Chauvel Charles: Third Readings — 
Text is incorporated into the Bound Volume 
Chauvel Charles: Third Readings — 
[Sitting date: 07 April 2011. Volume:671;Page:17850. Text is incorporated into the Bound Volume.] 
CHARLES CHAUVEL (Labour) 
: 
 I will say a few words on the third readings of these bills. First of all really I echo the comments made by my friend and colleague David Parker who found it somewhat ironic that notwithstanding the difficult economic conditions the country finds itself in we are now in the words of the Minister of Commerce nearing the conclusion of the Government’s largest package of economic measures to be passed in this Parliament. It is telling that those measures relate to the regulation of financial markets rather than to the stimulation of the economy—a real missed opportunity as far as current circumstances are concerned by this Government. 
Notwithstanding those words it is worthwhile recounting the history of these measures. The programme of reform that the Minister is now starting to bring to a close was begun obviously under the previous Government and I think it is important that people understand that this series of reforms which is supported on this side of the House is supported because it does represent important institutional reform that we began. 
When the last Government was in office there was a recognition of the need to strengthen regulation in this area. A number of the measures that were taken at that time included making regulations that gave trustee companies robust powers to supervise finance companies on behalf of investors; allowing criminal prosecutions against finance companies that had misled investors to be funded from the Securities Commission’s litigation fund; making the Reserve Bank the prudential regulator for non-bank deposit takers and finance companies are the classic example of those sorts of entities; regulating financial advisers and financial service providers; commencing in 2004-05 reviews of financial products and providers and financial intermediaries to improve the regulation of non-bank financial institutions financial products and financial advisers; amending the Securities Act to strengthen rules on insider trading and market manipulation; and passing securities markets legislation which introduced a co-regulatory framework for supervising registered exchanges. That was the beginning of much of this work. The Minister deserves credit as I said earlier for bringing a significant part of the continuation of that work through the House and to a conclusion. As I said that is why those measures will be supported by members on this side. 
I was amused to hear Sam Lotu-Iiga the deputy chairperson of the Commerce Committee talk about how hard that committee had had to work. That is a natural consequence of having to deal with levels of reform of this magnitude and detail. Similar experiences would be reported by the chairs of the Finance and Expenditure Committee and the Commerce Committee in the last term of Parliament. That is as it should be; these measures require careful scrutiny. They are of wide-ranging importance and if they are to work and to be fit for purpose then they need that level of scrutiny. That is the job of committees and of this House. I acknowledge the work that has been done in the Commerce Committee by all the members of that committee including its chair Lianne Dalziel. I think she feels some level of satisfaction that she is able for that side of the ledger as it were to watch the current Minister complete a series of important institutional reforms begun on her watch. I pay tribute to both of them for that. 
But the truth is as David Parker put it that the real job of broadening and deepening financial markets in New Zealand will be only partly accomplished by having good housekeeping on the regulatory front. Of course we do not want to see the sort of nonsense that has gone on in relation to finance company failures and the other sorts of frankly predatory behaviours that we have seen directed towards what are classically referred to as mum and dad investors. There should be an environment that stops that sort of thing from happening but there also need to be markets. The New Zealand Superannuation Fund which the previous Government set up and which sadly has been diminished by the current administration as far as ongoing contributions are concerned and the KiwiSaver scheme—again something that was cut by the incoming National Government at a time when actually some stimulus would have been a useful thing—are two very very good examples of substantive policy initiatives of the type we need to see in this country if we are to get out of recession and start growing the economy again. Those are the sorts of policies that we need in addition to this sort of good housekeeping. 
I have a couple of words on the housekeeping itself. As has been said in speeches during the passage of this legislation this is good legislation but there are some areas where it could be improved. I heard the Minister yesterday in the House during the Committee stage talk about how important it was to have the Financial Markets Authority in place as a comprehensive regulator across the sector and I agree with him on that point. But we should not mislead ourselves that—for example in the case of criminal behaviour or fraud—the Financial Markets Authority will be able to call all the shots. Obviously the Serious Fraud Office in particular will have an overlapping jurisdiction in certain cases. When the Serious Fraud Office decides to investigate then frankly the Financial Markets Authority and other bodies will just have to stand aside. In criminal investigations that is the way it works. It is important to observe that this seems to be a general problem we have in a country as small as New Zealand; we often have overlapping regulatory and criminal oversight responsibilities divided between different bodies. It might well have been a good idea to extend the Financial Markets Authority’s powers into the criminal sphere so that when there is a case of suspected serious fraud the authority has the power to deal with that matter to the exclusion of the Serious Fraud Office. As it is there are still overlapping jurisdictions and we will still see in future cases investors being burnt through unfair and fraudulent behaviour where the Financial Markets Authority is unable to act because the Serious Fraud Office has stepped in and there is a criminal investigation for a period. There will be frustrations and annoyance—justifiably—as a result of that overlap. We ought to have fixed that up by now. 
The other concerns about the way in which we have set up the regulatory oversight regime were pointed out by Lianne Dalziel in one of her speeches in the Committee stage. She tabled a Supplementary Order Paper that would have seen the Financial Markets Authority enabled to issue statements of principle in broad-brush terms along the lines of the Financial Services Authority’s powers in the UK. Market participants would have to comply with those principles. Instead we have gone for a much more compliance-based approach—to the delight I am sure of those in my former profession and in the accounting profession. We will have to see which approach in practice works out best for participants in the market. 
There are two others things that I want to say by way of foreshadowing the watching brief that I think needs to be kept on the legislation. The first thing is that we still do not have in this country a single body that is responsible for promoting financial literacy. I am pleased to see the Minister Simon Power nodding because I think it is something that across the House we could agree on and try to deal with on a priority basis. We can have all the regulation and enforcement in the world and we can even have the best-functioning capital markets in the world—which we are still a way from I am afraid—but until we have the ability of people to invest on a confident basis because they understand the products they are investing in there will be a problem. 
The final word is that it is great that we have regulated comprehensively the upper and middle ends of the market. We have not yet dealt comprehensively with those payday lenders—those loan sharks—that are preying on people in a particularly distressing way. Another part of the watching brief we will be keeping will be in respect of how Parliament reacts to the problem that those lenders present to the market. They are not yet sufficiently dealt with in the reforms and they need to be.