Lotu-Iiga Peseta Sam: Securities Disclosure and Financial Advisers Amendment Bill — Second Reading 
Lotu-Iiga Peseta Sam: Securities Disclosure and Financial Advisers Amendment Bill — Second Reading 
[Volume:654;Page:3096] 
PESETA SAM LOTU-IIGA (National—Maungakiekie) 
: 
 I rise to speak to the second reading of the Securities Disclosure and Financial Advisers Amendment Bill. Like the two previous speakers I fully endorse and support the recommendations made within the bill and the changes to the Securities Act that have been recommended through this new bill. Before doing that may I acknowledge firstly the Minister of Commerce the Hon Simon Power for his leadership and his guidance in bringing this bill to the House and the cooperative manner in which all parties on the Commerce Committee have worked towards refining and debating the various points of the bill. I also acknowledge the previous Minister of Commerce the Hon Lianne Dalziel who sadly is not in the Chamber at the moment for her work on the bill her chairmanship of the select committee and her experience as Minister in initially bringing this legislation to the House. 
As has already been described this afternoon the Securities Disclosure and Financial Advisers Amendment Bill was developed in response to the interim report of the Capital Market Development Taskforce which was released last year in November. That report was in response to the current financial crisis and its report focused primarily on increasing the availability of capital to New Zealand firms and reducing the costs of raising that capital. This bill goes some way to addressing some of the difficulties that we are currently experiencing in the international financial crisis. It is related to the financial sector due to the breakdown in credit rationing and credit market access for small to medium sized enterprises. The bill really goes to removing some of the barriers to raising capital whilst maintaining importantly the relevant information that is required by investors to be informed and to make rational decisions on their investments in companies. 
So it is a balance: it is a balance between requiring disclosure of financial as well as company information to investors whilst also recognising that over-regulation of the finance sector will only lead to less desirable outcomes for our investments. Across the OECD Governments are working with financial regulators to shore up some of the financial institutions. We have seen recent reductions by the Reserve Bank of New Zealand to the official cash rate so that businesses are able to access capital more cheaply. 
The bill really looks at the simplified disclosure prospectus and it is to be used by listed issuers who are already subject to what we call the continuous disclosure requirements. Those issuers would otherwise be required to produce a separate disclosure document for each offering. But this new type of prospectus the simplified disclosure prospectus really aims to reduce the red tape. The committee had the benefit of assessing one such document which came to 22 pages in length compared with the documents in excess of 100 pages that are regularly produced in terms of prospectuses for large companies raising capital. So the Securities Disclosure and Financial Advisers Amendment Bill aims to bring about a reduction in red tape. 
Many of the submitters noted that the devil will be in the detail and that the short-form prospectuses that I have referred to need to be made available. The regulations that will dictate the type of information to be disclosed within those particular documents will need to be readily available for market participants to fully understand and be informed as to the requirements going forward. 
As the Hon David Parker has referred to the Securities Commission will monitor and enforce compliance of the simplified disclosure prospectus—or SDP—regime once it is introduced. However a submission from various parties did say that a dual role for regulatory supervision was desirable. The role of the Securities Commission will be particularly important going forward. 
A number of firms made submissions to our select committee. They ranged through legal firms financial advisers firms and various governing professional bodies that are particularly interested in this bill. The three areas that the bill addresses relate to the simplified disclosure prospectus; the Securities Act 1978 in relation to categories of persons who are exempt from those particular disclosure requirements for offers of securities under the relevant Act; and the Financial Advisers Act 2008 through the correction to minor errors that were made during that process. The primary objective is to enable firms to have cost-effective access to capital whilst ensuring that investors continue to receive accurate and timely information. 
Let us look at those three particular changes that the honourable Minister referred to. The first change is to omit from the bill new section 3(2)(c)(i) in order to allow offers of subsequent securities to the initial $500000 to be for different types of security rather than limiting it to securities where “the rights privileges limitations and conditions attached … are identical to those attached to the initial securities;”. A number of submissions were made in this area. Concerns were expressed by various parties that a debt security for example that differed markedly from an initial public offering of equity securities could be deemed to be sufficiently different that the terms and conditions of that subsequent security would require a full new prospectus. 
Many on the committee understood these concerns and accepted the concerns of the various parties but we deemed that in order to fast track some of the raising of security the continuous disclosure provisions of the regime would be sufficient to cover a lot of the disclosure of information. 
Secondly we deemed that extending the provision in section 3(2) of the Securities Act to allow offers of subsequent securities to an initial $500000 to be made within 18 months of that first allotment was particularly critical because the reporting cycle of companies is typically 12 months. If that period were shorter there would be deemed to be compliance costs and interim accounts would have to be produced for the company raising those securities. 
Finally there were a number of technical amendments to Part 2 of the Act which the honourable Minister referred to in his presentation. In conclusion I say that this legislation is part of our response to the global financial crisis. This is just one step in a range of measures being taken by our Government. The bill is really to balance the investor confidence in the market by allowing for companies to raise capital effectively and efficiently whilst accepting that individual investors as well as sophisticated investors need to access timely and relevant information in that process.