Lotu-Iiga Peseta Sam: Financial Markets (Regulators and KiwiSaver) Bill Auditor Regulation and External Reporting Bill — First Readings 
Lotu-Iiga Peseta Sam: Financial Markets (Regulators and KiwiSaver) Bill Auditor Regulation and External Reporting Bill — First Readings 
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PESETA SAM LOTU-IIGA (National—Maungakiekie) 
: 
 I rise to support the first readings of the Financial Markets (Regulators and KiwiSaver) Bill and the Auditor Regulation and External Reporting Bill. 
What we heard from the member who has just resumed her seat Lianne Dalziel was an angry speech. It was an angry speech from a former Minister of the Crown who is blaming the financial collapses of recent times on the Government of the 1990s. What we have heard in the House tonight is a bunch of Opposition MPs blaming the Government of 12 years ago. We heard in the debate on the Electricity Industry Bill that Max Bradford’s reforms were to blame for the previous Labour Government overseeing a 72 percent increase in the price of electricity. Apparently the National Government of the 1990s is to blame. We constantly hear the shadow Leader of the House talking about blood-alcohol levels from 1990 and saying that in Labour’s 9 years it did not do anything but suddenly Labour is demanding action from this Government. 
Let me tell members about the financial reforms that this Government is making under the supervision of the hard-working Simon Power. The reforms are about regulating. I find it interesting that under the watch of the former Minister of Commerce we had some of the biggest collapses of financial companies in the history of this country. She gets angry but I suggest to her that she get angry in the mirror because it was under her watch that these companies collapsed and failed. The reforms that National has brought into this Parliament in 2 years include the Financial Service Providers (Pre-Implementation Adjustments) Bill and the Financial Advisers Amendment Bill. They have both passed—tick! A review of the Securities Act is coming in the new year—tick! We have the Securities Trustees and Statutory Supervisors Bill which is currently being put through this House. 
The fact is that we are having to clean up the mess of the last Labour Government. The Financial Markets (Regulators and KiwiSaver) Bill establishes a new financial sector regulator the Financial Markets Authority. It makes important changes to the governance of KiwiSaver schemes. The second bill the Auditor Regulation and External Reporting Bill provides for the regulation of the auditing profession and consolidates some of the accounting and auditing standards within a new body called the External Reporting Board. So National is focusing on improving the integrity of our financial system which was torn apart by the negligence of the last Labour Government. The overriding focus in the commerce portfolio—where I must admit we do work together in a multipartisan way to bring legislation to this House—is about mum and dad investors having confidence in the integrity of our financial markets. 
Hon David Cunliffe 
: That’s right. 
PESETA SAM LOTU-IIGA 
: Mr Cunliffe agrees. He knows that our Government is focused on boosting growth and creating jobs. It is also about providing financial security for families and providing services across the board. It is clear that New Zealand needs a single financial market regulator with a culture of visibility proactivity and enforcement. That is where the last regulator fell down. 
Hon David Cunliffe 
: Get tough. 
PESETA SAM LOTU-IIGA 
: It was the enforcement part and the lack of a culture of visibility. Now Mr Cunliffe wants to get tough. Under 9 years of a Labour Government he was soft. On too many occasions some of the finance company failures were about investors’ money falling through the gaps. I do not think the member would disagree with that. Undoubtedly it damaged the confidence of mum and dad investors. This legislation is really about giving people confidence in the capital markets more savings a basic understanding of their investments and advice that they can trust to help them make informed choices. 
The Financial Markets Authority will have significant new powers as the last two speakers have set out. It will set out the objectives and functions of the new regulator which will consolidate a lot of the regulatory functions that were in the Securities Commission the Ministry of Economic Development the Government Actuary and the New Zealand Exchange. Under the new bill— 
Hon David Cunliffe 
: Bills! 
PESETA SAM LOTU-IIGA 
: Under the first bill one of the most important powers will be the ability of the Financial Markets Authority to publicly enforce the duties of issuers directors auditors trustees and other players in the markets when it is in the public interest to do so. 
Hon David Cunliffe 
: Manage conflicts of interest? 
PESETA SAM LOTU-IIGA 
: I will repeat that for the member: when it is in the public interest to do so. 
This is a significant new provision. The new power was specifically requested by the Financial Markets Authority establishment board because it saw a gap in the authority’s ability to oversee and enforce financial markets. What became apparent when misconduct occurred was that individual investors could not for various reasons bring civil cases because of the costs and risks involved or because they had limited legal standing. This bill will enable the Financial Markets Authority to have the power to exercise a person’s right to bring a civil action against any financial markets participant where it considers that action to be in the public interest. 
The Government will also be able to make regulations to prevent financial products from being structured to avoid being supervised by the Financial Markets Authority. That is really important because as nearly always happens with legislation of this type lawyers will come in and try to manipulate matters and work out ways to avoid this regulation and these types of financial regulations. The Financial Markets Authority will also have increased powers to require that warnings about financial products and providers be included in the offer documents which is also particularly important and that the names of the people involved be published in those offer documents. 
I will not talk about the KiwiSaver regulations but I do want to move to the Auditor Regulation and External Reporting Bill. This bill strengthens auditor regulation because it will require the Institute of Chartered Accountants to regulate auditors as a specialist profession rather than as just chartered accountants. Currently any chartered accountant holding a certificate of public practice can carry out audits as long as they think they are competent to do so and no audit-related restrictions have been placed on them. The bill also provides for the proposed Financial Markets Authority to be responsible for auditor oversight in monitoring and reporting on the adequacy and effectiveness of the institute’s regulatory systems. As has already been stated a report by the Registrar of Companies identified that audit failure was a contributing factor to the finance company collapses— 
Hon David Cunliffe 
: Come on be bipartisan! You know you want to. 
PESETA SAM LOTU-IIGA 
: —it is true that some of the work that Labour did in this area was quite credible—and that shows that self-regulation alone was not working and that we do require independent oversight in this area. 
The new licensing regime will apply only to major audits such as the audits of issuers and large companies and it will not impact on the audits of small and medium-sized businesses and non-profit entities which I think is really important. So we will not have the unintended consequence of regulation affecting those companies. The bill also provides for consolidated accounting and auditing standards set within the reconstituted Accounting Standards Review Board to be called the External Reporting Board. 
In summary I commend the Minister for bringing these bills to the House. I commend the Minister for bringing a whole raft of legislation to the House in this area of the law. I commend the bills to the select committee. Thank you.