Carter John: Financial Markets (Regulators and KiwiSaver) Bill Securities Trustees and Statutory Supervisors Bill — Second Readings 
Carter John: Financial Markets (Regulators and KiwiSaver) Bill Securities Trustees and Statutory Supervisors Bill — Second Readings 
[Volume:671;Page:17513] 
Hon JOHN CARTER (Minister of Civil Defence) 
 on behalf of the  
Minister of Commerce 
: I move  
That the Financial Markets (Regulators and KiwiSaver) Bill and the Securities Trustees and Statutory Supervisors Bill be now read a second time 
. Both bills are important components of the Government’s programme of reform to restore confidence in New Zealand’s financial markets following the global financial crisis and the failures of a number of financial companies. The Financial Markets (Regulators and KiwiSaver) Bill establishes the new Financial Markets Authority to replace the Securities Commission and to take on the responsibilities of the Government Actuary and some of the regulatory roles of the Registrar of Companies. The bill also makes changes designed to improve the governance arrangements for KiwiSaver schemes and provides for better disclosure of fund performance. The Securities Trustees and Statutory Supervisors Bill addresses weaknesses in the supervision of issuers in retirement villages by trustees and statutory supervisors. 
I will focus on the most significant recommendations of the Commerce Committee’s responsive and expeditious consideration of both bills. In addition to the Financial Markets Authority’s main objective of promoting fair efficient and transparent financial markets the committee has rightly recommended the inclusion of a reference to the facilitation of the confident and informed participation of businesses investors and consumers in financial markets. An important regulatory tool in the bill is the Financial Markets Authority’s power to exercise a person’s right of action. The committee recommended changes to strengthen the rights of individuals by preventing the High Court from overriding an individual’s choice to opt out of the Financial Markets Authority’s proceedings. However the Financial Markets Authority will be able to seek the leave of the High Court to exercise a corporation’s right of action or to take over a corporation’s existing proceedings if the court is satisfied that it is in the public interest to do so. The provisions enabling the Financial Markets Authority to take action in the public interest are necessary to enable it to pursue negligent directors of a company. 
In respect of the amendments the bill makes to the Securities Markets Act 1988 the committee has recommended the retention of the new statutory oversight regime the new exchange rule approval process and the Financial Markets Authority’s ability to request rule change and undertake real-time surveillance of market activity. The committee has also recommended the inclusion of amendments to the bill that target unsolicited offers due to recent concerns regarding lowball share offers. The Financial Markets Authority will be able to use its enhanced warning powers to require a prominent warning to be included in such offer documents. The new regulation-making power is also recommended to allow rules to be set for unsolicited offers. Subsequent regulations could require a minimum offering and cooling-off periods disclosure of a market price and disclosure of other relevant information. 
The committee has recommended a number of amendments to the KiwiSaver part of the Financial Markets (Regulators and KiwiSaver) Bill including the shifting of responsibility for a range of functions from the trustee to the manager of the scheme. This change reflects the manager’s primary role in the marketing operation and regulatory compliance of non-restricted KiwiSaver schemes. As signalled in the explanatory note of the bill further changes will need to be made by a Supplementary Order Paper with regard to retail KiwiSaver schemes in order to require trustees to be licensed and to align the regime in the Securities Trustees and Statutory Supervisors Bill. 
I turn to the Securities Trustees and Statutory Supervisors Bill. The committee has recommended that the maximum licence period for trustees and supervisors be extended from 5 years to 8 years to reduce uncertainty arising from the need to regularly reapply for a licence. In respect of the power to grant or vary a licence the committee has recommended a regulation-making power to set out matters that must be taken into account when assessing whether directors and senior managers of the applicant satisfy good-character requirements. The committee has also made some important recommendations regarding the power to appoint a temporary supervisor when the previous licence holder has been removed or no longer holds a licence. The Financial Markets Authority will be allowed to appoint any person it sees fit in the circumstances as a temporary supervisor regardless of whether he or she holds a licence. This is essential as there is a limited pool of licensed supervisors to call upon. 
Although some submitters queried whether it was appropriate for retirement village statutory supervisors to come within the scope of the bill the committee decided on balance that they should. Both the committee and the Government are conscious of not imposing unnecessary costs on the retirement village sector yet it is justified there given the benefits to residents from improved supervision. I note the committee’s recommendation that the Government undertake a review of all statutory fees that impact on retirement village residents. The Government considers that this would be a useful step and it commits to undertaking its review within the next 2 years. 
As I signalled earlier I will table a Supplementary Order Paper that will align both bills by removing clauses from the Securities Trustees and Statutory Supervisors Bill that have been made unnecessary by the Financial Markets (Regulators and KiwiSaver) Bill. The Supplementary Order Paper will also provide for the licensing of KiwiSaver trustees align provisions relating to classes of trusts and statutory supervisors respond to some minor issues that have arisen since the committee’s report back on the bills and provide for consistency in commencement and transition periods under both bills. 
Both of these bills constitute very important steps in restoring investor confidence in New Zealand markets by establishing a new market conduct regulator that will promote fair efficient and transparent financial markets and by providing better oversight of front-line regulators. I commend these bills to the House.