Jones Dail: Securities Legislation Bill — First Reading 
Jones Dail: Securities Legislation Bill — First Reading 
[Volume:622;Page:18051] 
DAIL JONES (NZ First) 
: 
 As comfortable as the junior Government whip may be with this bill there is a little bit more to it than he has told the House. 
Darren Hughes 
: Leave it to the select committee. 
DAIL JONES 
: Yes it could be left to the select committee. However this bill apart from the explanatory note has 134 pages. To expect the Opposition parties in this House just to concede this debate on Wednesday at 11.28 p.m. is far too much for this Labour Government to expect. As my colleague Brent Catchpole said in his very fine speech in this particular legislation one finds that investors breaching insider-trading laws face up to 5 years in jail under sweeping new proposals to beef up the law. However up until now no one has been found liable for insider trading since the Act came into effect. So it is bit of a pyrrhic piece of legislation if the penalties are all increased but no one at this stage has ever been found guilty of anything in terms of it. 
Research has shown that enforceable insider-trading laws could increase trading volumes so the need to beef up our insider-trading legislation becomes apparent. They say that insider-trading laws are complicated difficult to enforce and easy to avoid. The Government hopes that this bill will deter misconduct in the markets and make New Zealand a more attractive investment destination. What is this Government’s solution? Just bring in an Australian-type model. And really why must we copy Australia? There have been any number of commentators on the New Zealand situation who have said that there is no need for us to mimic Australia—why can we not do something that is more appropriate to New Zealand? I would expect that that is one of the things that the select committee would have a good look at. 
For example I note that the Securities Commission general counsel Liam Mason has said that the bill would give the commission more power to take action in situations where previously only investors had been able to and the commission would have simpler and firmer laws and more powers to enforce them. But once again so far no one has been convicted in New Zealand. Of course when we look at the Australian situation and what has happened over there only the flamboyant stockbroker—as the person was described—Rene Rivkin has been jailed for insider trading in Australia during the past 10 years. The threat of jail in addition to a fine can only give those contemplating the use of inside knowledge an extra incentive to pause for thought. 
But of course the real problem I guess is the test that is imposed in order to find someone liable under this legislation. While the test remains that of “beyond reasonable doubt” clearly it will be very difficult to find someone guilty. Of course as Stephen Franks has indicated in his speech if people have come to an arrangement then there is no encouragement for them to take the matter to the Securities Commission. 
The other test that is usually available in civil law is a test of the balance of probabilities. As a member of New Zealand First—a party that really likes to get tough on people who try to rip off the community—I have to wonder whether consideration could be given to putting in an easier test to find someone liable such as the test of balance of probabilities. I hope the select committee will give some thought to this. I can see Mr Brent Catchpole nodding. I am sure he will give some thought as to whether a balance of probabilities test is possible. That will give the committee something to think about rather than it being fairly comfortable with the present situation which is very very hard to prove. 
How is it proved? We have the Securities Commission and the evidence that is necessary there. What about the funds available to the Securities Commission? I understand that currently the commission has a total budget of $7 million. I am told that the Australian Securities and Investments Commission has a budget of A$191 million. Depending on when one considers the translation of money values that is close to NZ$200 million today. One cannot get much for $7 million. It has been a struggle in Australia to get even one conviction on a $200 million budget. I have to ask whether this is really a waste of time in so far as insider trading is concerned. Are we just throwing money away? Do we perhaps have to change the test to try to achieve a result with the present lack of resources and the very high test that is required? 
Is the Government really serious? Are the stock exchange and the people who want to curb these problems really serious? I see for example that someone at Chapman Tripp has said: “These new powers do have the potential to curb the enthusiasm of offerers targets major shareholders and certainly their PR advisers.” I am quoting Roger Wallace a securities lawyer at Chapman Tripp. 
Even that is set out in modest legal terms. That is just the potential. He is not saying that we are going to catch them now; he just says that the powers have the potential to curb enthusiasm. Clearly we are not approaching this particular problem—if there is one—with enough resources for the Securities Commission. 
Some of the issues mentioned by Tony Ryall were those I was interested in considering. I was looking at page 58 of the explanatory note and wanting to discuss the question regarding investment advisers and brokers. It seems so easy today to throw up one’s shingle or sign and call oneself an investment adviser or investment broker. All those companies seem to have people working for them going out and giving advice. What really needs to be done is to make sure that the people who part with their money get a real indication of whether they will actually make any sort of profit on the transaction. 
Time and time again as we all know it is only the company that makes any money. It is only the investment adviser who makes any money. It is only the investment broker who makes any money. Often people who put their money into these transactions do not even get their capital back and the whole situation is not good enough in so far as the simple blue-collar tradesman is concerned as mentioned earlier by Tony Ryall. 
I will skip over that because I want to discuss a couple of other issues before time runs out. The bill is such a big one that one would think we would have more time on it rather than it being rushed through in this way. 
I was interested in the takeovers asset threshold on page 52 of the explanatory note and the question of compliance costs arises. It is good how in legislation today efforts are made to try to set out what those costs may be. On page 48 of the explanatory note we read: “For a person taking over a company newly caught by the provisions the total additional costs are estimated to be between $40000 and $75000 depending on the size of the company and the complexity of legal and independent merits advice required.” Those of us who have relatives or friends working in the banking and corporate law business will feel that this is another Christmas present to lawyers and advisers. Here quite baldly is an additional $40000 to $75000 available depending on the size of the transaction. Under the heading “Takeovers Act asset threshold” on page 52 it states: “the compliance costs associated with making a takeover bid under the Takeovers Code are estimated to be approximately $15000 to $35000 for legal advice (depending on the complexity of the takeover) and approximately $8000 to $13000 for mailing and printing costs:”. With $8000 to $13000 for printing costs obviously there is a lot of money to be made in these areas. 
This bill is a very complicated piece of legislation comprising 130-odd pages. I am confident that the select committee will give full consideration to it. We look forward to the submissions that will be made available to the select committee and the very many amendments that will inevitably be made. I am concerned of course that once again the Government has put up some legislation that in order to make it easy in the Committee stage is drafted in only a couple of parts. For lawyers who have to try to understand the legislation when it comes out it will be pretty difficult for them to follow.