Huo Raymond: Third Readings — 
Text is incorporated into the Bound Volume 
Huo Raymond: Third Readings — 
[Sitting date: 07 April 2011. Volume:671;Page:17860. Text is incorporated into the Bound Volume.] 
RAYMOND HUO (Labour) 
: 
 Ni hao Mr Assistant Speaker Robertson. It is a great pleasure to take a call on the third reading of this legislation which has been divided into five bills. It is relevant necessary and timely for us to deliberate on these important issues. 
Over the past 4 years 61 finance companies have failed the latest of which was South Canterbury Finance which was bailed out to the tune of $1.6 billion of taxpayers’ money. Labour’s finance spokesperson the Hon David Cunliffe has made some valid points on this matter. Bill English and the Government turned down recapitalisation offers that would have limited taxpayer costs for South Canterbury Finance to about $500 million. Instead National insisted on throwing it into receivership. Losses have already reached $1.2 billion and are still climbing. The extra $700 million lost to the taxpayer is in fact roughly equivalent to all the new money John Key has just cut out of this year’s Budget. 
It has been noted that shortcomings in New Zealand’s regulatory set-up are partly responsible for the finance company failures. No single entity took responsibility for any problems. Therefore Labour welcomes any measures that would ensure like the UK Financial Services Authority market confidence public awareness financial stability consumer protection and reduction of financial crime. 
The Financial Markets (Regulators and KiwiSaver) Bill had eight parts and it was divided into several bills at the Committee of the whole House. Parts 1 to 4 and schedules 1 and 4 deal with the Financial Markets Authority and they have become the Financial Markets Authority Bill. Part 5 amends the Securities Act 1978 and it has become the Securities Amendment Bill (No 3). Part 6 and schedule 5 are now the Securities Markets Amendment Bill (No 2). Part 7 and schedule 6 deal with the regulation of KiwiSaver and have become the KiwiSaver Amendment Bill. Part 8 and schedule 7 are now the Financial Advisers Amendment Bill (No 3). 
It is crucial that we enhance confidence in our financial markets. A single market regulator should contribute towards this end. Labour launched the Capital Market Development Taskforce and it is pleased that the Government is acting on its recommendations. We are concerned about a lack of transparency around current security commissioners. We support the bills and specifically the establishment of the Financial Markets Authority. In principle we support the idea of consolidating all the different regulatory bodies into a single agency. In 2008 the Hon Lianne Dalziel set up the Capital Market Development Taskforce to develop a blueprint and an action plan for the development of New Zealand’s financial system. We are pleased that the Government is starting to act on the recommendations in the task force report one of which was a single market regulator. The Labour-led Government took a number of measures aimed at strengthening our financial markets and this process was accelerated by the global financial crisis and the spate of finance company collapses. 
The bills are designed to deal with some important issues. Firstly concerning the securities law the reform of securities law is a crucial complement to this process. This bill provides for regulations to be made that will prevent products from being structured to avoid regulation. This happened in the case of the Blue Chip scenario. The investment scheme offered interests in land. It was therefore exempted from the Securities Act to the significant detriment of its investors. However the only concern I have at this stage is that the deadline for the review has been pushed back until 2012. 
Secondly in regard to KiwiSaver calls for changes to KiwiSaver regulation were made earlier this year when former Huljich KiwiSaver managing director Peter Huljich admitted he used his own money to top up investors’ funds. There are 1.5 million Kiwis with a collective $6 billion in KiwiSaver. It is utterly critical that the regulation of its schemes is robust. Compulsory enrolment even with an opt-out and the absence of a Government guarantee mean that a higher level of assurance has to be offered to those investors who do not wish to choose their own scheme. 
We support moves to tighten KiwiSaver’s regulation. This bill puts the onus on fund managers to act in the best interests of investors by making them primarily responsible for the accuracy of their prospectuses investment statements and advertisements. Currently KiwiSaver trustees are technically the issuers of KiwiSaver schemes under the Securities Act. This means that managers have few duties to investors and less liability for misleading statements than trustees. 
Thirdly in regard to the collapse of finance companies I come back to what I said at the beginning of my contribution. This bill should ensure the Financial Markets Authority has broad oversight of the sector ensuring that Kiwi investors do not face this kind of disaster again. As part of this reform of finance markets the Government might also wish to look at the sentences for so-called white-collar criminals. Lianne Dalziel and Charles Chauvel have recently said that people convicted of offences like burglary tend to be treated much more harshly than those who destroy huge amounts of wealth through reckless and dishonest business practices. 
Finally I am pleased to see that through these bills the law is being changed to provide for a regime that supervises the supervisors. This legislation removes the automatic right for the six previously statutorily approved trustees to supervise issuers of securities in some investment schemes. It introduces a licensing regime for trustees that will be run firstly by the Securities Commission then by the Financial Markets Authority when it is established. Under the new regime all trustees statutory supervisors and unit trustees must be body corporates and the directors and senior managers must be of good character. 
I agree with what the Minister responsible for this bill said that New Zealand needs a single market regulator with a culture of visible proactive and timely enforcement. Recent finance company collapses illustrated gaps between regulators. The Financial Markets Authority is needed to rebuild investors’ confidence. In relation to KiwiSaver the Government says it has fast tracked these measures due to apparent gaps in the regulation of some of the schemes. So they are all good initiatives and I commend the bills to the House.