Boscawen John: Securities Disclosure and Financial Advisers  Amendment Bill — First Reading 
Boscawen John: Securities Disclosure and Financial Advisers  Amendment Bill — First Reading 
[Volume:652;Page:1555] 
JOHN BOSCAWEN (ACT) 
: 
 I rise on behalf of the ACT Party to support the first reading of the Securities Disclosure and Financial Advisers Amendment Bill. Unlike the Green Party we will be supporting this bill going to the select committee. However I agree with my colleague Kevin Hague that this country is facing a total failure of investor confidence and that is one of the biggest challenges that we have to rebuild. The Minister said that this bill will be broken into two parts when we reach the Committee of the whole House. The first part will be the Securities Disclosure Amendment Bill and the second part will be the Financial Advisers Amendment Bill. The regulatory impact statement which the Hon Lianne Dalziel referred to earlier states that the world is currently in the midst of the worst financial crisis for many decades. The most important and pressing financial sector issue has been the breakdown in credit markets. This bill seeks to go some way towards building up that confidence in the wholesale investor markets with larger institutions dealing with publicly listed issuers. Although I acknowledge the lack of confidence that Mr Hague referred to our party will be supporting this bill. We think the bill is very important because it takes some small steps towards minimising the cost of regulation and making it easier for companies to raise finance in this current market. 
The part that will become the Securities Disclosure Amendment Bill seeks to make it easier for listed issuers to raise either equity capital or debt capital when it comes to raising money from if you like habitual investors or those investors who have already committed over $500000 to the company in the last 12 months. What it enables the issuer to do is to issue a simplified disclosure prospectus so rather than having to repeat information that is already in the public domain that information is assumed to be there. We do not believe that the concerns the Green Party has in that regard are real and we think this legislation will go some way to minimising the cost of raising capital. 
The part that will become the Financial Advisers Amendment Bill makes a number of technical amendments to the Financial Advisers Act that was passed last year. I thought it was very interesting that in question time earlier this afternoon the Labour Opposition continually referred to the job losses at Sealord Irwin Industrial Tools and GE Money. Although I acknowledge that those potential job losses are very real I think that one of the biggest issues this country has faced has been the absolute devastation of many thousands of families mainly retired families who have invested money over the last 4 or 5 years in finance companies. As Mr Hague says the losses now total 46. That I think has been a disgrace on the previous administration. It concerns me greatly that those losses in some part are still continuing. 
I think what we have to do is address the lack of confidence because we have seen a number of straight outright rorts. Some of the companies concerned are being brought to justice in the courts. I will give an example. What some of the finance companies have done over recent years is to simply create artificial profits. They have lent large sums of money to their client customers they have done it at a market interest rate—for finance companies below the going rate—but they have loaded the loan with large upfront fees. For example a finance company lending a major property development $50 million might charge an upfront fee of $10 million and that immediately allows the finance company to bring that $10 million charge to profit in the current year. It has not received that money in cash but it can book the money as profit and the finance company charges it or capitalises that sum to the loan. 
What then happens is that new money comes in the door of a finance company as cash and because the company is then solvent and has that cash it is able to pay that money out in dividends to its shareholders. What we have seen in the last 2 or 3 years is the collapse of a large number of finance companies which can be put down to one thing and one thing only and that is straight-out fraud. We need to bring the people who perpetrated and initiated those schemes to justice. 
I notice also that Mr Hague referred to the fact that the Government needs to seek out the people who have lost money. He says that if the Government does not do so the Green Party will. I am also very conscious of that and I actually met some investors yesterday. I met Ron Jensen and his wife Kathleen Jensen who invested $200000 supposedly in an apartment to be built by Blue Chip. Mr Jensen was told by the solicitor acting for him that the solicitor could look out of the window and see the building under construction that it was in strong shape and that it was a good and sturdy building. That building does not even exist; it is a car-park. That gentleman Mr Jensen is in his mid-70s and he faces losing the sum of $200000. 
I met Owen and Margaret Dawe yesterday afternoon in Auckland. Their losses could exceed $500000. They were sold an apartment—admittedly their apartment existed—but they were sold two apartments with a guaranteed income. A number of representations were made to them and those representations were false and fraudulent. They have evidence that the document they completed for their application was falsified after they had signed it. 
The measures contained in this bill go some way to making it easier for our listed companies to raise money in the current environment but the biggest challenge we face is restoring the confidence of the smaller investors. Those are people who have worked their entire lives are in their 60s and 70s and have invested money with organisations they deemed to be safe based on representations that have been proved to be fraudulent. What this Government needs to do if it is concerned about the people of this country is to look into those schemes investigate them and bring appropriate legal action. It also needs to put a moratorium on attempts by finance companies to put properties through mortgagee sales particularly when it involves an issue of fraud. Until those cases are brought to court and determined the ACT Party believes there needs to be some sort of moratorium. 
Finally I would like to comment on one of the issues that the last Government introduced—the Government guarantee of finance companies. Mr Hague referred to the fact that up until yesterday 45 finance companies had collapsed and now there are 46. There is something very special about that 46th company which is called Mascot Finance in that it has collapsed with the benefit of a Government guarantee. What is surprising about that Government guarantee is that Mascot Finance has not raised one single dollar since that guarantee was put in place. That guarantee will guarantee the former investors—and good on them because they may well have been duped by fraud. But no charge has been made to that finance company so essentially what we have is the Government subsidising private companies which enables private companies to offer a guarantee at interest rates that are now well and truly above the market rate. 
Yesterday we saw the collapse of Mascot Finance. Many millions of dollars will need to be reimbursed at cost to the taxpayer and the taxpayer will not get an appropriate return on those funds—on that guarantee. I do not deny that there is a need for a guarantee to shore up confidence but it should be done at a commensurate return to the taxpayer. Yesterday we saw the first loss and I have no doubt there will be many more. We need to ensure that we are not subsidising private business. Thank you Mr Assistant Speaker.