Power Simon: Securities Disclosure and Financial Advisers Amendment Bill — Second Reading 
Power Simon: Securities Disclosure and Financial Advisers Amendment Bill — Second Reading 
[Volume:654;Page:3092] 
Hon SIMON POWER (Minister of Commerce) 
: 
 I move  
That the Securities Disclosure and Financial Advisers Amendment Bill be now read a second time 
. From the outset I would like to thank the Commerce Committee and in particular the chair the Hon Lianne Dalziel for seeing this bill move through the committee at a pace that equates with the urgency that surrounds legislation of this nature. 
The objective of the bill of course is to respond to the global financial crisis by removing unnecessary impediments to the raising of capital in New Zealand while continuing to ensure the timely disclosure of relevant information to prospective investors. I thank the various parties in the House for their support both of the legislation and of the select committee process. The financial crisis has highlighted the need to act decisively to address credit rationing which has restricted access to capital for New Zealand firms. However the crisis has also taught us that companies cannot ignore the interests of investors—an important point. This means that any action the Government takes in response to the crisis should not serve to undermine investor confidence in the financial sector particularly when it is already frail. 
This bill addresses a number of the recommendations made by the Capital Market Development Taskforce in its interim report of November last year. The bill amends the Securities Act 1978 to provide for a simplified disclosure prospectus that may be used by listed issuers who are already subject to continuous disclosure requirements and would otherwise be required to produce a separate disclosure document for each offering. Listed issuers would therefore be required to produce only one disclosure document for a securities offering instead of producing both a full prospectus and an investment statement. The intention of the simplified disclosure prospectus is not to reduce the amount of information provided to investors but to reduce duplication between forms of disclosure. 
In addition the bill proposes other relatively technical changes to the categories of persons who are exempt from the disclosure requirements for offers of securities under the Securities Act which will make it easier for all businesses whether they are listed or unlisted to raise capital. The bill also amends the Financial Advisers Act 2008 through the correction of a minor error in the final version of the Act and through other minor tidying-up amendments. 
Since the first reading of this bill the Commerce Committee has recommended a number of amendments to strengthen the bill so that it may meet the objectives I have outlined so far. Overall submitters welcomed the introduction of the simplified disclosure regime. They were also supportive of the proposed amendments that relate to categories of persons who are exempt from the disclosure requirements for offers of securities under the Securities Act. 
It is important to note that I am aware that other issues were raised by submitters and that some people in the industry consider we have not gone far enough with the bill. Let me remind the House that this bill has been swiftly prepared in response to the need to address the current credit crisis and that I have already asked my officials to carry out a more thorough comprehensive review of the Securities Act. The committee considered the additional proposals that were raised by submitters and concluded that they were either outside the scope of the bill or better dealt with in a more fundamental review of the Act. No substantive changes are proposed to the part of the bill that relates to simplified disclosure prospectuses. 
The intention of the simplified disclosure prospectus is not to reduce the amount of information provided to investors but as I have said to simply reduce the duplication between the forms of disclosure. Any relevant announcements made through continuous disclosure will need to be referenced in the simplified disclosure proposal and to be made freely available to investors by for example publication on the issuer’s website. Liabilities penalties and remedies for the disclosure of false or misleading information will continue to apply to a simplified disclosure prospectus as they do to a full prospectus. 
However the committee recommended three changes to the provisions in Part 1 that deal with categories of persons who are exempt from the disclosure requirements. Where subsequent offers are exempted from the standard disclosure requirements the committee recommended that exemptions from standard disclosure requirements for subsequent offers by persons who have made subscriptions of $500000 be allowed to include offers for different types of securities rather than being limited to securities where the rights privileges limitations and conditions attached are identical to those attached to the initial securities. The committee concluded that it is unnecessary to restrict the securities to those that are identical to the initial securities and the proposed amendment recognises that an investor who has previously invested half a million dollars in one transaction prior to allotment does not need necessarily the protection of the Act. I agree that limiting the securities to those that are identical to the original offer would needlessly restrict a company’s ability to use a range of investment vehicles to raise further capital from its initial investors. 
The committee also recommended in relation to clause 5 that section 3(2)(a) of the Securities Act be extended to allow offers subsequent to an initial half a million dollars to be made within 18 months of the first allotment rather than 12 months. The committee thought it appropriate that the half a million dollar initial investment should be made within a reasonably small window but did not consider that 12 months would allow the issuer enough time to complete a full annual reporting cycle and to decide whether additional capital needed to be raised. I think this is a pretty sensible move. 
The committee has also suggested that the Securities Act be amended so that people who are experienced in investing money will be required to acknowledge that as experienced investors they will not receive the disclosures that are typically required in relation to a public offering. The committee thought it was important that those investors acknowledge that they are not to receive any of the information usually provided by an issuer who is offering securities to the public. I consider this to be another useful amendment. 
The committee also considered further amendments to the Financial Advisers Act designed to remedy errors that have come to light since the bill was introduced. These issues are all of a minor technical nature but are important to ensure the legislation works as intended. The committee also recommended changes firstly to remedy an oversight in the Financial Service Providers (Registration and Dispute Resolution) Act that potentially exempts some financial advisers from registration secondly to clarify that information contained in the disclosure statement that is required to be produced under the Retirement Villages Act 2003 is not financial advice—and you will be interested in that Mr Deputy Speaker—and thirdly to clarify the disclosure obligations and potential liability that applies to financial advisers operating as part of a qualifying financial entity. 
Hon Maurice Williamson 
: Excellent excellent. 
Hon SIMON POWER 
: These amendments are consistent with the policy decisions on the Financial Advisers Act so I too support their inclusion in this bill. I am confident that the amendments made by the committee will help the bill to achieve its objective of facilitating access to capital for New Zealand businesses. 
I conclude where I began the Hon Maurice Williamson will be pleased to know. I conclude by thanking members of the select committee and in particular the Hon Lianne Dalziel for her cooperative approach to working on this bill. Having been the Minister who put in place the Capital Market Development Taskforce she understood just how important this legislation was when we introduced it in recent weeks. I acknowledge the members of that committee for their swift consideration of the bill and in fact for their helpful suggestions for amendments. I acknowledge the contributions of those who provided submissions on the bill. I commend the bill to the House.