Power Simon: Estimates Debate — In Committee 
Power Simon: Estimates Debate — In Committee 
[Volume:674;Page:20233] 
Hon SIMON POWER (Minister of Commerce) 
: 
 I thought I might take just a quick call on the estimates for commerce. It was a spectacularly constructive estimates hearing that we had with the Commerce Committee this year and one I was happy to make a small contribution to. We—or the committee I should say—were interested in a range of issues with some of them traversed in Vote Commerce and others traversed in Vote Consumer Affairs. We kind of married the votes together to some extent over about an hour and a half from memory. 
One of the things covered off to some degree was how well the Financial Markets Authority had begun its functions since it came into effect on 1 May. Interestingly I think that the culture that has taken root at the Financial Markets Authority is a very strong one. A proactive sense of enforcement and supervision has become part of that organisation’s ethos. In particular—literally from memory—within about 48 hours of the Financial Markets Authority being formed it took a view on low-ball share offers being made by one individual and a warning notice from memory a new power under the Financial Markets Authority legislation was exercised very early in the piece. I think it is fair to say that the Financial Markets Authority has come out of the box pretty quickly with a fair degree of focus. 
Colleague Sam Lotu-Iiga talked a little bit about what was happening in the financial markets. As I have said many times one thing we cannot do is regulate for certainty; nor can we regulate for risk. I have said it many times but I will say it again now: nor should we try to regulate for risk. That is the nature of getting a return on an investment. But of course what we know about the type of product that was offered in the financial markets is that the Financial Markets Authority desperately needed a power to be able to deem a particular product to be a security for the purposes of security legislation—in particular for the Financial Markets Authority to be able to do that in order to avoid a situation where product was being specifically designed to fall outside of securities legislation. Fundamentally this type of product came about as a result of a property syndication - type product that was put on the market. Of course over the last 5 or 6 years we have seen about $8.3 billion worth of investors’ money lost or as they say put at risk. About $6 billion of that was prior to 2008 and about $2 billion - odd since 2008. 
One of the things about this story—it is not a story actually; it is a fact—is something that all members who are constituency MPs have experienced and even the odd list MP might have experienced it as well. An elderly gentleman came to my office in Feilding many months ago now. He was explaining to me that he had left school at about 15 years old and had managed to save the equivalent of between $75 and $100 a week from all of his wages over the period of his life. At about 73 or 74 years old he had managed to collect about $250000 in cash—I am pretty sure that is what he told me—and at that point he decided it was a reasonably substantial amount of cash for an elderly gentleman to have just sitting in a bank account so he went and saw a so-called financial adviser to find out how best to invest that money. 
The advice he got was to diversify the investments which on the face of it seemed reasonable in order to spread risk. That is indeed what he was told to do except that that risk was spread across four finance companies so he ended up losing the whole lot. It was clear to me at that point—and I know that the Hon Lianne Dalziel shares this view—that a product designed to avoid securities legislation is always going to be in the proximity of clever issuers lawyers and the like which is why the new powers attached to the Financial Markets Authority relating to the capacity to deem those products to be securities for the purpose of securities legislation are so important. 
I regret I seem to have run out of time to address patents and other matters but I am sure Ms Curran will raise those matters. 
Vote agreed to.