yet profitable and have minimal tangible assets.
Most do not view listing as the pathway to raise capital in the short term
as they view their ideal capital partner to be a high profile VC fund (usually
international) who can provide not just capital, but also access to networks,
advice, a halo effect and greater access to investors in subsequent rounds.
Further, these companies generally believe they do not have resources
at present to commit to governance and continuous disclosure standards
applicable to a listing. The founders would also like to maintain a degree
of control over their shareholder register and as a result do not favour
a public listing.
We observe that taking investment from an offshore VC does not preclude
an IPO from occurring later — there are many precedents for this — and we
encourage these types of companies to retain the flexibility to have a listing
as a choice for the future.
Small-medium size, low-to-medium growth companies
These companies (revenue, say, $5 million to $20 million) are typically owned by
a single individual, a family or otherwise closely held and have grown organically
over time, mostly with profits reinvested into the business and some use of
debt financing. These owners will often only consider selling their business in
conjunction with a decision to retire or step back from the business. In lower-
margin sectors such as manufacturing or industrials, these businesses struggle
to raise capital or sell their business for prices they would consider attractive.
A trade sale or retention by family interest is common.
Medium-large size, higher growth-seeking companies
These companies are often owned by a single individual or closely held.
This group of companies is generally growing at a healthy pace and profitable
or very close to it, and is confident of achieving more growth, often via export
or expanding offshore. These companies generally have a board in place.
A subset of this type of company appears more favourably disposed to listing
having been either positioned for a listing for some time, or at least to have
preserved it as an option. They intend to use the capital markets to fund growth.
62 | Capital Markets 2029 — Section 6
As discussed in the introduction to this report, the larger end of the listed market is working
well. It is liquid, well-researched and relatively easy for already listed companies to raise
additional capital. However, New Zealand has seen a dearth of recent IPO activity, while
private markets have grown. In this section, we discuss the trends and influences which
affect the New Zealand public markets.
Large and profitable private
companies
These companies are typically
owned by families and, in some cases,
management and employees also.
They tend to be older businesses
and, as they have been profitable for
some time, they are often aspiration
and growth focussed. Their owners
are generally not demanding of
distributions. They often have low
levels of gearing and a single banking
relationship. Many do not have a
significant requirement for equity
capital. A significant portion of these
companies are already operating in
Australia or considering expansion
there. For many of these firms the
need for capital and liquidity is
often driven by the time frames
of their shareholders. Often, one
may wish to sell but others want to
continue the growth path, but don’t
have an appetite to debt fund the
exit of a significant shareholder.
Often, these companies will look to
trade or financial partners, but they
are a substantial opportunity for the
public markets.
Capital Markets 2029 — Section 6 | 63
Medium-large size, higher
growth-seeking companies
Small-medium size,
low-to-medium
growth companies
Early stage,
high growth
companies with
global ambitions
Large and profitable
private companies
Direct Capital estimates there
are approximately 1,200 private
companies in New Zealand with
revenues over $30 million. Of these,
around 720 have revenues greater
than $50 million and are profitable,
and around 480 have revenues
greater than $100 million and are
profitable. There are approximately
70 NZX listed operating companies
with revenue greater than $30 million
which are profitable.
There are many reasons these
companies are not actively
considering listing. Some are based on
preferences, but some are attitudinal,
and some are misconceptions. Some
state that they do not want the public
profile associated with listing or to be
subject to the disclosure requirements
of a listed company.
Many acknowledged they do not have
full awareness or understanding of the
options for listing or benefits, as they
have not sought advice in this area.
An opportunity for the NZX and the
industry generally is to promote
the benefits of the capital markets
and dispel misconceptions. Capital
markets can be flexible with regard
to the preferences of vendors, and it
seems too many potential issuers rely
heavily on anecdotes and selected
examples to form opinions.
Local and central Government-owned assets
As discussed extensively on pages 49 to 50.
Other views
We also note there are a number of instances of companies that could otherwise
list choosing to accept private capital because they have a limited number
of suppliers or customers, and believe public disclosure of their financial
information would not be in their own commercial interests. They also preferred
to avoid the public scrutiny associated with being a listed entity.
Our discussions with companies who chose not to list in New Zealand, or did
not list at all, found that a number had been deterred because their initial
interactions with potential institutional investors was an underwhelming
experience. Comments include that institutions only had New Zealand stocks as
their frame of reference. Many companies reported finding a better reception
further afield where potential investors were more engaging and more open
minded. Research analysts offshore could offer more insight due to a greater
level of specialisation and a deeper pool of reference companies.
Brokers and investor base
We received feedback that listings of companies with likely market
capitalisations less than ~$100 million receive little support from traditional
brokers and investment banks, who seem less willing to support or sponsor
such smaller-scale listings. New Zealand has experienced a significant
consolidation in the number of brokers and investment banks capable of acting
as lead manager to an issue. Causes of this are the partial or full withdrawal of
international investment banks and consolidation of retail firms, generally for
economic efficiency in light of increased regulation, and to achieve the benefits
of scale. There are about half a dozen broking or banking firms remaining.
For these firms, a small IPO can take as much resource as a larger IPO, but
earns less. They can also be less certain with regard to completion, and
arguably riskier to sponsor. In short, the opportunity cost of an investment
bank undertaking a small IPO can be quite large.
Smaller IPOs require a similar level of work from the buy-side, but clearly cannot
contribute as much to investment returns. They may not ‘move the needle’ for
the larger investors and there are no economies of scale. Some larger managers
choose not to invest in smaller IPOs, citing liquidity reasons.
64 | Capital Markets 2029 — Section 6
In addition, a number of New Zealand
equity fund managers who previously
focussed on smaller-cap stocks have
significantly increased their funds
under management, to the point
where they have needed to move into
larger stocks. There are few, if any,
pools of capital dedicated to smaller
stocks, although we have indications
that one or two fund managers are
considering becoming more active
in this area. Retail participation by
brokers outside those sponsoring
an IPO can be problematic too —
stock allocations are uncertain,
and research may not be available.
Offshore stock exchange platforms
have been able to provide support for
some small market capitalisation New
Zealand-based companies. Many of
these companies (in their view) have
not been well supported by the New
Zealand public equity market.
The lack of recent IPOs can be
characterised as more of a ‘supply’
issue rather than a demand issue.
That is, there are investment dollars
available for investment into IPOs, but
there is a lack of sizable companies
willing to come to market. However,
there are several trends that, if
continued, would cause constraints
on the demand side, even when the
supply returns. These include further
consolidation of the broking sector
and, a lack of institutional capital
and people dedicated to smaller
companies, as discussed above.
Many of the recommendations in this
report are aimed at increasing the
ability of smaller companies to access
the public market.
Secondary equity market
Move from broking to wealth management models
Each of the five primary retail NZX firms has moved from broking models
to wealth management models with a concentration on asset allocation and
portfolio construction. This has been beneficial for those who get this advice
and service but has been at the cost of smaller-cap companies and those not
covered by research. Direct individual participation in the market has declined
with only a few participants serving the smaller direct investor. Aspects of this
are also covered on page 41.
On-market trading
NZX has historically been at the higher level of percentage of off-market trades
compared with other markets, and this was seen as somewhat negative by a
selection of investors. NZX has made significant progress in increasing the
proportion of turnover exposed to the market, rather than being crossed by
brokers and reported (61% on market in June 2019). These changes have
included changes to pricing structures and increases in the minimum size of
trades eligible to be crossed. We note NZX has recently undertaken further
consultation in this area.
Increased passive investment
As noted in the Introduction, increased passive investment is a global
phenomenon. Passive inflows result in indiscriminate buying of the index,
typically the larger stocks. Passive funds generally don’t participate in IPOs
— they wait for the index changes (typically one to four months following an
IPO). Increased passive investment can make IPOs harder to achieve because a
portion of the natural audience does not participate and it has implications for
voting and corporate control, depending on the policies of underlying passive
managers. The rise of passive investment has also concentrated liquidity around
the days of index changes, the last day of the month, and the closing auction
generally.
Recent experience
The recent performance of IPOs in the local market has perhaps reduced
appetite for both issuers and investors, particularly retail investors. It seems
retail investors and the media have been more fixated with recent IPOs which
have not performed well, while ignoring the many stories of success; examples
include Scales, Serko, Vista and Gentrack.
Increased passive investment
is a global phenomenon
Capital Markets 2029 — Section 6 | 65
Research
Many participants raised the topic of
research. In offshore markets, notably
Europe, regulation has diminished
the availability of research on listed
companies.
In New Zealand, broking houses
provide research to the extent that
client demand, interest and economics
warrant it. The majority of investor
interest and broking revenue is in the
larger capitalised securities and hence
broker research is concentrated in this
area. As a result, meaningful coverage
(research completed by three or more
leading research firms) is limited to
the top 50 or so companies, with
another 28 companies covered by
at least one leading research firm.
We note previous initiatives have been
considered and or implemented over
the years to increase the breadth
and depth of research on the NZX
and ASX, particularly for smaller
market capitalisation securities.
The economics of providing high-
quality research remain challenging
with most research offerings not
involving the major brokers — tending
to suffer from a perceived conflict
of interest (eg corporate or stock
exchange sponsored), a lack of
meaningful distribution or a perceived
lack of credibility.
In terms of creating a more viable
research model for the retail investors
more generally, we note Shareclarity
has an innovative new online
subscription-based research platform
providing “valuation in the cloud”.
This model lowers the cost of research
and is a potentially feasible model for
research expansion.
Increasingly, fund managers are
becoming less reliant on broker
research and completing more
analysis in-house. Anything that
reduces the availability of broker
research may reduce direct
participation in the market.
Public debt market
Submitters to this review generally
believe that debt markets are working
well in New Zealand and indeed is
a strength of NZX. However, some
note that since most, if not all,
debt issuance in New Zealand is
oversubscribed there is perhaps
unfulfilled demand and the industry
should consider how to increase the
prospect of debt issuance, such as
attracting more offshore issuance and
encouraging more wholesale issuers
to consider retail offers.
During the period 2009–19,
private debt accounted for the
majority (80.5%) of debt issued in
New Zealand. The total value of
private debt on issue has increased
from $307.0 billion in May 2009
to $461.7 billion in May 2019.
35
Government bond debt on issue has
had an increase of $48.7 billion from
$21.6 billion in April 2009 to $70.3
billion in May 2019 and now accounts
for 12% of total debt on issue, up
from 6% in April 2009.
36
As at May
2019, total Government debt is
$94.4 billion whereas local
government debt is $17.3 billion.
Government and local government
debt account for ~20% of total debt in
New Zealand as at May 2019.
37
Listed
debt has increased at a CAGR of
8.14% from $14.5 billion in May 2009
to $33 billion in May 2019.
38
66 | Capital Markets 2029 — Section 6
These are called compliance listings or direct listings.
Examples include Spotify on the NYSE and QEX Logistics
on the NZX. In New Zealand, a company becomes eligible
to make a same-class offer three months after it has listed
on a regulated market. The offer relies on the company
self-certifying that it complies with continuous disclosure
obligations.
Recommendations
Capital Markets 2029 — Section 6 | 67
Greater promotion and education of the
alternative pathways to the listed market
Typically, an entity joining the public market has combined
its capital-raising event with its listing event in a traditional
IPO. However, in recent times it has become a more
common choice to directly list a company on an exchange
without an associated capital raising.
Recommendation
Impact
Raise awareness
of benefits
and reasons to
list including
promotion of
success and
growth stories
Update NZX
website to provide
better user
experiences for
issuer and market
participants
Continue to
encourage and
support innovation
in public capital
markets
Encourage formal
debrief between
key stakeholders
following any
significant listing/
raising
Promote fund
platform for more
listed products
Use broker
syndicates and
public pools
Greater promotion
and education of
the alternative
pathways to the
listed market
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M
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Owners
Accordingly, some companies may choose to list without
an associated capital raising, with a view to raising capital
in the future. A direct listing has some benefits for the
issuer concerned:
• A greater range of listing advisors is available to advise
on the listing as capital raising services (‘distribution’)
are not required.
• A listing can be achieved with more certainty as the
outcome is not dependent on investor appetite or
market conditions.
An alternative means of obtaining a listing is a reverse
takeover, where a larger company seeking a listing is
acquired by a significantly smaller listed company, often
called a shell company or special acquisition company.
In these cases, a listing profile is required, and usually
the acquirer helps the combined entity achieve the
spread requirements.
We recommend greater promotion and education of
the alternative pathways to the listed market. These
options are available in New Zealand as ways for a
company to become listed, and may, over time, become
the route of choice for smaller companies. In addition,
recommendations included within the Regulation
section of this report on pages 34 to 45 would also
ease the path for listing.
Raise awareness of listing benefits in
New Zealand
Capital markets participants have noted there is
significantly more coverage of the risks and failures of
listed entities than of the successes. The benefits and
reasons to list are not well understood. That said, many
noted the increased efforts of NZX in issuer relations
over the past 24 months.
We encourage the NZX to devise a broader
communication strategy which is consistently shared
with New Zealand private enterprise, including angel
investment, seed and early-stage venture capital,
through to development capital and private equity
and infrastructure associations. This strategy could be
used to promote collaboration among the participants
to develop solutions for capital requirements for their
respective constituents.
We recommend the NZX implements processes to
increase awareness and education of the benefits and
reasons to list. We note this would take time but does
not need to be expensive.
There is a lack of awareness and understanding
of the reasons and benefits of listing:
• Ability to raise capital from public
• Provides liquidity for long standing shareholders
• Increases profile with customers
• Raises credibility with counterparties
• Creates a constituency of shareholders
• Ability to attract, retain and motivate staff
• Subsequent rounds of capital raise can be achieved
quickly and cost effectively (same class offers)
• Creates acquisition currency
• Exposure to market disciplines with being a
listed entity
• Sell a portion of the business with option for
further sales, without the need to give up control
68 | Capital Markets 2029 — Section 6
Update NZX website to improve
user experiences
We encourage the NZX to engage with
the issuer and participant community
to revise its website to provide an
improved front-end view of market
which would help streamline dialogue
between NZX, issuer and participants.
This could include:
• Integrated calendar of reporting
dates and other significant market
events.
• Clearer delineation of securities
by type (ie full listing, fund, debt).
• Highlighted and readily accessible
information during reporting
season.
• Schedule of investor calls, playback
features for video and audio calls.
Continue to encourage and support innovation in capital markets
If private markets are to become a greater feature of the capital markets (and
companies do not list until they are much bigger), there is a role for alternative
markets where owners can trade without it being on a mature registered
exchange. We recommend that both the FMA and MBIE encourage innovation
in support of capital markets. Recent innovations include the same class offer
regime, crowdfunding and peer-to-peer lending.
NZX has experimented with three secondary boards and none has been
successful. Suggested reasons for this include that they did not significantly
reduce any regulatory burden or attract a critical mass of companies. There was
also a lack of research and limited incentive for brokers to become involved.
There are very few instances of secondary boards operated by major exchanges
becoming successful. However, we note that others have proposed trading
platforms, such as Syndex and MyCap Markets, which are further discussed on
page 83. We believe that a workable model for issuers and investors may be the
concept of limited liquidity windows, with direct participation by investors, while
maintaining disclosure standards.
Encourage formal debrief following any significant listing or raising
We recommend a formal debrief between key stakeholders including, NZXR,
FMA, issuer/vendor, legal counsel, and joint lead manager(s) following any
significant listing or capital raising. Revised or new guidance notes should then
be provided to reflect any key findings.
Promote the fund platform for more listed products
We encourage the NZX to promote how the revised listing rules apply to funds.
As noted earlier in this report, funds allow for greater participation by a wider
base of investors and they can also be used as an investment vehicle for a
variety of underlying asset classes.
Use of broker syndicates, direct investor access and
after-market support
When a company is undertaking an IPO, we encourage the use of at least two
brokers in a lead role. This is to spread the supply of shares further and assist
with the depth of research coverage. We also suggest, as a default position, the
inclusion of a public pool in each IPO to cater specifically to New Zealand’s pool
of DIY investors.
Following any listing, the sponsoring investment bank should continue to assist
the company in transition with pro bono advice on investor relations and market
communications.
There are very few
instances of secondary
boards operated by major
exchanges becoming successful
Capital Markets 2029 — Section 6 | 69
Capital Markets 2029 — Section 7 | 71
Our comments in this section seek to outline those
ideas with justifiable and potentially significant benefits to
New Zealand’s capital markets. We do not seek to analyse
or outline all inherent implications arising from these
proposals, nor have we undertaken economic costings of
these ideas due to the many different forms in which the
ideas may be implemented.
The Government supports a sustainable broad-base, low-rate framework
for New Zealand’s tax system.
39
This should allow capital to flow to its most
productive use. Tax should not act as an impediment to investment.
Our broad-base, low-rate settings have a direct impact on New Zealand’s
capital markets. Income can be taxed when it is earned (an income tax) and
when it is spent (an expenditure tax). From the viewpoint of a long-term investor,
tax on investment income during the holding period has the most significant
impact on long-term savings.
40
Therefore, any reforms should consider that
holding period.
The Tax Working Group has already covered various important tax issues in
its reports, albeit with a different focus. We do not intend to repeat any of this
work. Our focus is instead on incremental tax points that add to the efficiency
and improvement of our capital markets.
New Zealand’s tax system works successfully:
• It raises over $80 billion each year.
• Public finances are stable.
• There is little evidence of tax-driven behaviour.
However:
• There is evidence that tax settings potentially contribute towards a private
savings problem in New Zealand.
41
• As highlighted in CMDT 2009, financial savings and investment products
are overtaxed relative to other savings vehicles, especially residential
investment property.
• A shortage of investment capital could be addressed by tax reform.
• New Zealand has an ageing population. As a nation, collectively we need to
save for retirement.
Most other countries make extensive use of tax concessions to boost investment
into capital markets and to assist with retirement. Currently, New Zealand taxes
savings more heavily than other OECD countries. New Zealand generally taxes
savings on a TtE basis; income is taxed when it is first earned (T); it is somewhat
more lightly taxed as it accumulates within a fund (t); but not taxed when it is
withdrawn and spent (E, meaning Exempt).
42
This is unusual. Most countries
apply an EET (‘E’xempt income contributed; ‘E’xempt income in the fund; ‘T’axed
when withdrawn), EtT or TEE model, which leads to a lower overall level of
taxation.
43
72 | Capital Markets 2029 — Section 7
Examples of saving regimes in other countries are:
The examples above illustrate that tax settings and product design are
necessarily linked. Our approach here is to consider tax settings inside our
existing tax and savings scheme recognising that KiwiSaver has a discrete
section and focus for this review.
Australia:
Superannuation contributions are compulsory at a rate of 9.5%, which is
legislated to rise to 12% in 2025. Pre-tax contributions are generally taxed
at a reduced 15% rate, and earnings in the funds are generally also taxed
at a reduced 15% (or lower) rate. In 2018, New Zealand’s pension fund
assets as a percentage of GDP were 25.8%, whereas Australia’s pension
funds 127.1% of its GDP.
44
United Kingdom:
An individual savings account (ISA), as a separate vehicle from its superannuation
regime, allows for annual tax-free contributions of up to £20,000.
46
The scheme has
been a success with the 2017-18 market value of adult ISA holdings at £608 billion.
47
This is an example of an additional, different incentive for saving.
United States:
A 401k plan allows employees to
have the employer contribute a
portion of the employee’s wages to
the plan on a partially pre-tax basis.
Employers are not legally required
to contribute but 401k employer
contributions are tax deductible and
can be tax-deferred up to a limit.
45
Distributions from the account are
taxable income at retirement.
Capital Markets 2029 — Section 7 | 73
Move New Zealand’s KiwiSaver regime from
a TtE to an EET approach
As outlined above, New Zealand generally taxes savings
more heavily than other OECD countries (OECD, 2018).
Allowing pre-tax income to be contributed or sacrificed
into KiwiSaver, as opposed to after-tax cash in hand,
will likely provide a significant part of the impetus
required to dramatically shift New Zealanders’ psyche
and rational economic decision-making towards saving
for their retirement.
Furthermore, the holding period is when the taxation
of a long-term investor’s investment will have the most
significant impact. As such, for this change to be effective
it is also important the investment income is exempt or
taxed at further concessionary rates through the duration
of the KiwiSaver investment.
Taxing KiwiSaver on withdrawal still ensures that tax arises
on such savings and investments, but that it arises at the
appropriate time and on an aspirational greater amount
than that which the current savings path may project.
Recommendations
74 | Capital Markets 2029 — Section 7
H
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Recommendation
Impact
Apply the PIE
taxation regime
rates and exemption
from tax on trading
to all direct listed
share investments
Alter loss
continuity rules
Review tax
concessions
for saving
De-merger
tax changes
Adopt exemption
from NRWT on
fully imputed
dividends from
listed companies
Allow deduction
for equity raising
costs
Consider tax
incentives for
capital-intensive
investment
Enable transfer
pricing and thin
capitalisation
exclusions for
listed companies
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Move New Zealand’s
KiwiSaver regime
from a TtE to an
EET approach
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Owners
Alternatively, the Government should consider how the
current ‘Tt’ components of our KiwiSaver taxation regime
could be made more concessionary through lower taxation
rates on contribution and ongoing investment income, to
stimulate greater saving.
Apply the PIE taxation regime rates and
exemption from tax on trading to all direct listed
share investments
Currently the PIE taxation regime allows for an exemption
on the taxation of gains and losses on the trading of
shares, and for capped taxation at lower rates than the
marginal tax rates. However, uncertainty remains over
the tax treatment of individuals who make gains and losses
when trading their listed shares, and income derived from
shares is taxed up to 33%.
We recommend that PIE taxation principles be extended to
apply more broadly to all directly held listed New Zealand
equities.
PIE rules themselves were originally intended to mimic
individual share trading that generally occurred on capital
account. So, taking any uncertainty away from the status
of revenue versus capital account of direct individual
investments in listed securities should simplify investing.
Similarly, the rate at which income from listed securities
is taxed should also match the PIE taxation treatment,
with such income having capped rates at 28% or lower.
Alter loss-continuity rules
New Zealand’s current rules for carrying forward income
tax losses require that at least 49% continuity of ultimate
non-corporate shareholders (subject to some concessions)
is maintained from the time of incurring of the losses,
until the time of utilisation. Thus, as businesses grow,
they require more capital and inevitably have changing
shareholder bases to fund that growth, historical losses
can be surrendered by virtue of these changes in
shareholdings.
The TWG recommended changing the loss-continuity
rules, albeit with a focus on start-up firms.
48
We commend
the Government’s announcement that its tax policy
work programme will include considering the loss carry
forward rules.
49
We recommend altering loss-continuity rules towards a
‘same business’ test. This allows businesses to openly
accept equity funding to fund growth without fear of
surrendering existing tax losses. We see this as positive
for companies generally, and the capital markets, as it will
allow vendors to receive economic outcomes from past
investment. In particular, some of New Zealand’s early
stage companies will benefit. Currently they may lose the
tax benefit of losses as their capital structure changes
through successive funding rounds.
The current settings discourage investment into such
companies where the investors know that otherwise
valuable tax losses are likely to be forfeited by subsequent
capital raisings. The current settings also discourage the
growth of the companies themselves as the founders are
deterred from taking on such investment where losses may
be forfeited. This may result in poorer growth, employment
and economic outcomes for New Zealand.
A review of tax concessions for savings
We recommend a review of the need for tax concessions
for saving in order to boost the pool of investment capital
and improve wellbeing in retirement.
Current settings tax New Zealanders’ savings more
heavily than certain other investments, such as real
estate. This uneven tax treatment discourages private
saving outside real property.
We therefore recommend implementing tax incentives
for saving. Some options to further encourage savings,
amongst many, could include:
• Inflation-indexing savings or concessions which proxy
for inflation indexation.
• Lower PIE rates.
• Extend PIE and KiwiSaver treatment to all savings types
(refer above).
• Increase KiwiSaver incentives, as previously discussed
in the KiwiSaver section, such as making all balances
below $50,000 exempt from tax in the funds.
Some of the above suggestions are also discussed in the
TWG’s recommendations.
50
The Government is considering
inclusion of such concessions for the savings of low-
income earners on its work programme alongside the
Government’s broader work on KiwiSaver.
51
Current settings tax
New Zealanders’ savings
more heavily than certain
other investments
Capital Markets 2029 — Section 7 | 75
De-merger tax changes
As companies expand, a natural evolution is potential
de-mergers or spinouts to provide for more focus
and value creation of specific parts of a business.
However, de-merger transactions can result in the
de-merged entity giving rise to a dividend to shareholders
even though there is no change to the ultimate ownership
and no distribution of actual income has occurred.
Rules have recently been introduced to allow for Australian
de-mergers from ASX listed companies, but not here in
New Zealand. We recommend changing the rules to allow
for efficient de-mergers for New Zealand listed companies
where available subscribed capital is not readily available.
This could require pre-approval by Inland Revenue as an
avoidance check.
Although mechanisms such as those utilised by
Trustpower/Tilt may be available to New Zealand
companies, the complexity, time and cost of implementing
such schemes is not justified for most companies.
In New Zealand, the policy rationale for allowing domestic
demergers appears stronger than that which allowed the
exemption for ASX listed de-mergers.
Adopt exemption from NRWT on fully imputed
dividends from listed companies
We recommend implementing an exemption from
non-resident withholding tax (NRWT) on fully imputed
dividends from listed companies. Currently, whether
NRWT is required to be withheld on dividends paid by
New Zealand companies to foreign shareholders depends
on the percentage shareholding held, whether the
dividends are fully imputed and any potentially applicable
double tax treaties. Capital market participants noted
that the foreign investor tax credit (FITC)/supplementary
dividend rules, which seek to reimburse <10% foreign
shareholders for NRWT that arises on imputed dividends,
are troublesome.
Many double tax treaties already allow for such investors
to access a lower rate at 0% or 5%. As such, an NRWT
exemption on all imputed dividends (regardless of
shareholding percentage) would simplify the process for
investments in listed companies. However, it is noted that
the current FITC regime does potentially provide foreign
investors with a better outcome.
76 | Capital Markets 2029 — Section 7
Enable deduction for equity raising costs
Costs relating to equity raisings, particularly for IPOs,
are incurred up front and are often significant and
can be a deterrent to undertaking IPOs. This cost is
exacerbated by the fact that most of these costs are
considered non-deductible under tax law.
We recommend allowing costs of equity raising, such as
IPO and deal costs, to be deductible. We note the 2009
CMDT report previously recommended allowing equity
raising costs to be deducted over the lesser of the life
of the equity or 20 years. We also note that the TWG
recommended that ‘black-hole’ expenditure be spread
over five years with a $10,000 safe-harbour threshold of
upfront deductions, which will be a focus of the tax policy
work programme as at August 2019.
53
In Australia, our
closest comparator and competitor, black-hole expenditure
is allowed as a deduction spread over five years.
This remains relevant to boosting our capital markets today
by encouraging businesses to seek capital in New Zealand
to grow.
Consider tax incentives for capital-intensive
investment
We suggest considering incentives for capital-intensive
investment. This is likely to attract and retain investment
capital in New Zealand, such as infrastructure investment.
The Government considers this as a high priority, and
recently announced that its tax policy work programme
as at August 2019 will include considering the role of
the tax system in driving infrastructure investment.
54, 55
We support this initiative.
Removing New Zealand transfer pricing and thin
capitalisation requirements for New Zealand
listed companies
Further consideration could be given to relaxing or
removing the transfer pricing and thin capitalisation
requirements to New Zealand listed companies.
The opportunity to artificially push excessive group
expenditure or interest into New Zealand becomes
extremely limited without the need for complex tax
legislation and associated compliance (significant
transfer pricing, benchmarking documentation etc).
This is particularly the case by virtue of having
independent directors as a New Zealand listed company,
corporate law obligations requiring the directors to act
in the best interests of the company, plus the added
transparency and scrutiny of being a listed company.
It was suggested during consultation that the independent
directors could provide some additional form of
confirmation that all associated-party transactions were
considered to be at arm’s length and in the best interests
of the company.
However, the likely impact of such changes may not be
significant where these independent directors were still
likely to require the appropriate third-party analysis and
confirmation that the allocations of group expenditure are
appropriate (which may equate to similar levels of analysis
and advice as current tax laws require in any event).
Capital Markets 2029 — Section 7 | 77
New
products
Capital Markets 2029 — Section 8 | 79
Recently, we have seen increased
innovation and introduction of new
products in the New Zealand markets, such
as crowdfunding, new participants to the
NZX, and collaboration between different
sectors within the ecosystem. A common
factor of many of these initiatives is that
they open existing investment opportunities
to a greater range of investors, either by
lowering barriers to direct participation or
creating indirect access.
We spoke to potential creators of new products to
understand what may become available over the
medium term. However, for competitive reasons, each
requested their plans be kept confidential. Based on
these conversations, we see encouraging signs that
new products are being developed to add depth to our
capital markets and will be launched in the near term.
These products will not necessarily need to be listed,
nor even themselves invest in listed securities.
We think it is important that regulators remain open to
innovation in the smaller end of the markets, and in the
growing continuum of private markets to public markets.
Observations
Stand-alone listing rules for listed funds
The NZX has recently developed a set of stand-alone
listing rules specifically for listed funds. This is a positive
move. Previously, listed fund issuers needed to seek
substantial waivers from the main board listing rules,
which required cost and time. The fund-listing rules
are more fit-for-purpose, and we understand NZX is
in discussion with several fund managers who are
considering listing new funds.
Passive funds
NZX itself has developed a range of passive funds,
investing both in New Zealand and in a range of other
markets and themes. These listed ETFs provide a simple
introduction to the capital markets for new investors
and provide a convenient method of diversification.
NZX most recently introduced a healthcare and robotics
and automation ETF, which allows New Zealand retail
investors the convenience of investing in an NZX listed
security but with specifically targeted offshore exposure.
Traded options
We have received some interest in a market for traded
options in New Zealand, but not enough to form a
recommendation to pursue it. In any event, NZX and its
participants are best placed to judge the business case
for development of this market. Development of an
options market would likely assist liquidity in the larger
stocks and create some alternatives for the hedging or
leveraging of equity exposure. However, we do not see the
lack of an options market as an impediment to the capital
markets generally.
80 | Capital Markets 2029 — Section 8
Collaboration between different sectors
We have seen recent instances of collaboration between
different sectors of the market. For example, Simplicity
committed to invest a small proportion of funds in early
stage companies via Icehouse Ventures. The various
angel organisations active in New Zealand have grown
rapidly since inception, and some of these networks have
developed a range of their own funds and have ambitions
for further growth. We are confident there will be more
innovation from locally based fund managers and brokers,
matching suppliers of capital (including individual investors)
with investment in companies, particularly in the non-
listed space — another means of accessing private markets.
As discussed on page 54, the Government’s market
development commitment of $300 million to the VC sector
via matched funding should open further opportunities
for more investors to access this part of the market.
Emergence of responsible and ethical investment
We note the emergence of environment, social and
governance (ESG) funds and other environmental ethical/
impact investment funds. New Zealand had $188 billion
of responsible investment in 2018.
56
The market potential
for New Zealand impact investing is an estimated
$5 billion.
57
Although it can be argued New Zealand was
lagging other jurisdictions in the area, there has been a
marked shift in investor awareness of these issues.
95% of KiwiSaver investors think ESG factors should be
considered when investing.
58
As a result, products to
meet investor preferences have been developed in the
last three years.
We acknowledge the Government’s sponsorship of the
$100 million Green Investment Fund. We encourage
the market to continue to explore environmental and
ethical investment. Investment in the ESG/environmental
space could be grown by way of listed debt products
such as green bonds or ESG bonds. Although issuance
of these bonds remains small in the context of the overall
global bond market, this asset class has been growing
rapidly overseas.
The NZX currently supports the development of the
green bonds market in New Zealand. There have been
three issues of green bonds in the last three years
(listed on the NZX Debt Market): Auckland Council’s
electric trains, Contact Energy’s geothermal energy
plants and Argosy Property’s 5-Star Green Star
buildings. We understand work is underway to address the
impediment that an issue of green bonds based on existing
vanilla debt would likely not meet the legal requirements to
utilise a `same class’ offer.
From the issuer point of view, many international investors
and markets are continuing to raise their regulatory and
exchange approaches to ESG promotion and filtering.
We acknowledge a significant number of current
New Zealand issuers are not seeking offshore investment
but any issuers seeking offshore capital should be aware
of increasing standards of behaviour and disclosure.
It is important that regulators
remain open to innovation in
the smaller end of the markets
Capital Markets 2029 — Section 8 | 81
82 | Capital Markets 2029 — Section 8
Observations continued
Crowdfunding and peer-to-peer lending
Crowdfunding is a new and increasingly popular addition
to New Zealand’s funding landscape. It is particularly
attractive for entrepreneurs who seek flexibility in who
they offer the investment opportunity to, and for
companies that are not large enough for IPOs.
The FMCA allows the promotion of crowdfunding
investment opportunities to the general public under
a reduced disclosure regime, which results in a lower
cost and burden to the business. Crowdfunding also
gives businesses additional marketing exposure.
When the FMA legalised crowdfunding in New Zealand in
2014, platforms began providing equity and crowdfunding
opportunities for entrepreneurs and small businesses.
Additionally, we have seen the emergence of dual offers
via a crowdfunding platform with a simultaneous offer to
exempt investors. Whether crowdfunding is the first step in
a series of larger raises by different means depends almost
solely on the performance of the underlying business.
Peer-to-peer lending has developed as an alternative
to bank and other forms of credit, and in New Zealand
continues to grow, although it remains a niche market
in terms of size.
New marketplaces and exchanges
MyCap Markets is investigating setting up an open
regulated marketplace for trading and investing in small-
to medium-sized Kiwi businesses. It proposes to allow
issues to have periodic auctions rather than continuous
trading, but with issuers required to disclose all material
information ahead of each auction event. It is designed for
businesses and projects that are too small to list on a public
market. This provides another option for SMEs seeking
capital where traditional methods may not be possible.
Syndex is an online exchange for investing in proportionally
owned assets. It provides a marketplace to invest in
alternative assets such as commercial property, farmland,
horticulture, units in property syndicates or shares in
private company assets which are held in proportional
ownership structures. Investment opportunities are
provided for both wholesale and retail investors. As Syndex
provides the opportunity to invest in assets other than
shares, it is another means of injecting capital into the
New Zealand market.
Online investment platforms
A number of online investment platforms are now available
to investors across the economic spectrum. Key attributes
of these platforms are modest annual fees for investing
through the platform as well as very low minimum
investment requirements; for example, on Sharesies
where the minimum investment is $5. Partial shares or
units in funds are able to be purchased, so that investors
are not having to input large sums of money in order to
begin investing.
These platforms (including Sharesies, Hatch, InvestNow
and Smartshares) provide a range of funds. Sharesies
has recently provided the ability to invest into individual
companies on the NZX whereas Hatch focuses on providing
the ability to invest in US companies, as well as US funds.
The platforms also provide assistance with taxes. For
example, Sharesies calculates tax credits for the investor’s
New Zealand income tax return and Hatch will complete
US tax returns on an investor’s behalf.
These alternative providers can bring in new investors
who previously would not have invested due to high
cost or minimum investment requirements. They should
help encourage saving and build financial knowledge
in new investors. The assistance and education offered
by the platforms should also assist with building financial
knowledge.
Capital Markets 2029 — Section 8 | 83
considerations
Technological
Capital Markets 2029 — Section 9 | 85
Technology is changing businesses and economies here, as in much of the rest of the world.
Earlier in this report, we outlined exciting technological advances in New Zealand capital
markets, such as crowdfunding, peer-to-peer lending and robotic/AI advice. Another recent
innovation for this market is online-only investment platforms, a number of which have
recently set up operations. This kind of technology can help overcome New Zealand’s lack
of scale and geographic isolation.
The Budget has set a vision of New Zealanders thriving
in the digital age. This requires industries and businesses
to innovate and adopt cutting-edge technology that
offers productivity and job benefits to make sure all
New Zealanders can take advantage of the opportunities
of this time of enormous and rapid change, known as the
fourth industrial revolution.
59
A 10-year time frame is a challenging one, as economies,
capital markets, global trade and technologies are highly
dynamic and will surely change significantly. We encourage
further research into the practical application of the world’s
emerging technology trends: cloud technology, digitisation,
robotic process automation (RPA), artificial intelligence
(AI), blockchain, quantum computing, data analytics, smart
contracts, 5G networks and mobile-based applications.
The list is by no means exhaustive but highlights the many
areas where substantial investment is being made globally
by capital market participants.
Technology should ultimately be
viewed as an enabler to support the
achievement of vision and ambitions
for capital markets in 2029
86 | Capital Markets 2029 — Section 9
New Zealand’s technology advances are constrained by
factors common to our capital markets, as this review has
noted. A key obstacle is the country’s size which limits
economies of scale enjoyed by larger nations. There’s also
a corresponding underinvestment of technology which is
clearly not consistent with the visions and ambitions shared
in this review. FMA’s recent survey of cybersecurity in
July 2019 highlights the need for financial services firms
to improve their readiness, something which will require
investment by participants.
60
Technology should ultimately
be viewed as an enabler to support the achievement of
vision and ambitions for capital markets in 2029 but so
too should the question of how participants collaborate
and consider shared services platforms such that solutions
are economic for everyone and lower costs for end users.
Recommendation
Recommendation
Impact
Develop a collaborative
capital markets ICT plan
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Capital Markets 2029 — Section 9 | 87
Develop a collaborative capital
markets ICT Plan
We encourage MBIE, FMA, NZX
and other market participants to
collaborate to pursue strategic
outcomes, consistent with principles
introduced by the Government’s
ICT strategy:
1. Customer experiences are seamless,
integrated and trusted.
2. Information-driven insights are
reshaping services and policies,
and adding public and private value.
3. Adoption of information and
technology innovations is
accelerated, and value is
being created.
4. Investment in innovative digital
services is being prioritised and
benefits are being realised.
5. Complex problems are being
solved and innovative solutions
are being adopted.
Market participants need to
collaborate and work with Government
(acknowledging the intention to
appoint a Chief Technology Officer role
or similar) on a coordinated review of
the technological environment and
how it should be deployed to improve
the New Zealand capital markets
ecosystem. We consider such a review
important to ensure New Zealand’s
capital markets continue to evolve in
the context of local and international
technology developments.
Owners
88 | Capital Markets 2029 — Section 9
Capital Markets 2029 — Section 9 | 89
3.
2.
1.
7.
4.
5.
6.
We note with keen interest the appointment of a Government Chief
Data Steward (GCDS) who published a data strategy and roadmap for
New Zealand in December 2018, which is also likely to have intersecting
insights for the capital markets ICT plan. Unfortunately, other than
this, the New Zealand Government is yet to frame policies for adopting
emerging technology. In contrast, other developed countries such as
US, Australia, UK, France, Singapore and Canada have plans, policies
or initiatives underway to address the opportunities and challenges.
This review encourages market participants to continue their consideration
of the following topics:
Robotic Process Automation (RPA) is enabling capital market firms to
overcome issues related to legacy infrastructure by automating middle-
and back-office operations. Potential high-impact areas for RPA are
client onboarding, trade reconciliations, reporting and tracking corporate
actions. How should RPA be considered in New Zealand and what are the
impacts for market participants?
Artificial Intelligence (AI) — firms are hunting for an edge in the market.
Instead of just relying on market data for price discovery, they are focusing
on the factors that influence price. AI can also be deployed in surveillance
to ensure capital markets integrity.
Data — how do we capture data coherently and use analytical tools to
identify information and insight for market participants?
Research — this has been identified as being an area for clarity and
improvement. There are existing tech platforms providing some research.
What further developments could be undertaken in this area?
KiwiSaver — this has been a strong feature of this review within which
technology could potentially play a vital role in implementing a number
of recommendations and initiatives.
Blockchain technology — Nasdaq, Australian Securities Exchange, the
New York Stock Exchange, the Tokyo Stock Exchange and the Deutsche
Bourse have either started to use blockchain technology for some of
their transactions or are studying its feasibility. In particular, the ASX
is developing this distributed ledger technology to replace its existing
clearing and settlement system. It has a target date of April 2021 to
introduce this and is attracting interest from other exchanges and many
commercial and investment banks. New Zealand should frame a clear
roadmap and regulatory landscape for advancement of blockchain
technology. The NZX does have a memorandum of understanding with
major international stock exchanges (Singapore, Shanghai, Hong Kong,
Nasdaq) which allows for a collaborative approach to serve their end
customers better.
Smart contract technology could replace ineffective, costly human
oversight in blockchain-driven trading platforms. The contracts execute
as soon as some prerequisite criteria are fulfilled, like a buyer and seller
agreeing on a price point. Quicker trades mean shorter time lags, freeing
up equity.
Appendices
Capital Markets 2029 — Appendix | 91
Appendix One: Acknowledgements
Capital Markets 2029
Steering Committee
Martin Stearne
Rob Campbell,
Chair of SKYCITY and THL
Rachel Dunne,
Partner, Chapman Tripp
Ross George,
Managing Director, Direct Capital
James Lee, CEO, Jarden
Neil Paviour-Smith,
Managing Director, Forsyth Barr
Jim Reardon, Treasurer, Westpac
Rebecca Thomas,
CEO, Mint Asset Management
Matt Whineray,
CEO, NZ Superannuation Fund
Geoff Zame,
Head of Institutional Equities,
Craigs Investment Partners
Capital Markets 2029 Secretariat
– EY
Andrew Taylor, Partner
Brad Wheeler, Partner
Rajnesh Tarsoloo, Senior Manager
Vivien Lei, Consultant
Special Thanks
Andrew Bascand,
Harbour Asset Management
Andrew Frankham, Direct Capital
Andy Hamilton, The Icehouse
Baldwin Boyle Group
Chris Swasbrook, Elevation Capital
Colin McKinnon, NZ Private Capital
Daniel Wong, Flacks & Wong
David Boyle,
Mint Asset Management
James Cooney, Bell Gully
John Phipps,
Forte Funds Management
Luke Facer,
Fonterra Co-Operative Group
Nathanael Starrenburg,
Harmos Horton Lusk
New Zealand Shareholders
Association
Rishab Sethi,
NZ Superannuation Fund
Ross Pennington, Chapman Tripp
Sarah Miller, Black Letter Consulting
Market Participants
Aaron Tregaskis
Aidan Vince, ASB
Allan Yeo, Booster
Amanda West
Andrew Allan, ANZ
Andrew Barnes,
Complectus and PaySauce
Andrew Clements
Andrew Harmos,
Harmos Horton Lusk
Andrew Simmonds,
Simmonds Stewart
Angus Dale-Jones, Knax Consulting
Anthony Edmonds,
Implemented Investment Solutions
ASX
Barry James Lindsay
Bevan Wallace, USX
Blair Tallott, ACC
Brian Gaynor,
Milford Asset Management
Brian Ward, Aroa Biotechnologies
Bridget MacDonald,
Securities Industry Association
Brooke Roberts, Sharesies
Bruce Sheppard, Gilligan Sheppard
Bryan Chapple, Treasury
Bryan Mogridge, Director
Buddle Findlay
CAANZ Tax Advisory Group
92 | Capital Markets 2029 — Appendix
Charles Batchelor,
Capital Advisory Partners
New Zealand
Chris Gaskin, Devon Funds
Chris Gregory
Chris Jagger
Chris Joblin, Tainui
Chris Juchnowicz
Chris Lambert, Forsyth Barr
Chris White, Jarden
Chris Wilson, ASB
Chris Yates, BNZ
Christopher Mark Metcalf
Colin Magee, MyCap Markets
Corporate Taxpayers Group
Craig Mulholland, ANZ
Craig Stobo
Dan Jones, Russell McVeagh
Daniel Kieser, Shareclarity
Dave Corbett, Chain Financial
David Anderson Smith,
TDB Advisory
David Fear, Jarden
David Flacks, AFT Pharmaceuticals
David Gibson
David McCullam,
Craigs Investment Partners
David Raudkivi, Russell McVeagh
David Steele, Forsyth Barr
David Wallace, USX
Dean Hamilton, Director
Dean Spicer, ANZ
Deborah Salter, MBIE
Douglas Lau,
Forte Funds Management
Edward Porter, Hobson Wealth
Eugene Tablis,
Bergen Asset Management
Frank Aldridge,
Craigs Investment Partners
Garrick Wells, SCENZA
Grant Straker, Straker Translations
Greg Driscoll
Greg Shanahan, TIN Network
Hamish Macdonald, NZX
Hartley Atkinson, AFT
Pharmaceuticals
Henry Chung, Jarden
Humphrey Sherratt, JB Were
Ian Beaumont, Russell McVeagh
Ian Silk, Australian Super
Ian Woolford,
Reserve Bank of New Zealand
Institute of Directors
Jack Powell,
Private Wealth Advisers
Jack Starrett Wright, MBIE
James Gibson, Bell Gully
Jenny Miller, NZSA
Jenny Sutton
Jeremy Williamson, Deutsche Craigs
Jim McElwain, INFINZ
Joanna Lawn, NZX
John Bishop, Auckland City Council
John Hawkins, NZSA
John Joseph
Jonathan Wall, Forsyth Barr
Jonathon Wells, NZTE
Joost van Amelsfort, NZX
Justin Queale, Goldman Sachs
Karl Woodhead, MBIE
Keith Cooper, Dunedin City Holdings
Kirsty Mactaggart
Kirsty Reynolds
Kiwibank
Lance Jenkins
Lance Wiggs, Punakaiki Fund
Landon McMillan, MBIE
Leighton Roberts, Sharesies
Liam Mason, FMA
Listed Companies Association
Marcus Driller
Mark Hutton, Evergreen Partners
Mark Stuart,
MinterEllisonRuddWatts
Marko Bogoievski, Infratil
Martin Goldfinch, ACC
Martin Poulsen
Martin Watson, NZSA
Martin Wight, Macquarie
Capital Markets 2029 — Appendix | 93
Market Participants
Matt Todd, Eastland Group
Matthew Goodson, Salt Fund
Max Lewis
Maxim Sherstobitov, NZSA
Mei Nah, Mayne Wetherell
Michael Chamberlain, MCA NZ
Michael Falconer,
Empire Management
Michael Midgley, NZSA
Mike Caird,
Craigs Investment Partners
Mike Guthrie, Mainland Poultry
Mike Hare, Craigs Investment
Partners
Mike Jenkins, Syndex Exchange
Mike Sang, Ngai Tahu
Mike Taylor, PIE Funds
Murray Harris,
Milford Asset Management
Nee Cullum, ANZ
Neil Robert Parker
Neville Todd, Woodward Partners
Nick Hegan, Forsyth Barr
Nigel Bingham, Pencarrow
Nigel Jackson, Westpac
Nigel Scott, Hobson Wealth
Paul Burgin,
Burgin Investment Strategies
Paul Goodwin, ANZ
Paul Munro,
Christchurch City Holdings
Pawel Grochowicz
Peter Forster, BNZ
Peter Huljich
Phil Hart, Herbert Smith Freehills
Philip Ascroft, Chapman Tripp
PwC
Rachel Taylor, DLA Piper
Ralph Shale
Randal Barrett, Pioneer Capital
Partners
Reserve Bank of New Zealand
Richard Bodman
Richard Dellabarca, NZVIF
Richard Fyers, Fyers Joyce
Rickey Ward, JB Were
Rob Dowler
Robbie Taylor, Treasury
Rod Drury, Xero
Roger Sutherland,
Private Wealth Advisers
Roger Wallis, Chapman Tripp
Ross Christie, Cameron Partners
Ross Verry, Syndex Exchange
Rowan Simpson, Hoku Group
Sam Morgan
Sam Stubbs, Simplicity
Scott St John, Director
Securities Industry Association
Shane Edmond, Forsyth Barr
Sharon Corbett, MBIE
Sharon Mackay, BNZ
Silvana Schenone,
MinterEllisonRuddWatts
Simeon Burnett, Snowball Effect
Simon Botherway, Serko
Simon Brown, Banqer
Simon Horner, Mayne Wetherell
Simone Robbers, RBNZ
Slade Robertson, Devon Funds
Stephen Hendry,
Craigs Investment Partners
Stephen Selwood, Infrastructure NZ
Steve Wellington,
Churchgate Partners
Susan Guthrie, RBNZ
Susan Peterson, Director
Taylor Kee,
Money Morning Investment
Research
Terry Price, NZSA
Tim Brown, Infratil
Tim Preston, CM Partners
Tony Batterton, Evergreen Partners
Tony Mitchell, NZSA
Tony Sutherland, Hobson Wealth
Veeshal Rama
Will Carnachan,
Tanarra Credit Partners
William Aldridge, Aldridge & Co
William Foster
94 | Capital Markets 2029 — Appendix
Capital Markets 2029 — Appendix | 95
Appendix Two: Glossary / definitions
TermDefinition
Active Share
Active Share is the percentage of fund holdings that is different from the
benchmark holdings. A fund that has no holdings in common with the benchmark
will have an Active Share of 100%, and a fund that has exactly the same holdings
as the benchmark considered will have an Active Share of 0%. If a fund has an
Active Share of 60%, then 40% of the holdings of the fund are identical to the
holdings of the benchmark, and 60% of the holdings are different (constituting
either over-weights or under-weights relative to the holdings of the benchmark).
Active Share is not a measure of skill but rather measures how different
the fund’s holdings are relative to the holdings of the particular benchmark
considered. Any difference in performance can only come from fund positions
that are different from the benchmark positions, i.e., that are ‘active’, and for
any given fund, higher Active Share could lead to either underperformance or
outperformance.
A FA
Authorised Financial Advisors are registered on the Financial Services Provider
Register and belong to a Disputes Resolution Scheme. They also go through a
detailed approval process by the Financial Markets Authority and have higher
competency standards than Registered Financial Advisors. Authorised Financial
Advisors can provide personalised advice on complex investments, such as
shares, bonds, futures contracts etc.
AML/CFT
The Anti-Money Laundering and Countering Financing of Terrorism (AML/
CFT) Act 2009 outlines the requirements that are imposed on New Zealand’s
businesses and professions to mitigate money laundering.
The purpose of the Act is to ensure that businesses are taking appropriate
measures to guard against money laundering and terrorism financing, to detect
and deter money laundering and the financing of terrorism, and to contribute to
public confidence in the financial system.
ASX
The Australian Securities Exchange is Australia's primary public capital market,
operated by ASX Limited (which is itself listed on the ASX).
AUSTRAC
AUSTRAC (the Australian Transaction Reports and Analysis Centre) is Australia’s
financial intelligence unit and its anti-money laundering and counter-terrorism
financing regulator.
CAGR
Compound annual growth rate (CAGR) is the rate of return that would be required
for an investment to grow from its beginning balance to its ending balance,
assuming the profits were reinvested at the end of each year of the investment’s
lifespan.
CFFC
The Commission for Financial Capability (CFFC) is an independent Government-
funded organisation helping people to get ahead financially.
https://www.cffc.org.nz/
CMDT
Capital Market Development Taskforce, chaired by the late Rob Cameron,
formed in 2008 and reported in 2009. This was a group formed in response to
the financial crisis in July 2008. The members included investment bankers,
economists and government advisors.
Crowdfunding
Crowdfunding is a process of funding a project or venture by raising money from
many people. This is most commonly done through the internet.
DIA
The Department of Internal Affairs work includes managing passports,
citizenships, name changes, birth, death, marriage and civil union registration
and certificates, providing grants, supporting charities, supporting local
Government and linking ethnic communities with the Government.
https://www.dia.govt.nz/
96 | Capital Markets 2029 — Appendix
TermDefinition
DMO
The Debt Management Office is one of the functions of the Capital Markets
Directorate at the New Zealand Treasury, the Government’s lead advisor on
economic, financial and regulatory policy.
They oversee the Government’s borrowing requirements and associated
activities, with a goal of managing debt in a way that minimises costs while
keeping risk at an appropriate level. https://debtmanagement.treasury.govt.nz/
EET
A tax framework on savings where income contributed to the savings vehicle is
exempt from taxation, the income earned from the savings scheme / vehicle is
exempt from taxation and the income drawn from the savings vehicle is taxed
when withdrawn.
ESG
Environmental, Social and Governance are the three central factors in measuring
the sustainability and ethical impact of an investment in a company or business.
First-Home Withdrawal
A First-Home Withdrawal allows a KiwiSaver member to withdraw money to
purchase their first home that is not an investment property, after having been a
KiwiSaver member for three or more years.
FMA
The Financial Markets Authority is responsible for enforcing securities, financial
reporting and company law as they apply to financial services and securities
markets. They also regulate securities exchanges, financial advisors and brokers,
auditors, trustees and issuers including issuers of KiwiSaver and superannuation
schemes. They jointly oversee designated settlement systems in New Zealand
with the Reserve Bank of New Zealand. https://www.fma.govt.nz/
FMCA
The Financial Markets Conduct Act 2013 is New Zealand’s primary legislation
governing capital markets in New Zealand. It includes the rules that apply to
offering financial products, as well trading those financial products on a stock
exchange.
The main purpose of the Act is to promote the confident and informed
participation of businesses, investors, and consumers in the financial markets;
and promotes and facilitate the development of fair, efficient and transparent
financial markets.
GDP
Gross domestic product (GDP) provides a snapshot of the performance of the
economy. GDP is New Zealand's official measure of economic activity.
INFINZ
INFINZ is the member based industry body for professionals working and
participating in New Zealand's financial and capital markets eco-system.
ICT
Information and Communication Technologies, including the Internet, wireless
networks, cell phones, and other communication mediums.
Inland Revenue
Inland Revenue is a Government department that collects most of the revenue
that the Government needs to fund its programmes. Inland Revenue also
administer a number of social support programmes. https://www.ird.govt.nz/
IPO
Initial Public Offering is a type of offering where financial products are sold to
institutional investors and retail investors at the same time as those financial
products are quoted on one or more stock exchange. Typically, an IPO is the first
time that the financial products are offered widely to the public.
KiwiSaver
KiwiSaver is a voluntary, work-based savings initiative to help with long-term
saving for retirement. KiwiSaver contributions can be made by members (both
through deductions from their pay or additional voluntary contributions), their
employers and there is also an annual Government contribution.
https://www.kiwisaver.govt.nz/
Capital Markets 2029 — Appendix | 97
TermDefinition
MBIE
Ministry of Business, Innovation and Employment is the Government’s lead
business-facing agency. They focus on delivering policy, services, advice and
regulation that contributes to New Zealand’s economic productivity and business
growth. https://www.mbie.govt.nz/
MOM
The Mixed Ownership Model, established in 2011 and completed in 2014,
resulted in the IPOs of Mercury NZ (then Mighty River Power), Meridian Energy
and Genesis Energy, as well as a reduction in the Crown’s shareholding of
Air New Zealand, with the Crown maintaining a shareholding of at least 51% in
each MOM company
NRWT
Non-resident withholding tax, which is a tax deducted from interest or dividend
income before the non-resident customer receives it.
NZMDT
The NZ Markets Disciplinary Tribunal is an independent regulatory body
established under the NZ Markets Disciplinary Tribunal Rules. The NZMDT’s
principal role is to determine whether an issuer or market participant has
breached NZX’s market rules in any matter referred to it by NZX Regulation. The
NZMDT does not supervise the market conduct of issuers or market participants.
That role is performed by NZX Regulation and the Financial Markets Authority.
A Special Division of the NZMDT exercises the powers and functions of NZX
Regulation as they apply to NZX and any related listed entity.
NZIER
New Zealand Institute of Economic Research is an independent economic
consultancy. NZIER generally provides membership services that include access
to regular forecasts, commentary and expert advice. https://nzier.org.nz/
NZQA
New Zealand Qualifications Authority is the New Zealand Crown entity tasked
with providing leadership in assessment and qualifications. Their purpose is
to help learners succeed in their chosen endeavours and contribute to the
New Zealand society. https://www.nzqa.govt.nz/
NZVIF
New Zealand Venture Investment Fund Limited. NZVIF is governed by a private
sector board of directors and plays an active role in market development.
https://www.nzvif.co.nz/
NZX
New Zealand’s public capital market, including the NZX Main Board and NZX Debt
Market, operated by NZX Limited (which is itself listed on the NZX Main Board).
NZX also owns Smartshares, New Zealand’s only issuer of listed Exchange Traded
Funds, and KiwiSaver provider SuperLife. NZX also provides wealth management
services for New Zealand advisers via its Wealth Technologies business.
https://www.nzx.com/
NZX Debt MarketThe debt security financial product market operated by NZX.
NZX Main BoardThe main board financial product market operated by NZX.
NZX Regulation NZX’s regulatory function.
NYSENew York Stock Exchange, owned and operated by Intercontinental exchange.
OIO
The Overseas Investment Office administers New Zealand’s overseas investment
laws.
PDS
The Product Disclosure Statement is the offering document that must be
provided to investors in a regulated offer under the FMCA.
PFIProspective Financial Information.
98 | Capital Markets 2029 — Appendix
TermDefinition
PIE
Portfolio investment entities (PIEs) an entity or fund which invests the
contributions from its investors in different types of investments.
RBNZ
Reserve Bank of New Zealand is New Zealand’s central bank. It is primarily a
policy organisation that exists to formulate and implement monetary policy to
maintain price stability and support maximum sustainable employment, promote
the maintenance of a sound and efficient financial system; and meet the currency
needs of the public. https://www.rbnz.govt.nz/
SME
Small and Medium-sized Enterprises play a key role in the New Zealand economy.
They comprise of over 97 per cent of enterprises in New Zealand.
SOE
State owned enterprises in New Zealand are registered companies listed under
Schedules 1 and 2 of the State-Owned Enterprises Act 1986. Most SOEs are
former Government departments or agencies that were corporatised.
TtE
A tax framework on savings where income is taxed when it is first earned (T); it
is somewhat more lightly taxed as it accumulates within a fund (t); but not taxed
when it is withdrawn and spent (E, meaning Exempt).
VC
Venture Capital is capital that has been invested in a project in which there is
a substantial element of risk, typically in new or expanding businesses. These
businesses are essentially start-up companies with the potential to grow from a
certain amount of investment.
Capital Markets 2029 — Appendix | 99
1.
This whakataukī refers to the reciprocity of support
between enterprise and investors to create a prosperous
New Zealand.
2.
See https://www.ey.com/nz/cm2029 for the definition of
capital markets we have referenced.
3.
Many references, refer Wright, Asimakopoulose &
Hamre (January 2019) The New Financial Global Capital
Markets Growth Index, Analysis of the Size, Depth &
Growth Potential of Capital Markets in 60 Economies
around the world, www.newfinancial.org; FCLT Global
(January 2019) Public Markets for the Long Term: How
Successful Listed Companies Thrive; European IPO Task
Force (March 2015) Rebuilding IPOs in Europe - Creating
jobs and growth in European capital markets; Xiaohui
Gao, Jay R. Ritter, and Zhongyan Zhu, “Where have all
the IPOs gone”, Journal of financial and quantitative
analysis.
4.
See https://www.ey.com/nz/cm2029
5.
Many references, refer Wright, Asimakopoulose & Hamre
(January 2019) The New Financial Global Capital Markets
Growth Index, Analysis of the Size, Depth & Growth
Potential of Capital Markets in 60 Economies around
the world, www.newfinancial.org; FCLT Global (January
2019) Public Markets for the Long Term: How Successful
Listed Companies Thrive; European IPO Task Force
(March 2015) Rebuilding IPOs in Europe - Creating jobs
and growth in European capital markets; McKinsey Global
Private Markets Review (2019) Private Markets come of
age; CFA Institute Capital Formation – The Evolving Role
of Public and Private Markets; Wright, “What are stock
exchanges for and why should we care?”, New Financial.
6.
Compound annual growth rate, from December 2008 to
December 2018, size refers to free float adjusted market
capitalisation and value refers to value of capital indices.
7.
NZX Debt Market source data.
8.
See TDB Advisory A Review of the Mixed Ownership
Model, www.tdb.co.nz
9.
Technology Investment Network (2018) TIN Report, 14th
Edition.
10.
NZIER (February 2018) The economic contribution of
NZX.
11.
Mai Chen (November 2015) Superdiversity Stocktake
Implications for Business, Government and New
Zealand, www.superdiversity.org/wp-content/uploads/
Superdiversity_Stocktake.pdf
12.
Sourced from Financial Markets Authority
13.
Sourced from Financial Markets Authority
14.
Sourced from Financial Markets Authority
15.
In Review of the KiwiSaver Fund Manager Market
Dynamics and Allocation of Assets (2015), Treasury
forecasts KiwiSaver funds under management to be
$70b by 2020. Extrapolating the same assumptions
out to 2030 brings the figure to $200b funds under
management.
16.
Section 68 of the FMCA grants the FMA the power
to waive the waiting period, but we are not aware of
this power ever being used, even where the FMA has
conducted extensive pre-registration reviews of IPO
disclosure materials. Accordingly, an amendment
to automatically waive the waiting period in the
circumstances outlined above would be appropriate,
or a regulatory or legislative direction as to the
circumstances in which the FMA should utilise this
existing power.
17.
See clause 39(c)(i) of Schedule 3 of the Financial
Markets Conduct Regulations 2014.
18.
The fair dealing provisions in Part 2 of the FMCA apply
to any statement made in connection with any dealing in
financial products by prohibiting misleading or deceptive
conduct or conduct which is likely to mislead or deceive.
This would include publishing statements including PFI
that is misleading (for example, because it was based on
entirely unreasonable assumptions). It is worth noting
that if the PFI was included in a regulated disclosure
document, the liability provisions in Part 3 of the FMCA
would also apply – under section 82(2), a statement
about a future matter (such as PFI) is taken to be
misleading if the person making the statement does not
have reasonable grounds for making it. If the PFI were
not included in the regulated disclosure documents,
then the provisions relating to unsubstantiated
representations at section 23 of the FMCA would be
relevant to similar effect.
19.
A compliance listing is where an issuer is listed, and its
equity securities are quoted, on the NZX Main Board
without any capital being sought through an offer of
securities. Under NZX Listing Rule 7.3.1, an applicant
for listing must prepare and issue an Offer Document
or a Profile (if required to do so by NZX) when seeking
initial quotation of a class of financial products (and
in certain other circumstances where there has been
a fundamental change in an existing issuer). For initial
listings, we understand practice has generally been for a
Profile to be provided.
20.
Australian Law Reform Commission (January 2019)
Integrity, Fairness and Efficiency—An Inquiry into Class
Action Proceedings and Third-Party Litigation Funders
(ALRC Report 134).
21.
The Treasury (April 2019) Reform of the Overseas
Investment Act 2005: Facilitating productive investment
that supports New Zealanders’ wellbeing.
Appendix Three: References
100 | Capital Markets 2029 — Appendix
22.
See https://www.ey.com/nz/cm2029 for copy of full
submission.
23.
See section 534 of the FMCA.
24.
See section 500 of the FMCA, which provides for a
true “due diligence” defence in relation to regulated
disclosure documents only.
25.
See sections 510 to 512 of the FMCA. Note that no
criminal liability presently attaches to documents which
are not “required” for the purposes of the FMCA – such
as investor presentations or fact sheets, unless they are
incorporated into a regulated disclosure document.
26.
See clause 41 of Part 3 of Schedule 1 of the FMCA.
27.
Part 15 of the Companies Act enables virtually any
‘arrangement’ involving a company to be approved
by a court, so could, in theory, be used to affect any
conceivable corporate transaction.
28.
New Zealand Productivity Commission (draft report July
2019) Local government funding and financing.
29.
https://treasury.govt/nz/information-and-services/nz-
economy/infrastructure
30.
The Government (May 2019) the Wellbeing Budget.
31.
RBNZ (January 2019) Capital Review Paper 4: How
much capital is enough?.
32.
NZTE (June 2017) Māori Economy Investor Guide, page
12.
33.
NZTE (June 2017) Māori Economy Investor Guide, page
42.
34.
Ākina Foundation (September 2017) Growing impact in
New Zealand, page 15.
35.
https://www.rbnz.govt.nz/statistics/c5
36.
https://debtmanagement.treasury.govt.nz/investor-
resources/data
37.
https://www.lgfa.co.nz/search/node/debt%20figures and
Financial Statements of the Government of New Zealand
31 May 2019
38.
NZDX source data.
39.
Hon Grant Robertson (2019) The Wellbeing Budget,
page 127.
40.
Savings Working Group (2011. Saving New Zealand:
Reducing Vulnerabilities and Barriers to Growth and
Prosperity.
41.
EY (2018) Future of Tax: EY’s submission to the Tax
Working Group.
42.
KiwiSaver and Portfolio Investment Entities generally
have some preference within the New Zealand system
but remain heavily taxed by international norms, so the
New Zealand system is often described as TTE.
43.
Organisation for Economic Co-operation and
Development (2018) Taxation of Household Savings,
OECD Tax Policy Studies No. 25, OECD Publishing.
44.
OECD. OECD Statistics Funded Pensions Indicators
http://stats.oecd.org/Index.aspx?DatasetCode=PNNI_
NEW
45.
https://www.irs.gov/retirement-plans/401k-plans-
deferrals-and-matching-when-compensation-exceeds-
the-annual-limit
46.
https://www.gov.uk/individual-savings-accounts
47.
https://assets.publishing.service.gov.uk/government/
uploads/system/uploads/attachment_data/file/797786/
Full_ISA_Statistics_Release_April_2019.pdf, page 13.
48.
See Tax Working Group (21 February 2019) Future of
Tax: Final Report Volume I – Recommendations, page
73.
49.
Government tax policy work programme
(https://taxpolicy.ird.govt.nz/work-programme)
50.
See Tax Working Group (21 February 2019) Future of
Tax: Final Report Volume I – Recommendations, page
80.
51.
Government response to TWG, https://www.beehive.
govt.nz/release/govt-responds-tax-working-group-
report, see #43.
52.
See Tax Working Group (21 February 2019) Future of
Tax: Final Report Volume I – Recommendations, page
74.
53.
Government tax policy work programme
(https://taxpolicy.ird.govt.nz/work-programme).
54.
Government response to TWG, see #36 http://taxpolicy.
ird.govt.nz/news/2019-04-17-government-responds-
twg-recommendations#business
55.
Government tax policy work programme
(https://taxpolicy.ird.govt.nz/work-programme).
56.
Responsible Investment Benchmark Report New Zealand
2019.
57.
New Zealand National Advisory Board (NZNAB),
https://gsgii.org/nabs/new-zealand/.
58.
RIAA (October 2016) KiwiSaver Study.
59.
The Government (May 2019) The Wellbeing Budget.
60.
https://www.fma.govt.nz/assets/Guidance/Cyber-
resilience-in-FMA-regulated-financial-services.pdf.
Capital Markets 2029 — Appendix | 101
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How you manage your capital agenda today will define your competitive
position tomorrow. We work with clients to create social and economic value
by helping them make better, more-informed decisions about strategically
managing capital and transactions in fast-changing markets. Whether
you’re preserving, optimizing, raising or investing capital, EY’s Transaction
Advisory Services combine a set of skills, insight and experience to deliver
focused advice. We can help you drive competitive advantage and increased
returns through improved decisions across all aspects of your capital
agenda.
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