Dalziel Lianne: Securities (Disclosure) Amendment Bill Financial Advisers Amendment Bill — Third Readings 
Dalziel Lianne: Securities (Disclosure) Amendment Bill Financial Advisers Amendment Bill — Third Readings 
[Volume:655;Page:5115] 
Hon LIANNE DALZIEL (Labour—Christchurch East) 
: 
 I want to go back over a matter that I raised in the Committee stage of the Securities Disclosure and Financial Advisers Amendment Bill because it is important that people think very carefully about what we are doing in the legislation in this particular area. As I said in the Committee stage the Securities Act 1978 is investor protection legislation; that is what it was designed to do. The reason we need investor protection legislation to be at the fore is so that confidence in our capital markets can be maintained. If we do not have confidence in our capital markets then there is a flow-on consequence to those capital markets and we simply cannot develop the depth and the breadth that we need in those markets. The previous Labour Government established the Capital Market Development Taskforce because we believed that it was very important that we had people who work within different parts of the economy actually focusing their minds on the barriers to growing the depth in our capital markets while also ensuring that investor protection is maintained. 
The Opposition has taken the position that we support this legislation not because it comes as a recommendation from the Capital Market Development Taskforce although I acknowledge the work it is doing but because we have assessed whether there is any degree of risk associated with the passage of the legislation. We do not believe there is any risk around the recommendations that are made. I know that Government members have stood up and said this is fine legislation that will make a huge difference to the raising of capital in New Zealand and have said the removal of compliance costs will ensure that people are able to raise capital in a much more cost-effective manner. I think that simply overstates the degree of change that will result from these particular amendments which is why we are supporting them. 
The rest of the world is reregulating; we are deregulating an aspect of the Securities Act. It is really important that we think about the recession that everyone has talked about in the debate on this legislation what lies behind the recession and how deregulating actually responds to what was started by an international crisis in the global markets. That global financial crisis was sparked off by either the lack of or the abuse of regulatory regimes. That is why every other country in the world is looking very carefully at its regulatory regime. Other countries are not talking about compliance costs at the moment; they are talking about investor protection because they know that without confidence they simply will not be able to restimulate those aspects of the world economy that have been damaged by their actions. So it is very very important that we do take this legislation seriously instead of just simply passing it off as a measure to reduce compliance costs for those who seek to fund-raise in a recession. The Opposition has gone through the legislation with a fine-tooth comb and that is why we are satisfied with the changes that are being made. 
However there is one area of change in the Securities (Disclosure) Amendment Bill—and the Minister has referred to it—that relates to the wealthy investor category. We do not mind the changes that are being proposed; we think they are pretty sensible. That is why we are happy to support the passage of this legislation and why we have done so right from the outset. What concerns us is that the wealthy investor category was subject to a specific question in the  
Review of Financial Products and Providers: Review of Securities Offerings 
 discussion paper which was distributed in September 2006 and which is still very much at the base of the Securities Act review that the Minister referred to in his contribution to this debate. The issue around wealthy investors that was raised in the paper was: “Should the exemption for wealthy investors be retained? If no why? If yes how does this meet the objectives of the Securities Act?”. 
I just make the point—and I have made it more than once during the course of this debate—that in the case of people who are deemed to be wealthy essentially their wealth is somehow seen as a proxy for their experience in investing. The previous section of the Act deals with utterly appropriate mechanisms for exemptions for sophisticated investors. Those investors are professional they are habitual and they are experienced. For them to choose to obtain their information in another way either through continuous disclosure on the stock exchange or through information that they are referred to in a shorter document rather than a full prospectus is fine. They know exactly what to look for; they know exactly what the risks are; they have been doing this for some time. They know exactly how to look after their own interests and indeed often the interests of others on whose behalf they may be investing. But possessing wealth is not a proxy for that degree of sophistication and I had hoped that out of this whole review process the wealthy investor category would go. 
I just want to quote from the discussion paper: “We seek feedback on whether this exemption should be retained. The policy behind this exemption is the least principled of all the exemptions.” I think that is simply obvious—that the exemption assumes that if an investor is wealthy then he or she will be able to make an informed investment decision without the aid of the disclosure regime because he or she will have the ability to seek professional financial advice. We had the Banking Ombudsman at the Commerce Committee today and I have to say there were some very wealthy people—before they invested in ING—who are no longer wealthy people. Wealth is not a proxy for experience. My only question about this change is why make it now? Why use the vehicle of this legislation to change the wealthy investor category when we are likely to get rid of it altogether? That is really the only point I have made. It is not a huge change that is being made to the category so I do not mind it. I would just prefer that we got on with the debate about whether to retain the category at all. 
With those words I reiterate the comments made by the Minister and I thank fellow members of the committee for their diligence on this legislation. There was certainly considerable debate on the issues as we dealt with them in a relatively truncated way in order to meet the report-back date that the Minister set. I especially put on record our grateful thanks to the officials who provided us with excellent support. I commend the legislation to the House.