Dalziel Lianne: Urgent Debates — Tranz Rail Shares—Insider Trading 
Dalziel Lianne: Urgent Debates — Tranz Rail Shares—Insider Trading 
[Volume:640;Page:9954] 
Hon LIANNE DALZIEL (Minister of Commerce) 
: 
 I am very happy to follow the Rt Hon Winston Peters and I thank him for giving Parliament the opportunity to focus its attention on one of the most outstanding results that this country has ever seen from our Securities Commission. I want to place on record the congratulations of this House to the Securities Commission on not giving up the fight—and let me just say that it was a fight. There were interests out there who did not want these defendants to be pursued; at one point I felt that those interests did not want the defendants to be pursued at any cost. So I want to place on record my congratulations to Jane Diplock and the entire team at the Securities Commission on having the guts and the gumption to take on these very strong powerful interests in our country. 
This settlement not only represents the greatest settlement in New Zealand history—when we take into account the fact that other defendants have already made a contribution to the total bringing it to $27.7 million—but also represents the greatest result in Australasian history. It really does put Australasia on the world map in terms of hunting down those who take advantage of inside information. If there was any example of why this Government has been so determined to get the legislative framework right for our securities markets then this would be the case that proves the point. 
I make the point too that although no liability has been accepted on the part of these defendants I think that Bruce Sheppard from the Shareholders Association summed up the public reaction with the words “Yeah right!”; “Yeah right!”—that is how the public have responded to the assertion that there is no liability in this particular case. The issue of $20 million coming from Midavia Holdings and from David Richwhite certainly poses that question very significantly. 
I do not want to dwell very much on the particular details of this case; the Rt Hon Winston Peters has traversed them with great eloquence already in this House. I really just want to reinforce how important it is that investors know that people who have inside knowledge cannot use that knowledge for their personal gain or for the gain of their friends and associates. This is a very powerful conclusion that one can draw from this particular case. 
I remind the House that when this Government took office in 1999 we said that four things needed to happen in respect of securing the kind of future that we wanted for our capital markets in this country. The first one was that we needed to have a Takeovers Code that had some teeth and was able to be implemented by the Takeovers Panel. The previous National Government had set up the Takeovers Panel and left it with nothing to do. Every year it reported a blank page—signed off a blank piece of paper—because it could do nothing. This Government brought in place the Takeovers Code. We were able to give the Takeovers Panel some teeth and it has had some very successful results from the work that it has done after this Government gave it the teeth it needed. 
The second area was of course reviewing our securities markets legislation. That was long overdue in this country and it was implemented by this Government. The third area that this Government worked on was this very area of insider trading and market manipulation. Members on the other side of the House should look downwards in shame as they recall their opposition to strengthening the laws around insider trading. I have to ask myself why they were so adamant that we should not strengthen the law in the area of insider trading. I think we have found the answer to that question in this House today. 
The fourth area of work that we are undertaking is in fact the area of work that I am announcing this afternoon and that is the review of financial products and providers and the review of financial advisers—so covering the whole area of non-bank deposit-takers. It is another area where the Government will be able to provide some assurance around the quality of our financial markets. 
So this Government really has the track record that shows we are prepared to put appropriate rules and regulations in place. We have a relatively light-handed regulatory regime in this country and nothing about that will change with the announcements that I am making this afternoon. But it is important particularly as we go into our KiwiSaver environment from 1 July this year that the public know that they will be protected from this sort of behaviour. They need to know that our regulators will ruthlessly track down those who breach the rules. We would like to think that all conduct in our capital markets was conducted on an ethical basis but we actually cannot rely as we have found out in many cases on everyone operating at that ethical level. Those who cross that line will be tracked down they will be prosecuted and where under the circumstances it becomes reasonable to accept a full and final settlement without the acceptance of liability then so be it. The only thing we have really missed out here is in respect of the penalties. That was in relation to an earlier decision of the court that penalties could not be pursued because of the court’s interpretation as to the timing under the legislation. That matter is being resolved. 
I think that the Securities Commission came under a lot of fire for taking on these individuals and companies and again I pay tribute to its willingness to continue down that track. The vast majority of the $27.7 million settlement that has been reached with the exception of about $2 million which will be going towards legal costs and other expert reports or in other words over 80 percent of what is claimed—well in fact most of what is claimed; the balance of the $27.7 million after deducting the costs—will go back to reimburse the shareholders. So it will go back to the people who lost out because of the behaviour of the individuals concerned. I just make the point—and it is probably a relatively strong point to make—that the vast majority of this settlement will go towards reimbursing the shareholders who essentially took a bath while others had the equivalent of a hot shower. I think that is a fair enough description of what has happened in this particular case. The shareholders were the ones who missed out and they are the ones who will benefit from the Securities Commission’s dogged determination to get to the bottom of this matter. 
So again I place on record my congratulations to the members of the Securities Commission. It must be very pleasing to them to have achieved a settlement in this case. There were those who simply were not prepared to come to the party at any stage until essentially the eleventh hour. I am glad that we have this result and that we can now move on to ensure that the lesson is learnt. The lesson is that those who trade on inside information will be hunted down will be caught and will be held to account.