The new regulator will mean the entire financial sector will be overseen by a single overarching authority.
He said the Financial Markets Authority (FMA) would be established to consolidate functions now fragmented across the Securities Commission, the Ministry of Economic Development and the NZX.
"This move is at the centre of the Government's drive to restore the confidence of mum and dad investors in our financial markets," Mr Power said in a speech.
The FMA was one of three major announcements included in the same speech by the minister.
The others were financial advisers being given extra time to fully comply with the new financial advisers regime and regulations to improve the governance and management of KiwiSaver schemes.
Mr Power said a key focus of the FMA would be on visible, proactive and timely enforcement.
It would enforce securities, financial reporting and company law as they applied to services and securities markets. It would also regulate and oversee trustees, auditors, financial advisers and financial service providers - including people who offered investments.
"Over the past year, it has become increasingly clear to me that one of the missing pieces in the regulatory landscape is a single regulator focused on proactively monitoring and enforcing securities law.
"On too many occasions in finance company collapses, we heard of investors' money falling to the floor through the cracks between regulators."
That damaged investor confidence, Mr Power said.
Dunedin financial services adviser Craigs Myles, of Myles Wealth Management, welcomed the formation of the FMA, but had a word of warning for the minister.
"Like any arm of government, its performance and reputation will be as good as its leadership, resourcing and the framework under which it is established.
"It is hoped that the FMA will act more like a referee rather than an executioner."
Often, market participants needed guidance, rather than a "go straight to jail" type of response, Mr Myles said.
There was concern that when people looked for guidance from the regulator, they put themselves at risk of prosecution rather than guidance.
That was particularly unhelpful.
"Of course red cards will be needed, as well as judicial input from time to time. But most people are wanting to operate in a manner that avoids such behaviour."
A positive feature of the FMA was it avoided the silo approach of Australia where there were multiple regulators, Mr Myles said.
FMA legislation would be fast-tracked ahead of the Securities Act review. It would be prepared later this year and Mr Power hoped it would be in place by the middle of next year.
