Dalziel Lianne: Financial Service Providers (Pre-Implementation Adjustments) Bill — Second Reading In Committee 
Text is incorporated into the Bound Volume 
Dalziel Lianne: Financial Service Providers (Pre-Implementation Adjustments) Bill — Second Reading In Committee 
[Sitting date: 22 June 2010. Volume:664;Page:11949. Text is incorporated into the Bound Volume.] 
Hon LIANNE DALZIEL (Labour—Christchurch East) 
: 
 I am pleased to be able to speak to the report back and second reading of the Financial Service Providers (Pre-Implementation Adjustments) Bill. When the bill was first introduced I said I was pleased that the Minister had indicated his determination to stick to the time frame that he had announced for implementation. As a result of listening to submissions we have accepted the Minister’s decision to extend the time frame not so much for the registration as for the implementation in its fullest sense post - 1 December right the way through to the end of June next year. I also felt that the proposed changes when they were introduced were in line with the principles and the intention of the legislation which I oversaw as the then Minister of Commerce. It was not until I actually started the somewhat arduous task of reading the submissions that we had received—and we received a significant number of very very detailed submissions—that I realised there were flaws in the original framework that I had introduced that I had not been aware of as the then Minister and that clearly the present Minister had not been aware of either. 
Just to put what the Commerce Committee has done with regard to this bill—because it is virtually a re-write of the bill that was introduced and we need to offer an explanation for that—I want to go back for a moment to the pre-2008 election period. In so doing I confess to the House something that I have confessed to my colleagues—that is I know more about the intricate detail and the potential application of this bill now as chair of the committee than I did when introducing the original legislation as the then responsible Minister. I think there is a reason for that which I think should be addressed and I will come to my suggestion about that later on. What I will propose though in this space is possible only when a non-partisan approach is able to be achieved. I think that the present Government when in Opposition and now the reverse—the present Opposition when in Government—proved that a collaborative approach is what is required and produces the best results. I think this bill and the work that we have done on the select committee demonstrates that and I pay tribute to all of the committee members for what we have been able to achieve on a collaborative basis. 
Returning to the pre-2008 period I know that as the then Minister I put pressure on Charles Chauvel who at the time was the chair of the Finance and Expenditure Committee. I put pressure on him because I wanted those bills back in the House in time to be passed before the 2008 general election. There were two bills that I wanted back in particular. They were the bills in my name but also the bill to provide proper prudential supervision for the non-bank deposit-taking sector which of course had transferred to the name of the then Minister of Finance the Hon Dr Michael Cullen. In many respects I did not mind if the legislation was not perfect and I kept saying that to Charles Chauvel at the time. That was because there was time post-election to undertake any remedial work that needed to be done while getting on with the job of establishing the regulatory frameworks for the new supervisory and dispute resolution regimes to cover what was an under-regulated sector. 
I just want to use the word “under-regulated” again. This was not a totally non-regulated sector but it was under-regulated and I think that was the critical problem. I know that a lot of people have wanted to put blame on those who were responsible for the regulatory frameworks over probably a couple of decades since the stock market crashed in 1987 if we really want to go back to when we were first alerted to the problems that we have to confront today. But the problem was that there were regulatory provisions in place and they offered insufficient protection. I think that our committee has been quite good at getting to the bottom of some of the things that we have not been able to get to the bottom of before. We have an inquiry under way that will continue to work to find those essential gaps in our system and hopefully it will make recommendations to resolve them. 
That was why I wanted the legislation passed before the election. I wanted the work to continue in the period when we went off to do our job applications for our triennial job interview which is I guess what a general election is. I wanted to make sure that the bills were not left at the select committee or remained on the Order Paper past the House’s rising for the election period because nothing would have happened for a very long time if that had been the case. 
If there is a criticism that I have of the current Government and there is one it is that— 
Hone Harawira 
: Just one? 
Hon LIANNE DALZIEL 
: —no—this bill should have been introduced last year. That is the only criticism I will make. If it had been introduced last year we would have had much more time to spend on the detailed analysis that we have had to undertake. I know that members of the committee our advisers our clerks the officials and the Parliamentary Counsel Office were all under pressure. But the pressure that we were under pales into insignificance in comparison with the impact that the time frame had on the finance sector and the finance sector is critical to getting this legislation right. So I pay tribute to the extraordinary efforts that the major stakeholders went to in order to meet the extremely tight deadlines that we imposed on them. We know that people worked over weekends and that people worked overnight in some cases in order to meet these time frames and to deliver what I believe is now much more like the framework that I envisaged 3 years ago when I announced the decisions made by Cabinet back in 2007. Less than a month before Bridgecorp failed I made those announcements and then the domino effect started again. We had had the three failures in 2006. Bridgecorp was really the tipping point as we saw finance companies fall over one after the other. That was what the committee returned to in the end. I acknowledge my colleague David Clendon from the Greens for commenting on that. 
The committee came back to a very fundamental question: what were we trying to do? We brought that perspective to what we were doing. We asked what the risk was that we were trying to mitigate what the mischief was that this bill was trying to remedy and whether the regulatory response was proportionate. We came up with a mixed set of answers depending on whom we were talking about. The legislation is fundamentally about protecting unsophisticated investors. I know that among some of the mum and dad investors as they are called—or probably more aptly in some cases nana and grandad investors—there was a kind of resentment that the language used implied that they were unsophisticated or naive but I reject the view that these were greedy investors as some have said. I want to place on record my abhorrence of the practice of deliberately hiding the level of risk behind a lower interest rate than was required to reflect the actual risk that they were taking with their hard-earned money. People lost their life savings in circumstances where they did not realise the level of risk that they were taking. There was a lack of knowledge and a reliance on financial advisers. 
Our driver as a committee became a single-minded focus on the mischief that we were seeking to remedy. That is why we divided category 1 and category 2 products more appropriately defined financial advice more clearly incorporated the concept of personalised financial advice and tied financial planning to the risk related to investment. We carved out the wholesale clients who can look after themselves and we tidied up the qualifying financial entity provisions. All the committee members worked hard on this bill and I thank them for that work. In the same way that I have acknowledged the stakeholders I also acknowledge our committee clerks our advisers the departmental officials parliamentary counsel and the Minister of Commerce and his staff—his private secretary and his adviser. Finally I acknowledge this House for allowing us to do things differently from usual such as granting us leave to provide the departmental report to stakeholders during the time before we had reported back. 
This has been a very good process. It has been a hard process but it has been made very clear to me that we do need to take up the option of exposure draft bills accompanying discussion documents at a much earlier stage so that the people who work at the coalface are able to give us very direct advice about how legislation will be implemented. In fact they have made it clear to us that they could not have known these things in advance. We have I think made this bill much better and I commend its passage through the House.