In a speech to the association's annual review function, TCA chairman Clynton Hardy said there had been a "major improvement" in the regulatory environment for financial markets, with just the Financial Markets Conduct Bill to go.

"However TCA does have a concern that there are still two weak links in what I call the investor confidence value chain."

The first, he said, is that of unlicensed custodians.

‘'Under the newly introduced regulatory model the spotlight has quite properly been put on all involved in the investment sector, from advisers to issuers and supervisors.

"However custodians, i.e. those responsible for holding investment assets on behalf of others are the only player in the sector that remains unlicensed, yet they hold all the assets.

"Many custodians are global firms, licensed in other jurisdictions, so are unlikely to object to being licensed in New Zealand.  I cannot understand the rationale for excluding this key part of the investment chain from regulatory oversight."

The second area of weakness is the contribution to investor confidence by auditors, he said. 

"TCA is firmly of the view that both issuers and the markets expect investors to be able to rely on financial information included in the prospectus and investment statement.

"If that information is accompanied by auditor audience limitation clauses, then surely this makes a moral nonsense of the new regulatory environment and the government strategy of building investor confidence.

"We hope that Parliament can address these two issues when it resumes after the election."