Cunliffe David: Financial Markets Conduct Bill — First Reading 
Cunliffe David: Financial Markets Conduct Bill — First Reading 
[Volume:678;Page:884] 
Hon DAVID CUNLIFFE (Labour—New Lynn) 
: 
 It is a pleasure to rise in support of this Financial Markets Conduct Bill and to note that Labour will be supporting it to the select committee. It is good to see a bill that has the largely multipartisan support of the House. The lifetime of the bill so far has encompassed several Governments. That is no surprise because it is a veritable telephone book of economic justice as it were. 
There is common ground philosophically behind the need for this bill. It is common ground that markets and in particular firms are the drivers of our economy. It is common ground as evidenced by this bill that for markets to work appropriately and properly and for the public’s interest to be safeguarded there have to be rules of conduct. That is why it is called the Financial Markets Conduct Bill. I think it is bipartisan as well that in the recent history of this country there has been far too much misconduct and that that has cost far too many New Zealanders far too much in terms of their life-savings. The hall of shame is well known to all of us. The names are writ into our history and they are writ into the personal histories of the families whose retirements have been prejudiced by those actions: Lombard Blue Chip Hanover and of course the largest corporate collapse in New Zealand history and the most expensive to the New Zealand taxpayer South Canterbury Finance. What do those finance company failures have in common and what have we learnt from them in respect of the legislation that is being brought to the House? 
Before I go on to that may I state the obvious which is that in 500 pages of legal detail I do not think any member in this Chamber at the moment with the possible exception of former Minister of Commerce the Hon Lianne Dalziel and the current Minister of Commerce would be equipped to comment in great detail about many of the clauses. But that is why we have a select committee process and why we all in good faith are going to engage with submitters and wrestle with the detail of this bill. It raises secondarily the important point that we are exceedingly dependent upon officials on matters such as this because of the arcane and technical legal detail in the bill and because it is a subject matter that is in itself inherently complex—for example the market for financial derivatives: advanced mathematics and very very opaque financial instruments. Regulators have to be on their toes to see through some of the structures. 
The consequences of not doing that adequately are weighing us all down to this day. The overhyped financial bubble of the last decade which burst in 2008 worldwide was in large part driven by the kind of conduct that this bill seeks to outlaw in New Zealand: the inappropriate disguising of risk the transferring of that risk to unsuspecting investors without due notice or information and the inability of the investor to make prudent decisions because others have been deliberately or perhaps innocently skewing the information that they receive and clothing it in a cloak of secrecy or dissembling. 
It is I think universally—well almost universally because I think the Greens are reserving their position until they see some more detail—agreed that the general intent of this bill is important. What is particularly important is that for a very small country like New Zealand where we are quite dependent upon for better or for worse foreign investment to fuel our economy it is even more important that the conduct of our market gives investors both domestic and foreign confidence that their investments are safe that the behaviour in the market will be appropriate and that therefore they can stand or fall on the prudence and smartness of their investment but they do not need to worry about criminal or quasi-criminal behaviour on the part of the companies they are investing in or through. That is why the very detailed prescriptive nature of this regulation is designed to pre-empt malintent or lack of clarity on the part of the companies and thus to protect the investors themselves. 
That of course touches on an important philosophical point and one that I would expect members opposite would agree with us on. The law in commerce has to provide for the fact that the business of business is to make profit; that if unrestrained sometimes that profit is made in the short term at the expense of others and sometimes by the cutting of corners; and that therefore we have a public duty to ensure that the conduct of markets is appropriate. I see nodding of heads and I think it is a motherhood statement. 
But let us reflect then on the narrative that is being played out in the wake of the recession and in public politics terms here. I think it was the Minister for Economic Development Mr Joyce who described the Labour Party as the party of “can’t-do” and tried to say his Government was the party of “can-do”. Here is a bill being brought down by that Government that is 500 pages of “can’t-do” and I say congratulations. That is right; that is appropriate. Let us get beyond this oversimplified over-polarised view that all regulation is bad. Here are 500 pages of regulation—without prejudice to submissions and without prejudice to the ability to improve them—that should have a beneficial effect on markets that should increase the level of investment in the New Zealand market and the quality of that investment and that should contribute in some meaningful way to more jobs higher growth and higher incomes if we are doing our work well because it will provide a safe and hopefully relatively level playing field for the conduct of business activity. To put it in more historic terms if you like capitalism is great at earning a crust but left to its own devices it often falls in on itself and that is why the dynamic tension between Government and market is essential for the market itself. 
Today in summary we are celebrating at the sending on of this very detailed piece of legislation to the Commerce Committee. We are celebrating what unites us in this Chamber: a desire to do the best for all New Zealanders. We are recognising our limitations as politicians—that the detail in here is enormous—and we are all pledging in good faith to work through that detail with the help of public submissions. This is what democracy should be about: Parliament working together to advance the public interest and to foreshorten the ability of markets on their own to act against that interest. The converse has been seen writ large in the lives of far too many people and we hope that this bill will help to put an end to financial markets misconduct.