Securities Legislation Bill — Second Reading 
Securities Legislation Bill — Second Reading 
[Volume:629;Page:1334] 
Securities Legislation Bill 
Second Reading 
Hon JUDITH TIZARD (Acting Minister of Commerce) 
: I move  
That the Securities Legislation Bill be now read a second time 
. As Acting Minister of Commerce I am delighted to move this motion. The bill is intended to encourage investment in New Zealand’s financial markets by strengthening the regulatory framework in our securities securities trading and takeover laws. The Commerce Committee has considered the bill and reported back in support of the key principles behind it but it has also recommended a number of amendments to better reflect the policy intent of the bill. I would like to discuss some of those changes because I think the committee has helped a good deal in the fine-tuning of the bill. 
The committee has recommended some important refinements to the key definitions of insider-trading rules. The test of what is material information has been simplified. The committee has confirmed that the announcements using the continuous disclosure rules will meet the required reasonable period for dissemination for information to be made generally available to the market. Those changes provide greater clarity and certainty about the application of the insider-trading regime. They confirm that the continuous disclosure of price-sensitive information is the expected norm for listed companies. Conversely those privy to information that is not made available via the continuous disclosure rules are put on notice to hold that information carefully and to act on that information prudently. 
Just as important the insider-trading rules do not stifle experts from making a living from judging the market. Information is also considered to be generally available when it consists of deductions conclusions or inferences made or drawn from information that has already been disclosed to the market or that is otherwise readily available whether by observation expertise or other means. Information thus available to an investor is not insider information and cannot be subject to insider trading. 
Allied to the definition of when information is generally available to the market the bill sensibly provides a research and analysis defence for the insider-trading prohibitions. Although some people have commented on the narrow application of that defence when it is read in conjunction with the definition of “generally available to the market” I agree with the committee that the bill addresses concerns that skilled investors should not be caught as insiders. 
The committee also recommended that the proposal in the bill to extend the meaning of “relevant interest” to include a power or control exercise by means of a practice be dropped. The idea in the bill as introduced was to cover a potential gap in the law that was exposed by recent litigation. However with the benefit of submitters’ views on this point the committee has opted for certainty about when the substantial security holder disclosure obligation arises rather than for the narrow benefit of attempting to be comprehensive. References to practice in new section 5A of the Securities Markets Act to be inserted by clause 20 of this bill are proposed to be deleted accordingly. 
I also mention the committee’s work on the declaration of the contravention mechanism. This is a new approach in the New Zealand law that is designed to make it easier for small investors to pursue claims for compensation that might otherwise prove too costly to bring to court. Although submitters were generally supportive of the idea they noted that a declaration of contravention could be made only subsequent to the Securities Commission or Takeovers Panel taking civil penalty proceedings. This would mean that a pecuniary award arising out of those proceedings would diminish the resources available for satisfying subsequent claims for compensation. That is a valid point. So to make a good idea work the committee recommends that the authorities or any aggrieved party be able to apply for an injunction to freeze the assets of a wrongdoer and potentially prevent that person from leaving the country. Such an injunction would be useful when for example it is suspected that money has been raised illegally. When that occurs investors will have a statutory right to a refund but the difficulty is that the right to receive a refund can be frustrated if the proceeds of any illegal offer are taken offshore or have already been used to purchase the assets of an investment scheme. 
The Securities Commission continues to warn about boiler-room operations that involve cold calls to the public with dubious share offerings. Money received under those scams is very difficult to recover. The operators of those schemes are now running secondary scams by calling back with a new transaction to buy or swap the original worthless shares purchased. The chance to recoup earlier losses inevitably involves the payment of more money that in all likelihood will again be lost. To date most of these cons have been run from overseas but there is nothing to prevent them from occurring in New Zealand. An injunctive mechanism to freeze assets or prevent people from leaving New Zealand would be a tool to capture funds before they disappear for good. 
The Commerce Committee has made a number of other amendments that also clarify the policy intent of the bill—some of which I will mention briefly. The committee has recognised that management banning orders are a significant punishment and they are to be available only when there has been a serious offence or contravention of the law. With the introduction of new prohibitions against misleading or deceptive conduct the committee has recommended provisions to clarify how the Fair Trading Act is to apply. In a similar vein the committee recommends provisions governing how and when the regulators of such conduct—the Securities Commission the Takeovers Panel and the Commerce Commission—can share information with each other. 
 Changes proposed to the clause accepting actions in relation to a takeover from the insider-trading regime better express the range of activity recognised by the Takeovers Code as necessary and helpful to the efficient operation of the takeovers market recognising that bank term deposits are well understood by the public have a low default risk and are also subject to other regulatory requirements. The committee has proposed sensibly that investment advisers recommending those products need not take such statutory disclosures to clients. 
In conclusion this bill is an important part of the Government’s security law reform programme. It is designed to ensure that regulation encourages an efficient and effective market for securities trading. It reduces transaction costs for trans-Tasman companies by aligning parts of our law more closely with Australia’s law and it enhances the integrity of New Zealand’s financial markets by providing domestic and international investors with the assurance that our regulation in this area is consistent with international norms. 
I thank again the members of the Commerce Committee for their work on considering this bill. I also acknowledge the very helpful contributions of many submitters. I commend this bill to the House. 
BRIAN CONNELL (National—Rakaia) 
: 
 I want to confine my contribution to the major issues that the Commerce Committee discussed and add my views to those already captured to a lesser or greater degree in the commentary on the bill. I begin by drawing attention to the claim in the commentary that: “This bill is designed to ensure confidence in New Zealand’s capital markets by increasing the effectiveness of securities securities trading and takeover laws.” With the benefit of hindsight I have a concern. To seek to enhance a general confidence in the regulatory regime of a market is one thing but to create a view that there is confidence in the market is quite another. Confidence in the market will ultimately depend on the performance of that market. No regulatory regime should leave investors with the impression that they should not rely on their own judgment or seek the advice of experts as to the consequences of their investment decisions. 
The bill sets out to strengthen the law relating to insider trading. Most of us would agree that we do not want to see people getting rich or richer because they have access to information that other players in the market place do not have. The bill sets out quite unashamedly as the Minister has already noted to introduce a regime—albeit with some differences—similar to Australia’s. Australia’s regulatory regime is not fully effective but in my time in Australia I remember many high-profile prosecutions being brought against senior executives engaged in insider trading albeit those successful prosecutions were hard won. In my time in New Zealand I cannot recall and I will stand corrected a successful prosecution and believe as the Minister has already indicated that it is time to act to safeguard the integrity of our capital markets. But and there is a but establishing a different regulatory framework should not create an expectation that these changes will contribute significantly to an increase in findings of liability or successful criminal prosecutions. 
Internationally insider-trading and market manipulation offences are notoriously hard to nail. Market misconduct will remain difficult to detect whatever the legal regime. A point that I stress and it was stressed to the select committee is that applying adequate resources towards enforcement is probably more important than the changes being proposed in this bill yet I do not see any determination by this Government to make sure that the resources required to give a life to this legislation are being budgeted. 
I was concerned throughout the course of the select committee discussions to avoid the creation of a regulatory regime that would stifle our capital markets in the pursuit of one or two crooks. I do not want to leave the House with the impression that “one or two crooks” is unimportant but we as regulators have to weigh up the cost-benefit rewards for instituting legislation. What we must not do is put our capital flows at risk. I tried my best to temper the zeal of some of the Government members but I fear that some parts of this bill will still promise a lot. The cost will escalate and parts of it will deliver very little. I sincerely hope I am wrong. 
I draw the House’s attention to subsection (1)(a)(i) and (ii) of new section 4 “What information is generally available to the market” to be inserted in the Securities Markets Act by clause 20. What we must not do is stifle endeavour. We must not stifle our bright young things. That will have a bigger impact on our capital markets than anything else I can think of. 
Let me give a hypothetical example. A bright young market analyst in Auckland for example is following a stock and based on his instinct feels that the stock is worth pursuing. He takes a packed lunch and a pair of binoculars finds a vantage point overlooks the activities of the Auckland wharf and sees that company A is increasing its inflow of product and he invests heavily in that stock and makes a fortune. Was he subject to information that was not readily available to other members of the market? Or was he just smarter than the rest? These are the complications that I do not think this bill has yet come to terms with. 
R Doug Woolerton 
: Like looking at my bedroom; not a lot happening. 
BRIAN CONNELL 
: I cannot attest to what happens in the member’s bedroom. 
Market manipulation is quite a different matter from insider trading. The bill attempts to introduce comprehensive prohibitions against practices involving the creation of a false impression of securities trading price movement or market information. These distortions if they were commonplace would impact negatively on capital markets. The resulting uncertainty would discourage trading reduce liquidity create increases in the cost of capital and compromise the ability of markets to allocate capital to those companies that could best use it. But I am not convinced that market manipulation is rife in this country and even if it were a significant problem I believe that trying to prove it would be nigh-on impossible. In this respect I think the bill anticipates this difficulty so imposes wide-reaching sanctions that essentially leaves it to individuals or corporate bodies to prove their innocence if an action is brought against them. 
This bill—and I refer members to new section 11 to be inserted by clause 21—creates the exception defence where trading occurs for legitimate reasons. However there is no guidance on what might be a legitimate reason which leaves the court in the awkward and somewhat unusual position of having to determine what the purpose of the effects-based offence was and what policy reasons would justify the provisions not being presumed to apply. I have said before and I will say again I think a rethink will be needed by the Government in this regard and I have some suggestions that I will table in the Committee stage. If a regulatory regime is so tough that it presumes guilt we will create an environment of risk aversion which will do more to stifle our capital flows than any other activity I can name. 
Improvements to the bill were made primarily by National members. In particular I acknowledge that the bill contemplates a provision for regulations to be made to make it clear that some activity is not to be caught in the prohibitions. I refer members to new section 11C(1) and (2) to be inserted by clause 21 if they seek clarification although I do warn that the explanation is complex and a little convoluted. 
The other matter I wanted to raise is management banning orders. As the Minister has already remarked—and quite rightly so—a sensible amendment has been suggested by the select committee. The bill as it is drafted gives the court discretion to impose a management banning order on a person if that person has been convicted of an offence against the Securities Act or if a pecuniary penalty order has been made against that person. Furthermore an automatic management banning order is imposed for the same reason. The select committee thinks that this serious penalty is inappropriate for many minor infringements and therefore proposes that a management banning order may be imposed only on a person convicted of serious offences specified under sections 58 59 and 59A of the Act or where a pecuniary penalty order has been made against that person. 
That concludes the major issues I wanted to raise. A significant number of amendments have been suggested by the select committee and on balance I think that they are warranted. National supports the bill going to the Committee stage and I conclude by thanking members of the select committee who worked tirelessly on this legislation which was at times very challenging and certainly is complex. I note the contribution made by advisers to the select committee too. 
RUSSELL FAIRBROTHER (Labour) 
: 
 I can only welcome back Brian Connell and ask him where he was during the select committee process. There were 29 submissions. The committee had good advisers it was well-chaired by Mark Peck and there was a unanimous report but suddenly the member has woken up and said he has some other ideas he wants to table. He was not prepared to speak up in the committee but perhaps that was because Mark Peck was such a good chairman. I must say before I go any further that it may well be testament to Mark Peck’s fine chairmanship that he got this bill through while Brian Connell was asleep. It certainly was a difficult bill and it went through with the committee unanimous in its conclusions. The committee made some quite sensible changes to enable the securities market regulators to work together better by trying to impose some objective standards that allow for reasonable conduct and that penalise gross misconduct. I heard that example of the person with binoculars—hiding in bushes with binoculars seems to be a subject that obsesses Mr Connell—as he made that very example in the select committee. He received an answer to his query from one of the submitters and from the advisers but it still has not sunk home with him. I say to Mr Connell that if he is in the bushes with the glasses at night-time and they are not night-time glasses he is not a danger to any securities market at all. 
I have to say Mr Connell is not a danger to Mr Don Brash at this stage in what must be Mr Connell’s new leadership bid because I note that he has come to Parliament now with a new hairstyle. The hairstyle is slightly retro but it probably celebrates Mozart’s recent bicentennial birthday. So I welcome him back to the House with his new zeal and just wish that during his time in the select committee he could have put some of those positive suggestions for the bill which he is going to table sometime in the future into the report so that we could all have considered them. 
I note as I browse through this fine report which did not have any dissenting opinion— 
Brian Connell 
: What happened in Napier? This Labour member did what no other Labour member did in 50 years—he lost a safe seat. 
RUSSELL FAIRBROTHER 
: This bill is exactly the reason why we need to legislate against shady practice so that mistakes like Napier will never happen again if we can organise ourselves to keep shady practice out of things such as the security market and the election market. That is the end of that for now but I will come back to it later I tell Mr Connell. 
As I was saying before I was so seriously interrupted I do not think Mr Connell was very happy with the removal of the serious penalty for minor offences as we find in clause 11. It was one of those things he was pontificating on at the time as I recall with regard to his huge experience in New Zealand before his return to Australia not realising that it was the other way around. He at the time thought that any bad person should be penalised but the committee thought that minor infringements which in fact were cases of strict liability should not lead to penalty by way of management banning orders. It is generally accepted that most managers in this country are competent and mistakes for which there is no mens rea—that is mental intent—should not lead to a banning from their livelihood or from the contribution they can give to a company. 
This is an omnibus bill so it amends three or four areas of legislation. It also does the remarkably simple thing of bringing the Securities Commission the Takeovers Panel and the Commerce Commission to the table to talk together as regulators in the area when they are looking at matters that arise. So I have much pleasure in endorsing the changes to this bill from a very industrious select committee—well chaired by Mark Peck—and I await with some eagerness the suggestions by the Hon Brian Connell that will be tabled many months after this report has slipped through the minefield of his scrutiny. I endorse the bill. 
R DOUG WOOLERTON (NZ First) 
: 
 Mr Speaker— 
Lindsay Tisch 
: I raise a point of order Mr Speaker. Given the order of speaking in this debate it should be a National call that comes next; after the Labour member. 
Mr DEPUTY SPEAKER 
: You are absolutely right. I am not sure whether I did not see Pansy Wong or whether she did not stand. I take your word for it but I have called Doug Woolerton. We will catch it up pretty quickly. 
R DOUG WOOLERTON 
: Thank you very much Mr Deputy Speaker and to return your politeness I will not take very long at all. 
I just want to pick up on a couple of points that Mr Connell raised. He is right to say that it is very hard to track down people who are engaged in insider trading whether they are looking through binoculars at the Auckland wharf or whatever they are doing. But there is another side to the coin. 
Of course people must have confidence to invest to be entrepreneurial and to start up businesses and carry them through in a tricky environment in today’s business world. But there is another side to this which is that the people investing—the mum and dad investors—must also have confidence. If we are to become a country of investors rather than a country of spenders then the ordinary investor needs to be confident that it is not just the insiders in those businesses who will make the money. I say with due respect that that has been the perception since 1987 and the public has been scared away from our stock market. People have been too scared to invest in shares securities or any of those sorts of things. They are going into property. We know what the Governor of the Reserve Bank thinks of that and we know what the spokespersons on finance on both sides of the House think about that. It is not wise. So we also must have confidence that the average Kiwi can invest in business through the stock market without those sorts of things happening without all of the profits going to insiders and without the perception that he or she has to be on the inside to win. 
PANSY WONG (National) 
: 
 Reflecting on the contribution made by Russell Fairbrother I cannot help but hope that Labour will bring back Mark Peck. I am sure that he would give the House a lot more inside information and more intelligent feedback on this legislation. I will be followed in this debate by a very hard-working intellectual National member Chris Tremain. I am sure that he will show the House further why he won the seat of Napier over Russell Fairbrother judging by the quality of that speech. 
The first thing I noticed from the report back of the Commerce Committee on this securities legislation was the extensive amendments that have been made to the bill. I acknowledge the members of the Commerce Committee in the last Parliament which my hard-working colleague Brian Connell who has great flair was part of. A technical bill of this nature is hard to digest and it takes members a lot of effort to get their heads around the issue. It is also a sad reflection on the fact that the Minister and the ministry could have done a much better job with their resources to make sure the legislation got it right in the first instance. 
I remember that not that many years ago the Hon Paul Swain when he was the Minister of Commerce made a lot of song and dance about riding into Parliament armed with a raft of amendments to the Takeovers Act and the securities legislation and he said that he would end the wild Wild West of the New Zealand securities market. That was not that long ago yet suddenly the House is faced with another raft of amendments to the takeovers and securities legislation. I have not seen many trophies paraded by the former Minister as to the benefit of his ending the so-called wild Wild West of our securities market. Indeed I have in my hand a press release from the Securities Commission today. The Securities Commission conducted a financial surveillance programme and it has picked 46 issuers of various financial instruments and according to the commission out of that number 19 have some shortcomings. One of them has a large discrepancy between actual and prospective information. Another one is an apparent overstatement of the value of property intended for sale. But apart from that the other 17 issues that it identified were to do with wording naming and failure to sign the financial statements. 
I agree with the Securities Commission that what is needed to improve the integrity of New Zealand’s security market is nothing more than ensuring high-quality reporting standards and making sure that the market is well informed. I actually disagree with the former president of New Zealand First Doug Woolerton who continues to think that the New Zealand mum and dad investors need a whole raft of legislation from the Labour caucus—which has no appreciation of how business is conducted—to protect them and advise them. I think that individual New Zealand investors are very intelligent. All that they need is a good disclosure information regime for them to make those intelligent decisions. 
The reality is that the Labour Government never has any idea about and no respect for reward for risk taking and return on capital hard work and innovative ideas. Without that attitude Labour members continue to try to pass legislation. They think that they can legislate the economy to grow to motivate investors and to divert investment from property to other financial instruments. One has only to reflect on the Prime Minister’s opening statement when she said that her answer to growing the New Zealand economy is to have not just a review but a major review of business structure and a fresh look at the regulatory environment whatever that means and whatever it would contribute to the growing economic cycle. For example earlier today the Labour Government introduced the Insolvency Law Reform Bill to introduce certainty in the financial failure and business recovery process in order to allow early intervention. Those types of lofty ideas certainly do not connect with the real business environment. 
It is true that New Zealand investors tend to favour property but that is not a new or unusual phenomenon because it happens overseas. Most individuals want to own their own homes plus more investment in properties. In some countries property prices are so high that individuals cannot afford to do that and also there is the attraction of other investment products. So overseas investors tend to diversify their portfolio more than New Zealand investors back here. Therefore the key is to encourage the availability of more diversified and attractive investment products and confidence in the capital and financial markets. But that confidence can only be partly provided by the existence of laws that spell out the rules and the penalties for breaching those rules. The other part has to be the enforcement of the law. We have learnt of the heavy workload of the Commerce Commission. My colleague Brian Connell has just raised the issue of enforcement. The Labour Government is particularly interested in passing legislation but it is the enforcement and the resourcing of the agency to enforce that legislation that really amounts to something. 
We have learnt of the heavy workload of the Commerce Commission. I want to know whether the Securities Commission etc. will get additional resources with the passage of this legislation. What is most important is that New Zealand has a vibrant environment and an open disclosure regime to allow investors to make an informed decision. A prime example is that we have seen the formation of small shareholding groups that are holding companies to account at AGMs. They are not funded by Government or by bureaucracy. They are individuals who have a stake in the company and all they need is consistency of law and a disclosure regulatory framework for them to have the information to hold those directors to be accountable. 
So no matter how many bills Labour aims to introduce to improve the market its attitude of anti-business and return on capital will ensure that New Zealand’s capital and financial markets continue to lag behind. Imagine the obstacles facing any small business wanting to grow and wanting a listing on the stock market and the bureaucracy tied up in the growth of business. I think that the barriers to the thriving of New Zealand’s securities and capital markets are due to the contempt and distrust of Labour towards business and investors getting rewarded for taking risk or wanting returns on their capital. Unless that type of attitude is changed we can spend lots of time in this Parliament passing various bills but I am not too sure the financial and capital markets will benefit hugely from those changes. 
CHRIS TREMAIN (National—Napier) 
: 
 I rise to speak in support of the Securities Legislation Bill and to follow on from Brian Connell and the fine words of Pansy Wong. 
I note that it is somewhat ironic that this legislation is brought to the House for its second reading at a time when the House is dealing with accusations of misrepresentation and manipulation in regard to spending prior to the 2005 election and in relation to the Labour Party pledge card. It is ironic because on the one hand the Government is supporting through this bill legislation that will toughen the penalties on insider trading on market misrepresentation and on market manipulation—that is what we are talking about tonight. Yet on the other hand that party is running for cover over the way it manipulated the Prime Minister’s fund to finance the Labour Party’s little red card knowing full well that it was manipulating the system and now it finds itself before the police. 
 National will be supporting the tightening of the securities legislation and we will also be supporting—as we indicated prior to the 2005 election—the tightening of the rules around the spending of the leaders’ funds especially in regard to blatant electioneering. 
I now turn to the main provisions of the bill. As members know the bill proposes changes to four Acts of Parliament—the Securities Act the Securities Markets Act the Fair Trading Act and the Takeovers Act—and of course to the well-known Takeovers Code enforced under the Takeovers Act. It is proposed that the bill be split at the Committee stage into a Securities Amendment Bill a Securities Market Amendment Bill a Fair Trading Amendment Bill and of course a Takeovers Amendment Bill. Given the broad scope of changes recommended under the new legislation I will focus tonight on just two aspects of the bill—that is two provisions for change proposed in the main bill. I will focus on insider trading and market manipulation. 
Firstly insider trading is currently dealt with under the Securities Markets Act 1988. Investor confidence in New Zealand securities markets is adversely affected by any concern that persons are trading with an information advantage as Mr Connell pointed out before. In order to ensure that confidence is maintained it is imperative that the Securities Commission have the power to bring criminal charges in the event of a case involving insider trading. For example in November 2005 the Securities Commission found that ABN AMRO Craigs used inside information during the Wrightson takeover bid by Rural Portfolio Investments Ltd in June of the previous year. However no insider trading was proven because the information did not come from an insider. The information was in fact about a Wrightson shareholder’s decision to sell his large shareholding to Rural Portfolio Investments. Under the proposed legislation Craigs would have faced a situation far more serious than a potential slap on the wrist from the Securities Commission. As a result the change in legislation being debated tonight will have the effect of increasing the confidence and integrity of the market. 
This bill has teeth. It provides that insider-trading conduct is a criminal offence. It imposes maximum penalties of 5 years’ imprisonment and a fine of $300000 for an individual and $1 million for a body corporate. I note that importantly in relation to contravention of the trading or disclosure prohibitions the prosecution must prove actual knowledge by the defendant that the inside information in question is material information and that it is not generally available to the market. 
Just as with this proposed securities legislation I hope that the public of New Zealand can in the future have similar confidence in the integrity of our election system and our election campaigns. I trust that in the future no party will be in a position to misuse public money to misrepresent or to mislead. Just as Bob Clarkson was taken before the High Court accused of misspending— 
Bob Clarkson 
: Spending my own money. 
CHRIS TREMAIN 
: Exactly—I trust that all parties will be subject to the same level of scrutiny. Just as the Securities Legislation Bill proposes stiff fines and imprisonment I propose that the same apply to our parliamentary system to prevent the situation in which we currently find ourselves and to ensure that we bring credibility to our upstanding profession. 
I now focus on two of the affirmative defences provided for under the proposed new provisions of the Securities Markets Act. I ask members to note that the defendant would have to prove defence on the balance of probability. The two defences that I would like to focus on are very interesting. Firstly absence of knowledge is a defence against a trading prohibition. Secondly a very interesting defence is the Chinese wall defence under new Part 1 inserted by clause 21. It is very interesting to consider those defences given the current accusations levelled at the Government about a $400000 overspend in election spending. 
Let us apply those two defences against the Labour Party overspend. Would the Labour Party have used the absence of knowledge clause as a legitimate defence on the balance of probability? 
Hon Member 
: The Prime Minister would. 
CHRIS TREMAIN 
: The Prime Minister would have done so. Well that would have been impossible. Simon Power wrote to the Auditor-General months before the election campaign complaining about the use of the pledge card and the use of taxpayer funds to meet the cost. Secondly would the Labour Party have used the Chinese wall defence to defend on the balance of probability its use of the little red card? The answer is clear: yes it would have used the Chinese wall defence. Labour members are experts at that—in fact they are building such a defence right now to protect themselves from the ensuing inquiry. 
So in considering those two provisions for defence within the Securities Legislation Bill I conclude that the provisions for defence are important to ensure legitimate research and representation. I would ask that under any review of the leaders’ funds defence options similar to those in the Securities Legislation Bill be available. However I politely ask that no Chinese wall defence be allowed when addressing the issues of future elections and future use of the leaders’ funds. 
Lastly I will focus on the consideration of the market manipulation provisions in the bill. With regard to market manipulation the Securities Legislation Bill states that a person must not make or disseminate a false or misleading statement or information that is likely to affect trading. 
Hon Tau Henare 
: Has that happened before? 
CHRIS TREMAIN 
: Well we will consider that now. The knowledge required is that the person knew or ought reasonably to have known that a material aspect of the statement or information is materially misleading. The bill makes broad provision prohibiting anything that has the effect or is likely to have the effect of misrepresenting the market. 
The same process should apply to the House. Future elections should be held under the microscope to ensure that nothing is done that has the effect of misrepresenting the House. The Securities Legislation Bill makes contravention of this provision a criminal offence punishable by 5 years’ imprisonment or a fine of $300000 for an individual and $1 million for a body corporate. 
Comparing this against the last election and in particular against the Labour pledge card can we apply that same litmus test to this piece of marketing? Does it have the effect or was it likely to have the effect of misrepresenting the market? Focusing on misrepresentation I bring to the attention of the House the picture of Helen Clark on this card. With all respect to the Prime Minister does this picture bear any resemblance to the person who sits on the other side of the House? The answer is of course no. It is indeed misrepresentative and misleading. So as with the Securities Legislation Bill I ask not only that we get to the bottom of the $400000 rort that has taken place across the House but also that we ensure that parties do not wantonly misrepresent reality and that if they do there is clear recourse for the taxpayers of this country. 
In closing the National Party supports this bill as it will promote robustness and integrity in the New Zealand securities market. I only hope that given the Labour Party’s current predicament regarding its gross campaign overspending we can see some robustness and integrity brought back into the election campaign process. Just as in the Securities Legislation Bill clear rules must be put in place to prevent abuse of the system. 
HONE HARAWIRA (Maori Party—Te Tai Tokerau) 
: 
 Mr Deputy Speaker would you mind if I used my laptop? My notes are on my laptop. 
Mr DEPUTY SPEAKER 
: Not at all. 
HONE HARAWIRA 
: Thank you. I read an article the other day entitled “Dishonest Nation”. Very interesting reading it was too. It was all about Bob Clarkson’s run in Tauranga. In that article renowned criminologist Dr Greg Newbold said the incidence of white-collar crime was about 40 times greater than that of benefit fraud. So why does benefit fraud make all the headlines while white-collar crime hardly rates a mention? Why are all fraudsters not treated the same? 
Lindsay Tisch 
: I raise a point of order Mr Speaker. At the beginning of the member’s comments he referred to my colleague Bob Clarkson and then further on he talked about dishonest behaviour. In the same paragraph he conveyed the view that my colleague was dishonest. I ask Mr Deputy Speaker that you ask the member to withdraw that comment. 
Mr DEPUTY SPEAKER 
: Well— 
HONE HARAWIRA 
: I raise a point of order Mr Speaker. I made no comment about Mr Tisch. 
Mr DEPUTY SPEAKER 
: You did not make a comment? 
HONE HARAWIRA 
: I made no comment about Mr Tisch and Mr Clarkson has not objected. 
Mr DEPUTY SPEAKER 
: No no. We understand that. Thank you for raising the point Mr Tisch. I did not take it that way but others may not see it the way I see it. There was a distinct break between when the member was talking about Mr Clarkson and what he subsequently said. I do not think the House would be offended; Mr Clarkson certainly is not. I would leave it at that. 
HONE HARAWIRA 
: When I look at my cousins in Kaitaia being prosecuted by Work and Income and being made liable for their debts I have to ask: “What is so different about white-collar crime that lets certain people off the hook?”. I guess that one of the reasons is that white-collar crime is carried out by the so-called more respectable members of our society. Members know the ones—the really big fraudsters. White-collar crime is also described as being victimless because there are no gang patches black eyes tattoos or foul language. But believe me the victims may be a little less obvious but they are there all right in their thousands. Falsifying insurance claims for example means that everyone’s premiums go up. It is just that the faces of victims are not staring out at us from newspaper pages. 
It seems that the Government has no problem running big-budget media campaigns to dob in the neighbour who commits benefit fraud so why does it not run similar campaigns to dob in white-collar fraudsters? The Maori Party supports any move to enhance New Zealand’s securities and takeover laws because at the moment we are seen as being a bit of a cowboy in those areas and even the cowboys are complaining about our behaviour. Being clean and green is just not enough. In this field integrity is what counts. This House talks a lot about integrity—most of it tongue-in-cheek of course—but that is indeed the issue we put to our business colleagues: integrity and full disclosure by investment traders and advice as to their crimes. 
As a matter of principle the Maori Party supports any move that acts to ensure responsibility towards clients and that protects the interests of clients in the event of wrongdoing. The Maori Party supports transparency accountability and the quality of being up front. The Maori Party is driven by the call of our people for justice for knowing and respecting the rules and for not trying to find ways to bypass them. The Maori Party urges this House to recognise that the best way to get business people to respect the concept of integrity is to put the concept of integrity into practice ourselves and to honour the Treaty of Waitangi. 
It is also interesting that this bill increases the penalties and remedies in order to deter breaches and encourage compliance. A breach of the Securities Act has a maximum penalty of up to $500000 for individuals and $5 million for a body corporate. For insider trading the penalty is 5 years in jail with a $300000 fine for an individual and a $1 million fine for a body corporate. Yet I am told there have been no prosecutions in this country to date for insider trading. We are told that existing laws are complicated difficult to enforce and easy to avoid. The changes are therefore necessary to ensure market integrity and confidence. Hopefully the changes will give confidence to people who may be considering investing but who have not done so because they know that the sharks are still swimming freely having escaped the net of the law until now. 
A lot of white-collar criminals have the luxury of being able to afford a heap of expert legal hot-shots and accounting wizards and it is little wonder that the Inland Revenue Department has a hard time catching up with the big boys. But that department does not seem to have the same difficulty with the little business people and it sure has no problem beating up on the poor little beneficiaries. Just now in my korero I want to share a true-life story that came into our office. A 73-year-old grandmother rang us up in a state of major distress. She had been reported for benefit fraud because Work and Income New Zealand reckoned that her male friend was staying over for a couple of nights a week—73-years-old for goodness’ sake. Are we serious? 
Shane Jones 
: Viagra. Viagra. 
HONE HARAWIRA 
: That kuia was in despair. She was seriously upset that she and her male friend were being treated like criminals by the “Winz police”. She is 73-years-old—just about as old as Shane Jones. We managed to get the case withdrawn of course because the allegations were baseless innuendo. But the traumatic effect of that experience has taken its toll on our kuia—an auntie of Shane’s actually. It made me wonder why we dedicate so much money to hassling the poor and the elderly when multimillion-dollar corporate thieves simply skip the country hire a flash lawyer declare bankruptcy and do not give a toss about poor little investor. 
During our time in this House we will look to see how effective this law is. If it turns out to be as toothless as the current law the Maori Party will promote legislation to genuinely plug up the holes and to nail those white-collar criminals. 
Bill read a second time.