Dalziel Lianne: Securities Trustees and Statutory Supervisors Bill — First Reading 
Dalziel Lianne: Securities Trustees and Statutory Supervisors Bill — First Reading 
[Volume:661;Page:9715] 
Hon LIANNE DALZIEL (Labour—Christchurch East) 
: 
 Labour will support the first reading of this bill and its referral to the Commerce Committee but that is as far as I can commit our support. It is interesting that with the benefit of hindsight and some distance from the pressure of ministerial deadlines I find it hard to recall why we need to have trustees performing what is now clearly defined in this bill as the role of the middleman. I think there are way more important issues in terms of securities law that we have to be getting on with but that is not a top priority for the Government. 
I am extremely disappointed to find out that we have an early report back foisted on us by decree in the House. I am the chair of the Commerce Committee and even I was not told that there is a report-back date expected for this bill—one of the most significant bills we have had to address as part of regulatory reform in this area—of 30 June. I do not know whether my deputy chair had been informed of that but it would have been nice to receive a phone call just to be informed that that was the Minister’s desire. I totally oppose that report-back date. This is a far more important issue than it would allow. It means that we can allow less than 6 weeks for the calling of submissions. We will have to hear the submissions very very quickly and then we will have to be in a position to report back to the House by 30 June. I do not think that is right or fair to the investors of New Zealand who have felt utterly and completely hammered by the lack of regulation in this area. Regulating quickly does not actually assist them with the problem. 
I remember asking the Securities Commission a question at a select committee hearing earlier this year about whether we needed trustees any more and whether the role of the trustee corporations was needed having been exposed by the Companies Office at the select committee last year as having failed abysmally in their obligations to investors. I remember asking the commission why if that was the role of the middleman that we now have we did not just beef up the role of the Securities Commission. Of course the Securities Commission were not in a position to respond to that. But they said that that was what happened in Australia in 1999. Australia did away with trustee corporations as middlemen and the Australian Securities and Investments Commission has control of the supervision of the non-bank deposit-taking sector. So the finance companies are covered by the Australian Securities and Investments Commission and not by individual trustee corporations. 
Maybe the events of the past 4 years demand something a little bit better of the Government and of this House than simply tightening the supervision of the supervisors such as beefing up the role of the Securities Commission and exponentially increasing its powers. I favour that. I think our Securities Commission needs more teeth. I think that our Securities Commission needs more resources in order to take on the demands that it has in this very very difficult market. The Government has already announced that it will look at the super-regulator that was proposed by the Capital Market Development Taskforce. Yet the golden opportunity to look at one aspect of the supervisory regime is being completely squandered by this bill—completely squandered. To then say that we have to report back to the House by 30 June is just adding insult to injury. It is absolutely unreasonable for this House to debate this issue under those kinds of pressures. It is far far too important. 
I ask members when this bill was tabled. I think it was tabled in Parliament on 15 December last year. We are already in March this year. If it was so important and if the time frame was so tight why did the Minister of Commerce not put it up the Order Paper earlier on in the year? We could have got on with it before now. I think that all of the people who will want to make submissions on this important bill will be appalled at the Government’s arrogance and its lack of respect for the people involved in the industry by its allowing such a short time for the bill to be considered by our select committee and then ultimately reported back to the House. The early report back for the bill has already excited enormous unfavourable comment from the financial sector. My view is that we have to take the time to get the legislative framework right. It is far too important to allow for a once-over-lightly response which is what this Government seems to find acceptable. 
What has happened in New Zealand should be a warning to all of us. I admit that I was the Minister of Commerce at the time that the finance companies failed. But at the time they were failing at the very beginning I was already in the process of regulating the financial sector. The Review of Financial Products and Providers was already out for consultation before the first of three finance companies fell over in 2006. I announced the main decisions arising out the Review of Financial Products and Providers in June 2007 a matter of days before Bridgecorp fell over. Then it was like a set of dominoes or a house of cards; they all came tumbling down. It was not surprising because it was not like a run on a bank; those people had their money invested in term deposits and they sat there holding their breath waiting for that term to expire. Then they pulled out their money. Reinvestment rates plummeted. That is why we had a crisis on our hands. Getting people to reinvest in that environment was something that a number of individuals tried to continue to do even though they knew that their companies were on the brink of failure. That is criminal and it is unacceptable. I said this last week in a speech I gave as I launched my member’s bill. I think we should be ashamed at the behaviour of some of the individuals out there who call themselves our top business leaders and who were prepared to allow people to invest their money knowing full well that it would never see the light of day again. 
As for the moratoria that were imposed on a number of unwitting individuals how can members in this House seriously think that people who did not have enough financial acumen to make the right decision for the original investment were going to make the right decision on moratoria? We have seen the results of that. I remember when the Securities Commission came to the select committee and we asked it about the moratoria. It said that people were in a state of shock that they could not allow for the totality of loss to crystallise by agreeing to a receivership and that is why they agreed to moratoria. I say to the Government that that is not good enough. We should be working together collaboratively to regulate this sector appropriately. 
Last year we received a report from the office of the Registrar of Financial Service Providers and Financial Advisers and he made it very clear what the problem was. He said that there was a lack of capability and capacity. He talked about weak trustees; he talked about a lack of role clarity; he talked about the potential for a lack of independence from the issuer; and he talked about weak accountability. That is not good enough. It is an indictment on people whom ordinary investors were entitled to rely on but could not rely on. Making the supervisors subject to a tighter supervisory regime of their own does not fix the underlying problem. 
This bill had no regulatory impact statement published with it so I went away and printed it off and I think it is utterly inadequate. I think that is why the Government does not want to print its regulatory impact statements in the explanatory notes of bills tabled in the House any more. There are only three options in it: the 2007 proposals the central regulator and this one. The central regulator gets the benefit of three paragraphs. Australia has a central regulator. I want to ask the Government to seriously think about that. Let us look at Australia and let us look at the Financial Services Authority in the UK which sets 11 “Principles for Business”. I know that I will run out of time to list all of the principles for business but essentially a firm must conduct its business with integrity; a firm must conduct its business with due skill care and diligence; and a firm must take reasonable care to organise and control its affairs responsibly and effectively with adequate risk-management systems. Yes there are rules that sit underneath the 11 principles and that is what this Parliament needs to give the people of New Zealand.