MBIE yesterday announced Phase Two of the Government’s capital markets reforms programme, seeking feedback on eight specific areas for potential regulatory change. This follows the changes implemented in Phase One, most notably the removal of the prospective financial information requirement for IPOs and the adjustment of climate-related disclosure rules.
The consultation is guided by three objectives:
- a proportionate regulatory system that does not impose unnecessary costs on issuers;
- a strong, dynamic "equity ladder" that supports businesses at all stages of growth; and
- globally competitive capital markets that attract investment and listings.
While Russell McVeagh welcomes the objectives of the Government’s reform programme, it is not clear that this latest set of changes will meaningfully assist in addressing the structural problems facing capital markets. We note, however, that MBIE is also seeking ‘big ideas’ from the industry for maximising the impact of capital markets, and what changes are needed to make that possible, presenting an opportunity for market participants and stakeholders to propose bold, ambitious reforms, as well as other non-regulatory ways both Government and the sector itself could support New Zealand's capital markets.
Key areas for reform
The key areas identified for reform include the following:
PDS disclosure requirements
MBIE proposes options to reduce (or in some cases remove) product disclosure statement (PDS) content requirements and redesign PDS documents as “digital-first” formats.
In the context of an equity IPO, it is not clear to us that the length of the PDS is the problem. The legislation already limits a PDS for an equity IPO to 30,000 words or 60 A4 pages and the clear focus of the regime is on "simple" disclosure tailored towards retail investors. In the US, on the other hand - home of the most vibrant capital markets on the planet - IPO offering documents regularly run to multiples of that length, filled with dense jargon targeted at sophisticated, institutional investors. The S-1 offering document for the recent Space X IPO clocked in at over 200,000 words, for example (including 10 mentions of the phrase "light of consciousness").
Of particular interest for debt issuers is an option proposed which would effectively expand the existing "same class" exclusion. If that option was progressed it would allow issuers with listed equity to issue new retail debt securities of any kind without requiring a PDS (and regardless of whether those debt securities were of the same class as existing quoted debt securities). This would significantly reduce the compliance costs for new issuers of retail debt securities, or existing issuers looking to issue different kinds of debt securities.
Civil liability for directors
The document raises the possibility of narrowing continuous disclosure liability for directors to address a perceived problem of "defensive disclosure practices". We don't necessarily think this is a problem that needs to be solved. Our experience of the continuous disclosure practices of New Zealand issuers is not that they are overly conservative - instead, issuers recognise their fundamental responsibility to keep the market informed of material developments (subject to the available safe harbours) and operate accordingly.
The document also proposes amending deemed director liability provisions in relation to defective disclosure (eg for misleading or deceptive statements in a PDS) and financial reporting contraventions, in order to reduce personal risk and compliance costs for directors. We do think a review of the liability regime for directors in the context of securities offerings is welcome, given that (in our experience) the potential liability arising from an IPO is often a key factor cited in preferring a private business sale.
Catalist and USX market settings
Options are put forward to adjust or remove market capitalisation entry/exit thresholds for Catalist ($60m/$100m) and to reduce audit requirements for smaller Catalist and USX issuers.
Crowdfunding and peer-to-peer lending
The Government is considering raising the $2 million per-issuer crowdfunding cap (potentially to $5–10 million), with a possible introduction of per-investor caps to manage risk.
Wholesale investor certification
Proposals include strengthening eligible investor certification requirements, extending or removing the two-year certificate validity period, and restricting public advertising of wholesale offers.
Readers may recall the FMA's approach to the High Court for clarification on the application of the eligible investor certification requirements following the FMA's concerns regarding misuse of the regime, in which the Court largely deferred to Parliament to provide for any strengthening of the requirements. While the detail will need to be worked through, we welcome the focus on ensuring that susceptible persons who do not truly meet the criteria are protected from risky investments.
Auditor liability and broker activity
Options to cap auditor liability for FMC audits (for unintentional wrongdoing), aligning New Zealand more closely with Australia. The document also seeks evidence on whether current regulatory settings constrain broker support for smaller issuers and research coverage.
Our initial thoughts
As mentioned above, while we see a vibrant capital markets as vital to New Zealand's future, we have less confidence that these proposed changes meaningfully support that aim. Capital markets globally are under real pressure - as one example that recently caught our eye, in the UK, the value of takeover bids for companies on the London Stock exchange has outstripped the value of new listings by 27 to 1 so far this year. This demonstrates the significant structural barriers and challenges that currently face global capital markets, despite increased focus by governments and regulators to increase participation and relax capital markets rules.
We therefore welcome the Government's focus on this area, but hope to see continued work done on harnessing superannuation and other pools of capital to ensure support for New Zealand companies to go public.
Next Steps
Submissions on the discussion document (available here) close on Tuesday, 25 August 2026. If you would like support in making a submission, or would like to understand how the proposed changes may impact your business, please get in touch with one of our experts below.