Sepuloni Carmel: Securities Trustees and Statutory Supervisors Bill — In Committee 
Sepuloni Carmel: Securities Trustees and Statutory Supervisors Bill — In Committee 
[Volume:671;Page:17716] 
CARMEL SEPULONI (Labour) 
: 
 There is still some more to discuss on Part 1 of the Securities Trustees and Statutory Supervisors Bill before moving on to Part 2 so I thought I would stand to take a call. It is a bill I am particularly interested in. I have been having quite robust discussions with my colleague Nanaia Mahuta on this particular bill. 
To start off as I have just come to the Chamber I will state very clearly Labour’s position on the bill before I get into the specifics and the detail in relation to Part 1. Just in case members are in any doubt I say that Labour will be supporting this legislation as it forms part of the ongoing reform of financial products and providers started by Labour and continued by National although we consider it to be premature as the Financial Markets Authority is not yet established and the Securities Act review is not complete. The legislation is being passed ahead of other decisions that will impact on the whole regulatory framework and that is a concern for us. 
We acknowledge that this bill addresses a number of the weaknesses in the current supervision regime for corporate trustees and statutory supervisors. It establishes a licensing regime for the trustees and supervisors of securities and retirement villages. The regime will be administered by the Securities Commission until the Financial Markets Authority is established. We support the bill but not without concerns. As I said it is being passed ahead of other decisions that will impact on the whole regulatory framework. 
I will get into the specifics in relation to Part 1 because I am sure that is what you want me to do Mr Chair. Part 1 contains the preliminary provisions; it contains the purpose and the interpretation. Looking at the purpose of the bill we see that the bill purports to protect the interests of investors and “to enhance investor confidence in financial markets … by—(a) requiring persons who wish to be appointed as trustees or statutory supervisors to be capable of effectively performing the functions of trustees or statutory supervisors;”. We find that purpose very interesting. As I said my colleague Nanaia Mahuta and I were having quite a detailed discussion about this. The bill also intends “requiring trustees and statutory supervisors to perform their functions effectively;” and “enabling trustees and statutory supervisors to be held accountable for any failure to perform their functions effectively.” That really is the gist of Part 1 and the purpose of the bill. 
The law is being changed to provide for a regime that supervises the supervisors. Although the role of trustees was included in the Review of Financial Products and Providers undertaken by Labour further concerns about the model of supervision they provided were raised by the string of finance company collapses. Concerns included perceptions of trustees’ lack of independence and capability. 
The bill contains a number of provisions designed to ensure that trustees and statutory supervisors comply with their obligations. The Securities Commission may seek pecuniary penalties and compensatory orders against those who fail to comply. Under the bill trustees and statutory supervisors are required to report to the Securities Commission any breach or potential breach of any issue or obligation and notify the commission of the steps they intend to take as a result. It also requires that they report to the Securities Commission when any issuer they supervise is likely to become insolvent and that they notify the commission of the steps they intend to take as a result. It also requires that when requested by the Securities Commission they attest as to issuers’ compliance with issuer obligations. In circumstances where they cannot so attest they must state the reasons why. 
The bill is being progressed prematurely. We could have waited to wrap it up with the Securities Act reforms and the establishment of the Financial Markets Authority. However since the Financial Markets (Regulators and KiwiSaver) Bill is also being progressed at the same time this may minimise some of the confusion when the bill becomes law. It is concerning that the Securities Act review deadline has been delayed until 2011.