Curran Clare: Financial Markets Conduct Bill — In CommitteeText is incorporated into the Bound VolumeCurran Clare: Financial Markets Conduct Bill — In Committee[Sitting date: 27 August 2013. Volume:693;Page:12996. Text is incorporated into the Bound Volume.]CLARE CURRAN (Labour—Dunedin South): I would like to speak to a particular part of the Financial Markets Conduct Bill that I focused on a lot when I sat on the Commerce Committee over all of those months and over all of those years. We heard evidence from everyday investors who came before our committee who told us about losing their life-savings and who cried in front of our committee. We heard those stories and saw those people up front and face to face which is something that every select committee should try to do. They should meet with and hear from the people who are affected by lapses in law and gaps in law.It was an important critical part of this bill that we address the criminal liability. I acknowledge the comments of my colleague David Parker earlier around the job that we had on that select committee not only to ensure balance as select committees often do but to ensure that there was not a chilling effect occurring for directors of companies. We had to ensure that they would not be put off because they would think that they might end up before the courts or even in jail for the issuing of material that was not fully correct. But the fact was that over the period of years when these financial companies collapsed and we know that that effect was escalated into our communities and affected so many people there had to be significant measures put in place that would be a deterrent to that kind of behaviour—to the reckless and knowing behaviour of unscrupulous people who were essentially ripping off ordinary New Zealanders.We have argued throughout this process that perhaps it has not gone far enough as in this country people who are convicted of offences like burglary can be treated more harshly than those who destroy huge amounts of wealth through reckless and dishonest business practices but I would like to say that there is a key change in this bill. It is that the issuer and the director are criminally liable for misstatements in their disclosure documents but only if the Crown proves a subjective fault element and that is the reckless knowing behaviour—they had to know what they were doing and it was not a mistake. If it was a mistake there is still liability but it comes into the civil area. It does reduce the scope of criminal exposure but the maximum punishment has increased to 10 years’ imprisonment and a $1 million fine for an individual and a $5 million fine for a body corporate.Promoters—this was an issue that I particularly focused on. People who invest and make decisions to invest as everyday investors do so often because they trust the person telling them that they should invest. Often those promoters have been celebrities—people whom New Zealanders have trusted. There have been countless examples of that. We were told by almost all of the submitters including those ordinary everyday New Zealanders who appeared before us that they trusted those people and that they felt ripped off. The promoters of statements are also criminally liable and I think that that is right. I think that if you are a celebrity and you stand up and go on television or whatever and have your face all over the place saying “Trust me.” and telling people toinvest in such and such company then you should know what you are doing and you should take responsibility. This bill ensures that they will take responsibility and I think that is right.At the same time though there is an important set of principles underpinned in the criminal liability area. They are that the regime should not discourage capable prudent people from becoming directors through overly punitive sanctions; that companies should be able to attract directors with a diversity of skills and backgrounds; that the directors should be able to focus mainly on business strategy and supervising management rather than on compliance and minimising liability; that directors should supervise capital raising and exercise due diligence in relation to offer documents; that they should be liable for civil pecuniary penalties and should compensate investors who lose money if they fail to perform their duties; and that they should not be liable to imprisonment where there is a no-fault element. Those principles as I understand it have remained in the bill.They are important principles because they are the principles that protect directors from that chilling effect—from the fear that if they slip up or if there is a mistake made they might end up in the clink. It is important that they do not but it is also important that the ones who are reckless the ones who are dishonest and the ones who know that what they are doing is wrong are accountable and that they end up in the clink. I would like to see that happening. I would like New Zealanders to be able to be reassured that if they invest their money in a company that is dodgy and tells them lies then it will be held accountable. If there is one thing that I think is in this tome of a bill it is the mechanism to ensure that that happens.