The Hon Simon Power last night confirmed to INFINZ, the anticipated decision to roll together the Securities Commission with some of the functions of the Companies Office, MED , the Government Actuary, and the NZX.

An underwhelming speech. It did not address many of the Capital Market Development Task Force recommendations on which the government said in February it would have a discussion paper by the end of April. Let's hope that the delay is evidence of hard practical thinking, and determination to get the detail right, even if the timetable slips a little.

It is not as if the new structures have an urgent job. Market failures create caution. Most risks of stupid investment disappear for years after a bull market ends. So the new body will look successful even if it can not really claim the credit for a likely decade of low loss investing, until irrational enthusiasm holds sway again.

Announcements of intention to change the carpets and curtains and to demolish or move internal walls of regulatory structures work well politically:

• They look like decisive action – people can actually see something changing.
• They allow the postponement of the real decisions, on what the remodel should actually do that is different from now;
• They give a grace period, while people wait to see if it works. The politician is not held responsible for failures at least while it is obviously finding its feet; and
• They distract from the past. It seems churlish to keep asking about past failure once something is definitely changing.

There is sensible stuff on Kiwisaver though unadventurous.

But most of the stuff on the FMA is the political equivalent of corporate changes of letterhead and livery, until proved otherwise. Sometimes it signifies a genuine transformation. More often it is instead of genuine change. We won't know till we see the detail.

Whether "institutional architecture" changes are a net benefit usually depends on the quality of the people variously attracted, newly empowered, and dispensed with, by the changes. Calling in the architects gives the necessary excuse for bypassing unfair dismissal law, so there is room to make necessary change. But that does not mean it will be in the right direction, nor that the benefits will outweigh the costs of disruption. Good people can be driven away if the portents look bad.

Room for optimism is limited by:

• the Minister's advisers included rhetorical stuff instead of substance in several areas. For example, the  line " on too many occasions in finance company collapses we heard of investors' money falling to the floor through the cracks between regulators" is a good one, but it's hard to think of many such cracks. I'm not aware of any jurisdiction reasons for the failure of the worthies on the Securities Commission to take more interest in self-dealing finance company directors, and the vanishing restrictions in Trust Deeds on self dealing. What stopped them issuing warnings and commenting publicly, even if they rightly had no power to prohibit?
• some dumb Labour government decisions confirmed last night, in particular forging ahead with the breathtakingly stupid financial advisor regime when the Minister should be calling halt if government rhetoric about quality regulation and productivity means a thing;
• the expanded responsibility of the FMA for the content of NZX listing (conduct) rules. NZX already has a desperately low rate of recruitment of new companies. Few astute advisers can recommend listing to an Exchange where the rules (Aussie style continuous disclosure for example as opposed to our previous US derived model) are so potentially damaging to business and threatening to decent directors. Regulators and politicians have incentives to 'gold plate' rules. They're  unlikely to "relax" silly rules if some disappointed investor in the future could say on National news "if you had had not removed [x] rule I would not have lost", even if the interests of investors and issuers overall would be enhanced. Regulators know they will not be held responsible for gradual decline, or get credit for gradual growth, but they will suffer for any high profile disappointment.

The owner of the securities auction house has the best incentive to balance the rules at the point where they serve both the issuers, and those who trade. Politicians and regulators should then ruthlessly enforce the integrity of the auction house's application of the rules. That does not require that they determine what those rules say.

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