Chauvel Charles: Financial Markets (Regulators and KiwiSaver) Bill Securities Trustees and Statutory Supervisors Bill — Second Readings 
Chauvel Charles: Financial Markets (Regulators and KiwiSaver) Bill Securities Trustees and Statutory Supervisors Bill — Second Readings 
[Volume:671;Page:17652] 
CHARLES CHAUVEL (Labour) 
: 
 I will follow my friend and colleague Katrina Shanks by repeating her acknowledgment of the work that a number of people have done on this legislation. The Minister of Commerce Simon Power has carried on the reform agenda in this area that was begun by Lianne Dalziel when Labour was in office. That there has been widespread support across the House for this level of reform is a matter the House can take some pleasure in and I think it is appropriate to acknowledge both Ms Dalziel and Mr Power in my opening remarks. 
I hope given the announcement that Mr Power will be departing from this place that we will not see a slackening off in this agenda because there is a lot more work to be done. A lot of reforms in the financial markets area need to be completed. I have tried to bring one of those necessary reforms to the House with the bill to regulate the activities of loan sharks the Credit Reforms (Responsible Lending) Bill. 
I will say just a few words about that bill at the outset because if we are to take the previous speaker at her word which we must do then everybody in the House should be serious about comprehensive financial markets reform. What we have achieved so far is to get some way along reforming if you like the middle band of the market—the finance companies. I see that Mr Boscawen is in the House. When he was on the Commerce Committee he said some fine words about the need for reform in this area and I hope that he will follow those words through now that he holds the warrant as Minister of Consumer Affairs. 
One of the areas that still badly needs reform particularly in these straitened economic times is the position of those at the lowest end of the market who have to go to fringe or holiday lenders in order to get credit from week to week because they just cannot make ends meet. This House had an opportunity last year to try to complete the suite of reforms at the lower end of the market but it did not do so. Members of the ACT Party and National chose not to regulate loan sharks fringe lenders and holiday lenders. 
Hon Steve Chadwick 
: Shame. 
CHARLES CHAUVEL 
: That matter brings some shame on this House. If we are to see comprehensive reform in this area and look after all New Zealanders not just the so-called mum and dad investors—the middle-class investors who have not been well treated by the market and need to see proper protections—but also those at the lower end of the market then we urgently need to revisit the issue of fringe lenders. Both my colleagues and friends Carol Beaumont and Carmel Sepuloni will be bringing up measures by submitting them to the members’ bills ballot on a regular basis in order to ensure that this House does not forget the urgent need to also deal with that end of the market. If we are to legislate for all New Zealanders then we must do that. 
Previous speakers have said that the Labour Party supports both of these bills. I will make a couple of comments about the Securities Trustees and Statutory Supervisors Bill. I acknowledge the work that the Commerce Committee has done and also compliment the officials on their work. I know from my time on the Commerce Committee that the committee is advised by very competent officials and it is appropriate to acknowledge the assistance they have given. 
The Securities Trustees and Statutory Supervisors Bill tries to address a number of weaknesses that have been identified in our supervision regime for trustees and statutory supervisors. A licensing regime will be brought into place for those who supervise the issue of securities and for the statutory supervisors of those who are in charge of another vulnerable sector in our community: people who live in retirement villages. There will be amendments to a number of Acts such as the Retirement Villages Act the Securities Act and the Unit Trusts Act. This new regime will be administered by the Securities Commission. I see that under the provisions of the bill there is an intention that this supervisory role be taken over by the Financial Markets Authority once it is established. 
The bill follows on from the conclusions of both the International Monetary Fund and the World Bank which reported in 2004 on this general area and consultations that were subsequently undertaken by the Ministry of Economic Development in the Review of Financial Products and Providers in 2006. The fundamental finding at that time was that New Zealand places too much reliance on private supervision—basically the corporate trustees—and that there is no great accountability regime in our law for those people. 
The bill would remove the automatic right for the six appointed and approved trustees under statute to supervise debt issuers and some investment schemes and introduce a licensing regime for trustees as well. It will make it an offence to act as a trustee or a statutory supervisor without a licence so that a person who commits an offence will be liable on summary conviction to a fine not exceeding $300000. It is a serious penalty regime. A number of provisions are designed to ensure that trustees statutory supervisors and unit trustees comply with their obligations and the enforcement mechanism be it the commission or the Financial Markets Authority can seek penalties and compensatory orders against anyone who fails to comply. Clearly a better accountability regime will be brought into place by this legislation. 
I refer to a speech that was given by Lianne Dalziel in August last year. She spoke about the improvements that we hoped to see across the market both by the enactment of this legislation and by bringing into being this comprehensive new regulator of the sector the Financial Markets Authority. This authority is to absorb the functions currently performed by the Securities Commission the Ministry of Economic Development’s national enforcement unit the Government Actuary and even the New Zealand Exchange as far as its market discipline functions are concerned. 
Lianne Dalziel said: “The Minister has said it”—the authority—“will have ‘grunt’ and I welcome that. We need a single-minded approach that says that the risk of getting caught is high and the consequences of conviction are severe.” She went on to say: “I am constantly affronted at the discount our criminal justice system appears to afford the white collar criminal over all other criminals even though the wealth they have destroyed makes the proceeds of house burglaries pale into insignificance by comparison. I think we should allow our courts to impose what I now call the Madoff sentence for the most egregious cases. And there are some people who should never be allowed to fundraise from the public ever again or to claim the protection of limited liability against creditors—and those are the people against whom fraud has been proven. There should be no second chances under these circumstances.” 
The select committee as I said did comprehensive work on this bill. It received and considered 18 submissions and heard eight oral submissions. It dealt with the issue of the inclusion of retirement village statutory supervisors. Obviously that recommendation met with some approval because the House is dealing with the two pieces of legislation in tandem. 
To conclude my short contribution I say that this is necessary regulation of a sector. That is why it is receiving support from across the House. It is not comprehensive regulation. There is still much work to do as I said particularly at the bottom end of the market where our most vulnerable people still are not properly protected. The previous speaker claimed that this legislation was part of some comprehensive economic plan. Frankly that is a risible claim. There is no such plan. This is sensible regulation that goes some of the way towards what is needed in our markets. For that reason and that reason alone it is supported by the Labour Party.