Goodhew Jo: Securities Disclosure and Financial Advisers Amendment Bill — Second Reading 
Goodhew Jo: Securities Disclosure and Financial Advisers Amendment Bill — Second Reading 
[Volume:654;Page:3100] 
JO GOODHEW (National—Rangitata) 
: 
 I rise today to speak in the second reading of the Securities Disclosure and Financial Advisers Amendment Bill. I do so with the benefit of having sat on the Commerce Committee as the bill was examined. The Securities Disclosure and Financial Advisers Amendment Bill responds to the current international financial crisis by removing unnecessary impediments to raising capital while ensuring the timely disclosure of relevant information to prospective investors. We—that is New Zealand—are a capital-deficient nation. Therefore it is particularly important that bills such as this are both safely and speedily progressed through the House. 
We bring this bill to the House in the knowledge that there were 19 submissions to the select committee. We heard from six interested parties who wanted to discuss further with the committee aspects of the bill. I can say that the recommendations for amendments that we bring to the House show that the select committee process was a robust one and also a necessary one because the bill is in a better state now than it was when it came to the committee. I note that we gave quite a short period of time for submissions to come to the committee and we acknowledge those who did submit and the fact that they had to do so with quite short notice. 
To begin with I would like to reiterate the principal objectives of the bill. Firstly the bill provides for the use and regulation of a simplified disclosure prospectus. Members of the select committee were interested in what a simplified disclosure prospectus might look like and we were given an example that was some 50 pages long. At that stage we wondered just how simplified “simplified” was but in reality when we compared it with an ordinary prospectus which in that case would have been 300 pages long we could see that there was significant simplification of what would be offered to the potential investor. This new type of prospectus would in connection with regulations to be made under existing regulation-making powers allow stock exchange - listed issuers to offer certain debt and equity securities but without duplicating information they had already publicly disclosed under their continuous disclosure obligations. 
It would be fair to say that New Zealanders who have suffered losses through finance companies and through loss of property value and those who are relying on Government guarantees are often lost in the technical terms and minefield of the finance sector. What we want to achieve with this bill is a balancing act between giving investors the opportunity to have the information they need without additional cost arising from considerable amounts of information being duplicated. 
Part 2 amends the Financial Advisers Act 2008 to correct an error in the Royal assent version of the Act and to make a number of other but very minor amendments. 
Again what we see tonight as we go through the second reading of this bill is an example of a National-led Government’s dedication to the principle of helping businesses to do business. It would be fair to say that we have drawn on work that was undertaken by the previous Government but this National-led Government is totally committed to putting through this Parliament initiatives that will help businesses to do business. A key objective as I have already said was the balance between the cost of doing business versus security and adequacy of information for the investor. 
Finance company failures have undermined confidence in the finance sector and this added to the current international finance crisis has resulted in quite understandable unease amongst investors. Each and every week members of this Parliament have representations from business people who come to their offices. They are experiencing difficulties in accessing capital. In my own electorate those businesses are often the young—in other words still largely in development mode—businesses. They are hardest hit by this credit tightening. 
This bill was spawned by the Capital Market Development Taskforce interim report which was released in November last year. I again acknowledge the work of the previous Government and in particular the current select committee chair the Hon Lianne Dalziel. Recommendations made in that report included how securities law could be improved to increase the availability of capital and to reduce the compliance costs of raising capital. This bill is about responding to the global financial crisis and the need to raise capital in New Zealand and ensuring not only disclosure of relevant information to prospective investors but also timely disclosure of that information. 
The committee recommended that exemptions from standard disclosure requirements for subsequent offers by persons who have made subscriptions of $500000 be allowed to include offers for different types of security rather than being limited to securities where the rights privileges limitations and conditions attached are identical to those attached to the initial securities. Our committee concluded that it is unnecessary to restrict the securities to those identical to the initial securities. The proposed amendment recognises that an investor who has previously invested that much money—$500000—in one transaction prior to allotment does not need the protection of the Act. 
We also recommended amending clause 5 to extend section 3(2)(a) of the Securities Act in order to allow offers subsequent to the initial $500000 to be made within 18 months of the first allotment. There was debate around whether 12 months or 18 months was an appropriate period of time. The decision made by the committee was that 18 months was a better time because in reality it would allow the issuer enough time to complete a full annual reporting cycle and to decide whether additional capital needed to be raised. 
The committee also suggested that the Securities Act be amended so that a person who is experienced in investing money will be required to acknowledge that as an experienced investor he or she will not receive disclosures typically required in relation to a public offering. The way I understood this during the committee deliberations was that it was something akin to—in terms of my own experience—informed consent; in other words those investors knew exactly what they needed to know they acknowledged that they did not need any more information and they signed off so to speak. In making the recommendation the committee said that those investors had to acknowledge that they were not going to receive the information usually offered by the issuer. 
The committee also considered and recommended further amendments to the Financial Advisers Act that are designed to remedy errors that have come to light since the bill was introduced. Those issues were as I have said of a minor technical nature but they were important to ensure that that legislation works as intended. 
We recommended changes to remedy an oversight in the Financial Service Providers (Registration and Dispute Resolution) Act 2008 that potentially exempted some financial advisers from registration. We also recommended changes to clarify—and this was rather interesting for me with my interest in the aged-care sector—that information contained in a disclosure statement required to be produced under the Retirement Villages Act 2003 is not financial advice. We also recommended that there was a need to clarify the disclosure obligations and potential liability that apply to financial advisers operating as part of a qualifying financial entity. These amendments are consistent with policy decisions on the Financial Advisers Act so their inclusion in the bill will be supported. 
Overall as I have mentioned there were 19 submissions on this bill—given at short notice I might add. In the main they were in favour of the simplified disclosure regime. We had the opportunity to discuss the bill with six of the submitters. Some submitters stated that they did not think the Government had gone far enough with regard to the bill but the bill has been swiftly prepared in response to the current credit crisis and it should be considered in the context of a more comprehensive review of the Securities Act. The select committee often discussed that because there was concern about the bill not going far enough. But the Minister of Commerce has instructed officials to carry out that comprehensive review of the Securities Act. 
Indeed this bill is yet more evidence of the Government’s commitment to helping New Zealand through the recession. The amendments made by the Commerce Committee will help the bill achieve its objective of facilitating access to capital for New Zealand. This bill is part of the Government’s commitment and the Government acknowledges that as well as bringing this important bill to the House this work must be ongoing.