Groser Tim: Securities Legislation Bill — In Committee 
Groser Tim: Securities Legislation Bill — In Committee 
[Volume:634;Page:5471] 
TIM GROSER (National) 
: 
 Mr Chairman if you had a name like mine and you had a dollar for every time it had been misspelt or mispronounced you would be a rich man so I take no offence. 
I rise to take a call to support the Securities Legislation Bill. I am well aware that the bill had been in front of the House for a number of years prior to my arrival. Unfortunately I have not unlike some of my colleagues had personal experience in dealing with securities but I have had a long interest in economic reform and I recognise that this bill addresses some issues in that area and is therefore worth supporting from that perspective alone. 
I am well aware of—and I think we have had increasing debate in this country on—the thinness of our capital markets. I am well aware that those capital markets are vital not only to establish New Zealand companies but to benefit new companies that have gone beyond the mezzanine and angel financing stages and are looking at initial public offerings. I am well aware of a recent Ernst and Young study that placed—unfortunately as an illustration of the weakness of our capital markets—New Zealand 21st out of 22 OECD countries in 2005 in terms of the funds raised through initial public offerings. I think the parties in this Chamber recognise that we have a structural problem in this country and the cleaning out by some Australian companies of some of our more successful emerging companies is itself unfortunately an illustration of our need to address some of those weaknesses as best we can. The bill is worth supporting as one move in that direction because it is perfectly obvious that the public’s confidence in our capital markets legislation is a component in it. The public can get burnt off capital markets for any number of reasons including of course the public’s own inappropriate decisions. But if there is a widespread belief in the malfeasance of markets that is something that is within the control of the authorities and we should move to do what we can to put in place the measures necessary for the public to have confidence in the integrity of the markets. 
I have to say however that on all of these issues there is a first test that one has to apply and that is to establish whether there is a problem and if there is to find out how large it is and what the costs and benefits are of fixing it. I remain a little bit unconvinced by the argument that our having had no prosecutions in the last 5 to 10 years proves there is a problem. I ask members to just look at the matter intellectually. As far as I know for example the authorities have not captured recently a single live ferret in Wainuiomata. I am not quite sure what that proves. It could prove that the authorities do not have the Taser guns necessary for the task or it could establish that there is not a problem with live ferrets and therefore the good denizens of Wainuiomata have nothing to fear; I am not quite sure what it proves. So I do not think the absence of prosecutions per se is particularly convincing proof that we have a pervasive difficulty in this area. It would be naive to imagine that in the last 10 years there have not been in the capital markets of New Zealand people who have gone well beyond what I would call sharp practices towards engaging in some very dodgy activities. But I start from the somewhat more optimistic assumption on matters of this nature that there is a fairly high level of integrity in New Zealand. I do not think there is even anecdotal evidence that suggests—a few obvious examples aside—that we are dealing here with a large problem. 
Therefore the policy implication that I would draw as somebody coming to this debate fresh is that we should look quite critically at some of these provisions support them in terms of their general direction but regard this legislation frankly as a work in progress. Obviously this bill does some positive things including the tidying up of the provisions for the three relevant bodies the Securities Commission the Takeovers Panel and the Commerce Commission that are responsible for ensuring that deceptive practices are not left undetected. It is very sensible that the bill establishes procedures for the proper exchange of information between those regulatory authorities. 
Equally it is very sensible that the legislation tidies up provisions to ensure that the considerably enhanced penalty provisions apply only to serious offences. I am not quite sure which adjective I would use to delineate those offences from other offences but let us use the term for want of something better “technical offences”. Those are very considerable penalties and I think the issue of proportionality arises here so it is sensible that the bill addresses that. Equally it is sensible that the bill contains provisions to avoid what I call “forum-shopping”. I am not quite sure whether that is a term one uses in this realm of public policy but it concerns the ability of litigants to look around for alternative forums to pursue endless litigation—in this case conducting private prosecutions under the provisions of both the Fair Trading Act and the Securities Markets Act. It is sensible that we are tidying up this provision. So I put these provisions down as good housekeeping and well worth supporting. 
But what worries me—and I think Mr Connell and Mr Foss touched on this—are the illustrations of that old enemy of legislation the law of unintended effects. Having worked in the public sector for 30 years I am deeply conscious of the dangers of putting in place compliance regimes and management systems that encourage deeply risk-averse behaviour. I remember when I was a junior investigating officer in Treasury more years ago than I am prepared to admit— 
Hon Members 
: Tell us! 
TIM GROSER 
: I will tell members in private. It was pointed out to me that a certain very senior Treasury official—and I am not referring to that great public servant Henry Lang—had sat in his office at a very senior level in the New Zealand Treasury and for 30 years he had never approved a single departmental expenditure proposal had never put forward an initiative on his own and had said no to everything that had crossed his desk. So I know all about risk-averse activity and its great cost to the public sector. I guess what I am worried about if we apply the law of unintended effects here—and I have listened carefully tonight to the helpful explanations of the Minister the Hon Lianne Dalziel on some related points—is that here we are dealing with something that is at the cutting edge of private sector entrepreneurial activity; we want to ensure that due attention is paid to risk but we do not want to put in place compliance regimes that are actually completely counter to the underlying purpose of having capital markets in the first place. 
Mr Connell and Mr Foss have addressed some of those issues including the definitions of insider trading and the tests that are generally available to the market—the evidentiary tests. The Minister has given us a view that is interesting but I have to say that I have some reservations about this and I have some reservations about the enforcement policy. Although National supports this bill we should regard it as a complex piece of Government machinery that is very much a work in progress. Thank you.