Cosgrove Clayton: Financial Markets Conduct Bill — First Reading 
Cosgrove Clayton: Financial Markets Conduct Bill — First Reading 
[Volume:678;Page:874] 
Hon CLAYTON COSGROVE (Labour) 
: 
 The Labour Party is generally supportive of this bill the Financial Markets Conduct Bill as I believe most parties in the House are but we reserve the right as we go through the select committee process to review our support based on information provided by submitters as is the normal process. This is a substantial bill—over 500 pages. I thought I had seen the largest bill that was put through a Commonwealth Parliament I think in this Parliament when I chaired the Finance and Expenditure Committee. It was the tax simplification legislation which was in two volumes that were about a foot high. This bill is bordering on that but I mean no disrespect to the legislation. It is necessary and we support that. 
I echo the Minister of Commerce’s comments about the environment that we see ourselves in. If you look at the last 4 years the evidence shows us that there have been 61 finance companies that have failed over the last 4 years the latest of which we know was South Canterbury Finance which was bailed out to the tune of $1.6 billion of taxpayers’ funds. We know that those depositors will get their money back given the governance scheme of arrangement that was put in place originally by the previous Government but other depositors in other situations similar to that may not be so lucky. What this tells us is that there is no way you can zero-risk an investment. What I would like to ask the Government to look at as it goes through not just this but other legislation is that it does not matter how much regulation and legislation you put through; people will take investment risks. 
What is lacking—and I know it is not appropriate in this bill—is some financial literacy education and support for our communities to raise their financial literacy and to become far more au fait with the levels of risk that they embark on when they invest their dollar. We can have all the rules in my view we like to ensure that people act appropriately when giving advice and when putting financial products on the market and to ensure that company directors act appropriately but if people do not have the confidence because they do not have the basic education—if “confidence” is the right word—to assess investments then that is a gap in our system that no legislation will actually take care of. It becomes the ambulance at the top of the cliff if people have the confidence to assess risk and as I say no legislation can zero-risk any investment or proposition. 
I am not going to go into the great detail of this bill; I think the Minister has covered it. But I just note in passing—and I think my colleague Lianne Dalziel may have made these comments recently—that the Government as an adjunct to this bill might also want to look at the criminal penalties and sentencing arrangements in respect of so-called white-collar criminals. The evidence is reasonably clear I think and my colleague made the point recently that if you are a burglar you are often treated far more harshly by the courts. Having no disrespect and not to downplay the emotional impact of a burglary but it is generally localised to a small group of individuals compared with the massive emotional impact that a white-collar criminal who engages in fraud or embezzlement or misrepresentation can have as we have seen throughout our communities. So it is another issue I suppose adjunct to this bill that I might invite the Minister to take up with his colleague the Minister of Justice in respect of the penalties around white-collar crime. 
The bill I note also provides for regulations to be made that will prevent products being structured to avoid regulation. It seems self-evident. This happened of course in the infamous Mark Bryers Blue Chip case. Because that investment scheme offered interests in land it was exempt from the Securities Act to the significant detriment of investors. I welcome the fact that those issues are going to be catered for in this bill. 
It will be interesting to see—it always worries me when I see bills of this size—what officials have come up with. It will be very interesting to see the various financial stakeholders in the financial and securities sector and various other submitters with expertise—the Law Society the Institute of Chartered Accountants and others—who presumably will come before the select committee and render their view on it. One would hope that this legislation will not wrap people in undue red tape. Although I accept absolutely that the safeguards are incredibly necessary and this reform provides a one-stop shop as I say you cannot regulate for zero-risk investment. So it will be interesting to see whether the Government through the select committee process where submitters come up with productive and positive ideas around this and perhaps ways to do things better than officials may have thought of—whether that will be taken on board by the Government. As I say we reserve our right to review our level of support based on that response. 
I just note in passing that the Minister made reference to the Capital Market Development Taskforce. I would just note that the previous Government and the previous Minister in 2008 Lianne Dalziel established that task force as a blueprint an action plan for the development of New Zealand’s financial systems. 
Hon Ruth Dyson 
: That was a good Minister. 
Hon CLAYTON COSGROVE 
: A very good Minister; a very good action. We are pleased to see that the Government—it reported to this Government as our Government acquiesced as it were—is now taking on some of those recommendations. 
It is appropriate that we have legislation like this given as the Minister said the global financial crisis the failure of finance companies and the general lack of confidence by ordinary New Zealanders in those who provide advice and who provide products in the financial sector for investors. An economy can thrive only where there is investor confidence where people are prepared to lay a dollar down and risk it knowing there is an appropriate level playing field and an appropriate regulatory framework whereby everybody adheres to the rules and people get a fair shake. That does not of course guarantee that you will make a profit or a substantial profit but it means that certain assessments can be made in respect of levels of risk and that people can do that in an open and transparent way. 
So the Labour Party will support this bill through the select committee process. I note the cooperative nature with which the Commerce Committee acts and the chair has set a high benchmark and a high example in that respect. I do think there is not a heck of a lot of politics in this apart from trying to get the best possible outcome. I would hope and I am sure it will happen at the select committee that submitters are given a wide opportunity to work through the massive detail that resides in this weighty tome and also that the Minister is open in a bipartisan way to suggestions from all parties based on advice from submitters where deficiencies in this piece of legislation may be identified and where this legislation can be improved. 
I note that the Minister has extended the branch of cooperation and we look forward to that being maintained because I think for all of us this particular piece of legislation cuts to the quick with most of our constituents. There would not be an electorate in this country that has not been touched or visited upon by undue financial loss as the result of the nefarious activity of some. This will bring as I say a one-stop shop together. This should combat a lot of that and give people the confidence to invest in businesses and make sound investment decisions. So we look forward to the scrutiny. We believe this bill will take some time to scrutinise and we should be given a due time period to go through the detail given its length and breadth. We look forward to working with submitters and we look forward to a positive outcome for our investment community.