THE PORT Moresby Stock Exchange is set to be opened to greater competition in new legislation flagged by Papua New Guinea Prime Minister Peter O’Neill.

The draft legislation, which has been approved by the National Executive Council, will establish the Securities Commission of Papua New Guinea as an independent government agency through the repeal of the Securities Act 1997.

The Prime Minister said while Papua New Guinea’s banking and non-banking financial institutions have grown significantly since the financial sector reforms of 2000, the capital market has not grown as had been anticipated.

“The legislation will position the Securities Commission of Papua New Guinea, as an independent office, moving away from its current status as a Division of the Investment Promotion Authority (IPA),” he said.

“Currently, the Securities Commission does not have an independent organisational and administrative structure.”

This, he said, meant the Commission was unable to perform its regulatory functions by providing oversight of the Papua New Guinea Capital Market, including the buying and selling of shares on the Port Moresby Stock Exchange.

Mr O’Neill also said the existing Securities Act had “a number of vagaries and ambiguities that undermined the capacity of the Commission to perform duties as required under law.”

“The Commission, for example, was not able to give effect to the findings of the Commission of Inquiry into the Investment Corporation Fund of Papua New Guinea due to the obvious lack of powers under the existing law,” he said.

“These reforms are intended to ensure that the Securities Commission has the necessary powers to properly regulate the capital market and deal with issues when they arise.”

While the Prime Minister did not elaborate, a briefing note prepared by law firm Allens Linklaters suggested that the proposed changes may focus on licensing requirements for financial intermediaries and advisors, greater clarity around offers to the public and issue of a prospectus and disclosure obligations.

The Prime Minister said the legislation will provide a major boost to the Port Moresby Stock Exchange through improved competition and transparency, with changes to its ownership structure and board composition.

“The Port Moresby Stock Exchange was established in 1998 with two stock brokers, and today there are still only two stock brokers on the exchange,” Mr O’Neill said.

“The National Government cannot allow the Port Moresby Stock Exchange to remain a closed market, owned by only two Stockbrokers who control the stock market and its activities,” he said.

“There are many qualified Papua New Guineans and foreigners in the country who are able to provide competitive broking services and we will open the market to competition.”

Mr O’Neill said less than K1 billion had been circulating in the market over the past 17 years, despite the Exchange having a market capitalisation of over K60 million.

“The Government would like to see more Papua New Guineans use the Port Moresby Stock Market as an avenue for investment,” he said.

“We also encourage Papua New Guinean companies to look to the Port Moresby Stock Exchange to raise long-term funding and capital.”

Through the reforms, the Prime Minister further said the government would encourage companies to introduce new products to the market, including investment funds, unit trust funds, debentures and other capital market or financial products.

“We would like to see private equity funds established to provide capital for major transformational projects in key national sectors such as agriculture,” he said.

Mr O’Neill said the changes would encourage innovation in the financial sector in Papua New Guinea and lead to increased domestic and international investment.

“Reforms to legislation will enhance the financial sector in Papua New Guinea by making it more competitive in the global market,” he said.

“There have been significant changes in global financial markets in recent years as technology has evolved and international competition has increased.”

“Papua New Guinea must continue to grow our financial services sector to be a leader in the Pacific Islands and serious presence in the Asia-Pacific.”

The intended reforms are in line with similar reforms undertaken in other countries that are aimed at improving corporate governance, he said.

The draft bills could be introduced to parliament as early as August 2015, after which they will become publicly available.