Parker David: Securities Disclosure and Financial Advisers Amendment Bill — Second Reading 
Parker David: Securities Disclosure and Financial Advisers Amendment Bill — Second Reading 
[Volume:654;Page:3095] 
Hon DAVID PARKER (Labour) 
: 
 I rise to indicate the Labour Party’s support for the second reading of the Securities Disclosure and Financial Advisers Amendment Bill. We will support the second reading of the bill. As has been indicated this bill is the outcome of work that was commenced by the previous Government and led by the Hon Lianne Dalziel who would ordinarily be speaking first on behalf of the Labour Party in this debate but is unable to be here today to do so. 
The Capital Market Development Taskforce was established by the previous Government in July 2008 and it included members from Government departments and the private sector. Its objectives were to identify constraints on and opportunities for the development of New Zealand’s financial system. It wanted to identify and debate the different options that were available to improve the performance of our financial system and to develop a blueprint to enable its proper development. Originally when the task force was set up it was envisaged that we had the luxury of more time than has turned out to be the case. When the task force was set up the global financial crisis was not as serious as it had become by the end of last year. So although it was originally intended that the task force would take a year to produce specific recommendations that would then be implemented because of the seriousness of world events it decided to produce an interim report in November of last year. 
In simple terms the world financial crisis has done two things: it has put pressure on the ability of institutions and companies to raise the money they need to go about their business—that is a pressure that they are already facing—and in addition it has created suspicion on the part of some investors particularly smaller investors as to where they should put their money what information they should rely on and how they can have confidence that risks are being properly assessed. This bill tries to grease the wheels of commerce. It tries to put in place improved rules so that it is possible for institutions and companies that need to raise capital to be able to do so whilst at the same time giving investors greater confidence to place their money in those investments. 
I do not think anyone in this Parliament pretends that we can legislate away risk; I certainly do not hold that view. There are risks inherent in investing. This Parliament ought not to try to avoid risk because plainly we cannot but what we can do is make sure that investors have the confidence to make investment decisions by ensuring they have the appropriate level of information. 
The current regime is imperfect and this bill is being passed to improve it. One of the problems with the current regime is that alternative sources of information are available to investors: the investment statement which can be relied upon and the prospectus. Both of those documents are available but in practice most investors are given an investment statement rather than a prospectus. I think it is the experience of many more knowledgable investors that the level of information provided in an investment statement is inferior to the more detailed provisions in a prospectus and perhaps is not enough information for an investor. So although in theory investors have access to a prospectus if they want it the reality is that normally they get only an investment statement with an inferior set of information which is not enough to give them confidence that all of the risks and benefits have been properly outlined to them before they make their investment decision. This legislation says that certain public issuers must revert to a prospectus. 
There is an additional improvement. At the moment the prospectus requirements require the repetition of information that has already been made publicly available pursuant to the continuous disclosure obligations of certain public issuers certain companies on the stock exchange etc. At the moment the rules require that much information that has already been made available to the public is included in the prospectus. That information may be relevant but it certainly does not need to be repeated every time. This amendment enables the prospectus to focus on items that are more important to the investor so that the investor has a higher level of information than might be provided in an investment statement but none the less is not overwhelmed with copious quantities of documents that have already been disclosed by the public issuer. If that sort of overly prescriptive level of detail is required to be disclosed then the poor old investor unless he or she is full-time in the business of interpreting those things is so overwhelmed with information that it is sometimes hard for the investor to see the wood for the trees. Hopefully through this legislation we are getting to a better balance. 
Hon Maurice Williamson 
: Keep the trees you cut down. 
Hon DAVID PARKER 
: Well trees are at risk of being cut down at the moment because of the Government’s suspension of the emissions trading scheme but that is nothing to do with this bill. 
Another change made by the Commerce Committee which I endorse as the Minister did amends the strange situation where investors who are wealthy enough to afford to subscribe $500000 in a single investment in a public issuer seem to need to be protected against making other investments in that same issuer albeit in a different class of security. This bill remedies that situation by saying that if an investor had $500000 to invest and did so then presumably he or she could afford to take the risk inherent in investing in other securities in that same entity. Certainly if an investor was able to afford a $500000 investment he or she could afford to seek advice as to whether a different class of security would be a better investment than one from that same public issuer. That change is a sensible improvement. 
I address also one other change that has been made. Another feature of the bill changes the central supervision of financial advisers to be by the Securities Commission rather than as was originally proposed via a co-regulatory model with the industry. The bill establishes a Commissioner for Financial Advisers who will be a member of the Securities Commission and will have a code committee and a disciplinary committee. Both of those committees will include advisers with industry experience in order to make use of their expertise but will come under the ambit of the Securities Commission rather than as was originally proposed using a separate co-regulatory model with the industry. That again is appropriate. 
There is less rather than more public confidence these days in self-regulation of the financial sector. One of the outcomes of the crisis internationally has been to show that there is a very proper role for centralised Government-controlled regulation of the financial sector. Against that background it is very appropriate that the regulatory model that is now proposed is effectively under control of an arm of the Government albeit independent of the Government in its decisions. The appointments to the Securities Commission are controlled by the Government; the commission then acts independently of Government and industry. Although the regulator has the ability to avail itself of members who have experience in those industries the regulator is not a co-regulator with the industry; it is separate from the industry. That is important and should give investors confidence that they are making wise decisions when they take risks and invest. That maintenance of investor confidence should make it easier for financiers to raise the funds they need in order for them to go about their business and for our economy to prosper. I recommend this bill to the House.