Anyone who buys units in a unit trust, holds shares in a PNGX-listed company or deals with a licensed fund manager in Papua New Guinea is relying, often without knowing it, on the Securities Commission. This article explains what the Commission is, where it came from and what Parliament has told it to do.
From IPA division to independent regulator
Papua New Guinea first had a securities regulator under the Securities Act 1997. From 1998 the Securities Commission operated as a division of the Investment Promotion Authority (IPA), the body that also registers companies. Unit trust trustees were licensed under section 72 of that Act.
In 2015 Parliament passed three Acts together. The Securities Commission Act 2015 re-established the Commission as a stand-alone statutory body and repealed the 1997 Act, the Securities Regulation 1998 and the Takeovers Code 1998 (section 117). The Capital Market Act 2015, in force since 15 December 2017, contains the substantive rules on licensing, prospectuses, unit trusts, takeovers and market misconduct. The Central Depositories Act 2015 governs the electronic holding of securities. The Securities Commission Act calls these three Acts together the “securities law”, and the Commission administers all of them. The Securities Commission Act is in force and was substantially amended by the Securities Commission (Amendment) Act 2023. See what changed when the 1997 Act was replaced.
A body corporate that is independent
The Securities Commission of Papua New Guinea “is a body corporate, with perpetual succession”, has a common seal, may acquire, hold and dispose of real and personal property, “may sue and be sued in its corporate name and style”, and has the functions and powers conferred on it by the Act or any other Act.
The Commission is therefore a legal person separate from the State and from the individuals who run it. It can own property, employ staff, sign contracts and appear in court, as it did as the respondent in Melanesian Trustee Services Ltd v Securities Commission of Papua New Guinea [2023] PGNC 356; N10524. Section 6 declares that the Commission is not subject to direction or control by any person, and section 38(4) repeats that it acts independently in exercising its powers under the three securities Acts. The Commission has its own Fund, fed by levies and fees as well as budget appropriations; see how the Commission is funded.
What it is for: the section 7 objectives
Section 7 lists seven objectives that must guide everything the Commission does. In summary, they are to ensure the orderly administration of the capital markets; to ensure the sound conduct of business in the capital markets and over-the-counter centres; to develop policies for fair, efficient and transparent securities and derivatives markets; to develop policies on money laundering in the capital market; to study new avenues for development in market services, with an eye to economic sustainability and job creation; to ensure, in collaboration with the Bank of Papua New Guinea, the soundness and stability of the financial system; and to work out objectives, policies and priorities for market development. Investor protection and market development are the two themes.
What it does: the section 8 functions
Section 8 turns those objectives into seventeen functions. The most important for unit trust investors are to:
- administer the securities Acts and license, regulate, monitor and supervise business in the securities and derivatives market (paragraphs (a) and (b));
- set rules and guidelines, and issue orders, class orders and directives, on the conduct of business, OTC activities and money laundering (paragraphs (c) and (d));
- prepare and publish a Corporate Governance Code for public and exempted companies and ensure listed companies and market intermediaries meet the highest governance standards (paragraphs (e) and (f));
- identify and prevent investment business abuse, and investigate and suppress illegal, dishonourable and improper practices, market abuse and financial fraud (paragraphs (g) and (j));
- promote public understanding of the market, including the benefits and risks of different kinds of investment (paragraph (i));
- take measures for the better protection of investors and advise the Minister on the securities market (paragraphs (o) and (p)).
The other functions cover research, statistics, international liaison and anything incidental to the objectives. In practice the Commission approves and registers unit trust deeds, licenses trustees and fund managers, registers prospectuses, supervises PNGX, investigates complaints and takes offenders to court. Later articles explain each of those powers in turn.
Where it sits among PNG’s regulators
| Body | Role | Relationship to the Commission |
|---|---|---|
| Bank of Papua New Guinea | Central bank; licenses banks under the Banks and Financial Institutions Act 2000; supervises superannuation funds under the Superannuation (General Provisions) Act 2000 | The Governor sits on the Commission’s Board; the two share responsibility for financial stability (section 7(f)) and may coordinate OTC and money market regulation (Capital Market Act, section 468) |
| Investment Promotion Authority | Registrar of Companies under the Companies Act 1997 | Former host of the Commission; registers the companies the Commission regulates |
| PNGX Markets Ltd | The stock exchange (formerly POMSoX), approved under section 9 of the Capital Market Act | Market operator supervised by the Commission, which approves its rules and can direct it |
A superannuation fund such as Nasfund is therefore supervised by the central bank, but when it invests in a unit trust, that trust and its trustee are the Commission’s responsibility. See who regulates unit trusts and how the stock exchange is regulated.
Reports, judgments and websites from before 2024 describe an Executive Chairman and a Board of Commissioners appointed on the advice of a Securities Appointment Committee. The 2023 amendment replaced that structure with a seven-member Board and a Chief Executive Officer. See how the Commission is governed.
Sources
- Securities Commission Act 2015 — ss 2 (“securities law”), 3, 4, 6, 7, 8, 38(4), 117, as amended by the Securities Commission (Amendment) Act 2023
- Capital Market Act 2015 — ss 9, 468
- Central Depositories Act 2015
- Securities Act 1997 (repealed) — s 72
- Melanesian Trustee Services Ltd v Securities Commission of Papua New Guinea [2023] PGNC 356; N10524
Before relying on anything here, read the current text of the Capital Market Act 2015 and check for later amendments. If a decision matters to you, get advice — start with the Office of the Public Solicitor, or find a firm in the law firms directory.