The review of Financial Market Conduct Regulations asked industry participants about a number of issues, including whether New Zealand should pursue mutual recognition with other countries besides Australia.

A joint submission by boutique managers Pathfinder Asset Management and Pie Funds has questioned whether New Zealand would benefit from such a move.

“In the case of Australia mutual recognition was entered into with the best intentions but has failed from a New Zealand perspective,” said the submission, citing a 35:1 disparity in the number of Australian offers into New Zealand versus New Zealand offers into Australia.

“There are several reason for this huge disparity – one is that the regulatory environment in Australia places hurdles for NZ fund managers that Australian managers do not face in New Zealand. 

“The cost of these extra hurdles is circa A$100,000 to A$200,000 per annum for a NZ fund manager to distribute product into Australia.  There is not true mutuality.”

Pathfinder executive director John Berry said the cost was due to New Zealand fund managers having to distribute and promote their products through an Australian licence-holder.

“It’s a barrier to entry to the market.  We’ve welcomed Australian fund managers here but they haven’t given us reciprocity.”

The submission also called for offshore fund managers to have the same level of disclosure as New Zealand managers, including Australian unit trusts available here under mutual recognition.

“They currently operate under secrecy in New Zealand – they do not disclose how much they have raised from New Zealand investors.

“We find this unfortunate as many New Zealand investors derive comfort from the fact an Australian fund may be large – they do not realise they may be an early adopter of the fund in New Zealand.”