Tremain Chris: Securities Legislation Bill — Second Reading 
Tremain Chris: Securities Legislation Bill — Second Reading 
[Volume:629;Page:1341] 
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.