Curran Clare: Financial Markets (Regulators and KiwiSaver) Bill Securities Trustees and Statutory Supervisors Bill — Second Readings 
Curran Clare: Financial Markets (Regulators and KiwiSaver) Bill Securities Trustees and Statutory Supervisors Bill — Second Readings 
[Volume:671;Page:17518] 
CLARE CURRAN (Labour—Dunedin South) 
: 
 As members have heard the Labour Party supports both of these bills. I intend to direct most of my comments to the Securities Trustees and Statutory Supervisors Bill but I would first like to make a few comments about the Financial Markets (Regulators and KiwiSaver) Bill. 
This bill establishes the Financial Markets Authority and sets out the wider enforcement and surveillance powers that are to be available to regulators. It also makes changes to the regulation of registered exchanges and improves the regulation of KiwiSaver schemes. Labour believes that it is critical that we enhance confidence in our financial markets and that having a single market regulator should contribute to that end. Labour launched the Capital Market Development Taskforce and is pleased that the Government is acting on its recommendations. We are concerned about a lack of transparency around the current securities commissioners. Labour supports this bill as I said. We think that the concentration of power in the hands of the Financial Markets Authority means that all its officers must be beyond reproach and its processes must be fully transparent and that the integrity of the markets depends on the integrity of the Financial Markets Authority and its personnel. 
Labour started the financial markets reform process and it is pleased that the Government is continuing that work. I would like to make a special mention of the Hon Lianne Dalziel with regard to both of these bills. She set up the Capital Market Development Taskforce in 2008 to develop a blueprint and an action plan for the development of New Zealand’s financial system. Out of this has come these bills. Labour believes in terms of the Financial Markets Authority that enforceable principles such as integrity skill reasonable care and financial prudence are needed. Principles are flexible unlike rigid rules that are made to be broken. It is important that ethics underpin the new regime because that will help to rebuild trust and confidence in the financial sector. I think we have heard from all speakers on these bills about the absolute importance of having trust and confidence in the financial sector. 
In speaking to the Securities Trustees and Statutory Supervisors Bill and the Financial Markets (Regulators and KiwiSaver) Bill I should thank the Minister Simon Power for his work as well. I also again make particular mention of the Hon Lianne Dalziel and the work done by the Commerce Committee which did enormous amounts of work on these bills and recommends that with certain amendments they be passed. I also thank the officials for their work and the consultation with the committee on the legislation. 
Although Labour supported the Securities Trustees and Statutory Supervisors Bill at the time that it passed through the Commerce Committee we did have some concerns about it. We considered at the time that it was a back to front bill. We felt that it needed to be considered at the same time as wider reform of the financial markets. So we are pleased that it is being read alongside the Financial Markets (Regulators and KiwiSaver) Bill. The Securities Trustees and Statutory Supervisors Bill seeks to address a number of weaknesses in the current supervision regime for trustees and statutory supervisors. It establishes a licensing regime for trustees and statutory supervisors who supervise certain issuers of securities and for statutory supervisors of retirement villages. It amends several pieces of legislation which include the Retirement Villages Act 2003 the Securities Act 1978 and the Unit Trusts Act 1960. That new regime was to be administered by the Securities Commission. We noted at the time that it was intended that the commission’s role under the bill would be taken over by the Financial Markets Authority once it was established. It appears now that that will happen. 
It follows on from the conclusions of both the International Monetary Fund and World Bank report in 2004 and the consultations undertaken by the Ministry of Economic Development in the Review of Financial Products and Providers in 2006 which found that New Zealand placed far too much reliance on private supervisors such as corporate trustees and that those supervisors and trustees often lacked accountability. This bill removes the automatic right for the six statutorily appointed approved trustees to supervise issuers of debt and some investment schemes. It also introduces a licensing regime for trustees which will be run by the Securities Commission. It makes it an offence to act as a trustee or a statutory supervisor without a licence so that a person who commits such an offence will be liable on conviction to a fine that does not exceed $300000. The bill also includes a number of provisions designed to ensure that trustees statutory supervisors and unit trustees comply with their obligations and the Securities Commission may seek pecuniary penalties and compensatory orders against those who fail to comply. 
Those clauses are designed to address the lack of capability and accountability of supervisors and trustees in the current system as I have already said. The fundamental role of trustees statutory supervisors or unit trustees is to ensure compliance with the terms of the trust deed or the offer of security. When an issuer gets into difficulty the trustee supervisor is supposed to take action inform the investors and engage expert assistance or to place that issuer into liquidation. 
I would like to quote from a speech that was given by the Hon Lianne Dalziel at a conference Reviewing Securities and Investment Regulation in New Zealand on 30 August last year. In it she backed 100 percent the establishment of the Financial Markets Authority to absorb all those functions that have been talked about that are currently spread across the Securities Commission the national enforcement unit within the Ministry of Economic Development the Government Actuary and the market discipline functions of NZX. She said: “The Minister has said it will have grunt and I welcome that. We need a single-minded approach that says that the risk of getting caught is high and the consequences of conviction are severe. I am constantly affronted at the discount our criminal justice system appears to afford the white collar criminal over all other criminals even though the wealth they have destroyed makes the proceeds of house burglaries pale into insignificance by comparison. I think we should allow our courts to impose what I now call the Madoff sentence for the most egregious cases. And there are some people who should never be allowed to fundraise from the public ever again or to claim the protection of limited liability against creditors—and those are the people against whom fraud has been proven. There should be no second chances under these circumstances.” 
Lianne Dalziel talked about the five key objectives that should underpin the Financial Services Authority framework. They are: market confidence which is maintaining confidence in the financial system; public awareness which is promoting public understanding of the financial system; financial stability which contributes to the protection and enhancement of a financial system; consumer protection which secures the appropriate degree of protection for consumers; and the reduction of financial crime which reduces the extent to which it is possible for a business to be used for a purpose connected with financial crime. It is those principles and objectives that should underpin all reforms in this area. 
The Securities Trustees and Statutory Supervisors Bill was referred to the Commerce Committee on 23 March last year—a year ago tomorrow. We received and considered 18 submissions from interested groups and individuals and we heard eight submissions. Essentially we support both of these bills. We think it is good that they are being read together and I recommend them to the House.