A bill aimed at restoring investor confidence has passed its first reading in Parliament.
The Financial Markets Conduct Bill clarifies the responsibilities of finance companies and proposes fines of up to $5 million for those that breach the law.
Commerce Minister Craig Foss says the bill provides a once-in-a-generation opportunity to make the financial markets more efficient.
Its introduction follows a review of securities law and builds on recommendations from the Capital Markets Taskforce, effects of the global financial crisis, and the failure of finance companies.
The bill proposes that prospectuses and investment statements be replaced with a single product disclosure statement aimed at retail investors.
It also proposes that companies making misleading statements be liable for fines of up to $5 million while individuals face fines of up to $1 million.
The second reading of the bill will take place by October.