Foss Craig: Financial Service Providers (Registration and Dispute Resolution) Bill — In Committee Third Reading 
Text is incorporated into the Bound Volume 
Foss Craig: Financial Service Providers (Registration and Dispute Resolution) Bill — In Committee Third Reading 
[Sitting date: 23 September 2008. Volume:650;Page:19044. Text is incorporated into the Bound Volume.] 
CRAIG FOSS (National—Tukituki) 
: 
 I continue in the Committee stage here but I would like to acknowledge the very good valedictories we enjoyed before from Mark Blumsky Katherine Rich and Clem Simich. We will miss those members not only in our caucus and in our party but also in the House. 
I will concentrate on a couple of clauses. Clause 42 was of interest to me at the Finance and Expenditure Committee and even as we have it now as new clause 42B. It is about the territorial scope of this bill. Again it is one of those particular clauses that at the select committee we made sure was totally aligned with and very much the same as those in the Financial Advisers Bill. But at the select committee we had some interesting discussions about this one and even towards the last minute I think it was being constantly improved. I just note that because there are many theoretical examples in which people could fall outside this bill. Under the title “Territorial scope” the clause states: “This Act applies to the provision in New Zealand of a financial service by a person who is in New Zealand regardless of where the financial service provider is resident is incorporated or carries on business.” We had a lot of discussions actually because we had the theoretical example of someone—as the bill was originally drafted—who could whip through Auckland airport and make a few phone calls and we were not sure whether that person would be covered. So the provision has been tightened but again in this new clause and in the same clause in the previous Financial Advisers Bill it is a very difficult part and almost a glaring hole in both bills. Although I am not offering a solution to it I am identifying the problem. 
This relates to the common theme of what I was speaking about earlier—the globalisation of everything. For example we could make up an example right now: someone living overseas could offer an interest-free loan to people in New Zealand. If New Zealanders went offshore to solicit that money or to get advice to get such funds etc. took ownership of those funds outside of New Zealand and then came back and in some way utilised those funds for themselves or others without getting advice and if various regulatory bodies had problems with those particular transactions then they would fall outside the gambit of this bill. The same applies for the Financial Advisers Bill.  
I am not offering a solution to that. I do not think there is one unless we tighten up our agreements with other jurisdictions. Some authorities are quite tight—Australia in places and other places in Europe—and of course any dodgy activities happen in places that are commonly known as tax havens or that have somewhat lower thresholds of regulatory integrity than we expect here in New Zealand. Sadly there have been examples in the past. A while ago people from Thailand were calling down to New Zealand offering to New Zealanders wonderful deals on equity trading and all sorts of commodity gains and unfortunately some New Zealanders were taken in by the scams and sent funds to Thailand. Those people had no recourse whatsoever; there was no civil or legal recourse. Even under this bill there is no recourse whatsoever if a New Zealander transacts funds and sends them overseas to some unusual pyramid scheme or to what is basically a simple rip-off. 
Again I am not offering a solution to that but just identifying this practice as a potential problem because those who are of a mind to exploit others and rip them off are also of a mind to look through regulations such as these look for the holes and find them. They could be New Zealanders deciding to transact from outside New Zealand or they could be people pushing something down into New Zealand from an offshore entity with which New Zealand does not have strong arrangements. Unfortunately we will probably see ongoing examples of that activity. Between now and earlier when I spoke on the second reading of the bill I note that I saw a headline going across the news wires that the FBI—a major regulatory body in the United States but not even a financial regulatory body—was reviewing the activities of Lehman Bros Freddie Mac and Fannie Mae for potential or alleged mortgage fraud. That was very interesting. 
I have a question to ask of the Minister concerning clause 62 which is under the heading “Annual reports and information requests by Minister”. 
The clause states: “The person responsible for an approved dispute resolution scheme must supply to the Minister within 3 months after the end of the financial year applying to the scheme an annual report containing prescribed information about the scheme …”. I ask about the time period which is kind of touched on there. We see by the words that were struck out by the committee that we originally said the report had to be supplied “by 1 July each year … in relation to the 12 months ending on 31 March in that year.” I ask the Minister whether the provision relates to the financial year of the particular scheme because of course there can be many end dates for financial years—31 December 31 March 30 June or even others. Because I see that the Minister has to report back to the House I ask whether there would be any interest by the Minister to have reports presented all in one go. From the time of the first annual report back to a Minister—let us say 3 months after 31 December—to the potential last one which is 3 months after 30 June and is therefore 30 September one can see there is quite a long time between drinks—a long time between annual reports to the Minister. I would be interested in that explanation because I see that that provision is sitting alongside the 5-year review of the scheme in relation to the robustness of the regulations we are putting in place tonight. 
Finally I tell the Committee that clause 59 relates to the obligation to publish rules about any approved dispute resolution scheme. I understand that the wording of this clause comes from other legislation but something does not read quite correctly to me in subclause (b) which states that the rules must be published “on an Internet site in an electronic form that is publicly available (at all reasonable times).” Well first of all “on an Internet site” means that it is electronic; it cannot be anything but electronic. And I would just like to question what is meant by “at all reasonable times”. Reasonable time for one entity for the Minister or for the public can mean many different things. I fully realise that the common-sense test there is about being available all the time. The net is wide open somewhere 24/7 and back-up sites are available so most sites particularly for these financial services are cached somewhere and are available 24/7. It is not the availability on the Internet site that would be the problem; it would be a power cut or something like that. But the rules would still be available on a site somewhere in the world. That is just a little bit of a quirk and I wonder whether the Minister had thought about that or whether there had been any advice on that. Otherwise I will just leave it on the Table as something to consider. Thank you.