Boscawen John: Securities (Disclosure) Amendment Bill Financial Advisers Amendment Bill — Third Readings 
Boscawen John: Securities (Disclosure) Amendment Bill Financial Advisers Amendment Bill — Third Readings 
[Volume:655;Page:5124] 
JOHN BOSCAWEN (ACT) 
: 
 It is a pleasure for me to speak in support of the Financial Advisers Amendment Bill and the Securities (Disclosure) Amendment Bill. Previous speakers have acknowledged the work of the officials and the advisers on this legislation. I would like to acknowledge my own colleagues. I was not able to be personally involved in a great deal of the deliberation on this legislation and I would like to thank my colleagues on the Commerce Committee for working in my absence. I cannot claim to have played a major part in the development of this legislation. 
Raising capital for firms is fundamental to the New Zealand economy. It was interesting to hear my colleague Melissa Lee talking about the role that the Hon Lianne Dalziel played when she launched the New Zealand Capital Market Development Taskforce and said: “To deliver wealth in jobs New Zealanders need access to capital.” What this legislation seeks to do is put in place a series of regulations that make it easier for companies to raise capital. In particular it provides for a simplified disclosure prospectus that may be used by listed issuers. They are companies that are listed on the stock exchange and are subject to the continuous disclosure requirements. It enables them to raise money from potential investors without having to go to the trouble and expense of a full-blown prospectus. I think it was my colleague Melissa Lee who referred to the fact that a full-blown prospectus might number over 100 pages whereas a simplified disclosure prospectus might come to only 20 pages. 
Anything that will help to raise capital and give access to capital to companies has to be good for the New Zealand economy. But it needs to be done with certain protections. I thought it was very interesting to hear the Hon Lianne Dalziel focus on the wealthy investor exemption this afternoon. This is the exemption that allows so-called wealthy investors to accept a lesser level of disclosure on the grounds of their wealth. Lianne made the point that simply because someone is wealthy does not mean that he or she is necessarily a sophisticated investor. I think she makes a very good point. She was the first of the speakers this afternoon to refer to the fact that the Banking Ombudsman appeared before the Commerce Committee this morning and subsequent speakers have also referred to this. 
Of course the Banking Ombudsman came in to give us evidence in respect of the so-called ANZ-ING affair. This was where ING launched a number of funds but two in particular its diversified yield fund and its regular income fund were marketed to investors on the grounds that they were low to moderate risk. Some 13000-plus investors who invested in those two funds have lost considerable sums of money. ING to its credit offered the opportunity for people to sell their interest in those funds but only at a considerable loss. So I pass on my grateful thanks to ING for at least putting up a proposal because for a number of people who lost money in finance companies there was no such proposal. But there are a number of deficiencies not least of which in my view is that ING is probably offering approximately half of what it should be. During the course of the morning I had the opportunity to meet many members of the ING-ANZ Frozen Funds Action Group and I acknowledged the role that its founder Gerard Prinsen from Wellington has played. Over the course of the morning I learnt about an investor who was very successful. He had a business and when it came time to retire he had a sum of about $2.5 million. That is a very substantial sum. That investor was encouraged by ANZ to invest $1.8 million—three-quarters of the total—of his $2.5 million in the regular investment fund or the RIF fund. There is no doubt that he was persuaded to do so by his ANZ investor. So if ever we wanted evidence of what the Hon Lianne Dalziel was saying we could not get a better illustration in my view. He was a very successful investor who reached retirement age sold his business had $2.5 million to invest and was persuaded to put three-quarters of that—$1.8 million—into one of those funds. 
One of the reasons I was keen to hear evidence from the Banking Ombudsman this morning was that there are some 13000-plus people who invested in this fund and most of them have accepted an offer from ING to buy their units. Most of them—some 95 percent we are told—have accepted an offer to buy their units but they are doing so at a considerable loss. Those funds the diversified yield fund and the regular income fund were frozen in March of last year when their reputed value was respectively 70c and 80c. People were told that their money was being frozen that they should not worry about it that their assets in the fund would be looked after and that they should leave it to those in charge of the fund. Then some 12 months later those people were apologised to and told that their funds were now only worth 20c. The initial offer was 20c and was subsequently increased to 60c and 62c. That is still well short of the 80c that the funds were frozen at in March 2008 and obviously well short of $1 which was the face value of those units. By accepting that offer to sell back their units at either 60c or 62c some 95 percent of the 13000-odd investors in that fund have surrendered all of their rights. They surrendered their rights to benefit from any future legal action or from any action brought by the Commerce Commission under the Fair Trading Act. 
A small subset of those investors some 2800 who took direct advice from the ANZ Bank have the ability to lodge a direct complaint with the Banking Ombudsman under the Banking Ombudsman scheme. Sadly some 11000 people who took advice or bought their product through another channel do not have that same access. Those 2800 people who do through the Banking Ombudsman scheme are lucky. The Banking Ombudsman told us this morning that she had received some 520 complaints. Of those 2800 people about a fifth—20 percent—have lodged a complaint with her. Of the 129 complaints that she has decided on about 110 have been found in favour of the complainant either wholly or partially. So there is a very clear message from the Banking Ombudsman. If one lodges a complaint it is more than likely depending on the circumstances that it will be decided in favour of the complainant. 
It concerns me that only 520 of the 2800 people who invested on the basis of ANZ’s advice have so far lodged a complaint. Sadly under the terms of the settlement they reached with ING they have only 8 more days in which to do so. They have only until 31 July. I hope that out of the evidence presented by the Banking Ombudsman today and the media coverage of it more people who took the advice of ANZ—like the gentleman I referred to earlier who I am told this morning had invested $1.8 million of the $2.5 million he received from the sale of his business—actually lodge complaints. I found it interesting that so far that gentleman has not lodged a complaint. It might surprise members to hear that. He is being advised to lodge a complaint and he has until 31 July to lodge a complaint but after that date he will forfeit those rights. 
That is clear evidence of what Lianne Dalziel said to the House this afternoon: simply because someone is wealthy does not necessarily make that person a sophisticated investor. A level of wealth does not equal sophistication. People rely on advice. They rely on banks. In our society it is accepted that banks are the pinnacle of financial institutions. Beneath them come other institutions such as finance companies and the like. But people rely on banks and they should be able to act confidently on advice from banks. If we are to address the capital market needs of our economy we have to put in protections that give people the confidence to invest. It is absolutely critical for the life of our system. Thank you.