Curran Clare: Securities Disclosure and Financial Advisers Amendment Bill — Second Reading 
Curran Clare: Securities Disclosure and Financial Advisers Amendment Bill — Second Reading 
[Volume:654;Page:3102] 
CLARE CURRAN (Labour—Dunedin South) 
: 
 I rise in support of the Securities Disclosure and Financial Advisers Amendment Bill in its second reading. Labour will be supporting this bill. As mentioned the bill will amend the Securities Act 1978 and the Financial Advisers Act 2008 and was considered by the Commerce Committee. 
The main proposal of the bill is to provide for the use and regulation of a simplified disclosure prospectus by stock exchange - listed issuers offering certain debt and equity securities. The bill is intended to respond to the current international financial crisis by removing unnecessary obstacles to raising capital while ensuring the disclosure of relevant information to investors—both very important aims. It is intended that this bill be divided into two parts at the Committee stage. The bill provides for simplified disclosure prospectuses to be sent to investors instead of an investment statement for all prospectus amendments to be sent to investors before subscription and for additional Securities Commission powers to ensure these prospectuses are used only by appropriate issuers. Part 2 will amend the Financial Advisers Act by correcting an error in the assent version and making other minor amendments. 
The bill was dealt with at the Commerce Committee of which I am a member. I thank members for the time devoted to this bill and I particularly thank and acknowledge my colleague the Hon Lianne Dalziel who is the chair of that committee and whose expertise and knowledge has helped steer this bill to the House in a timely fashion. 
I thank the people who gave their time to make submissions on this bill. In total 19 submissions were received and six of them were heard by the Commerce Committee: I acknowledge Kensington Swan NZX the Capital Market Development Taskforce the Institute of Chartered Accountants of New Zealand the Property Council of New Zealand and Lazelle for appearing before the committee. 
The select committee considered and recommended amendments to the bill relating to offers of further securities to investors who have made subscriptions of $500000 or more and it recommended allowing subsequent offers after an initial subscription of $500000 to cover different types of security rather than limiting this to securities carrying identical rights privileges limitations and conditions to the initial securities. It recommended amending clause 5 to allow offers subsequent to an initial $500000 to be made within 18 months of the first allotment rather than 12 months as is currently the case. Importantly this bill amends the Securities Act because it is unnecessary to restrict the securities offered to those identical to the initial securities as the proposed amendment recognises that an investor who has previously invested $500000 in one transaction prior to allotment does not need the protection of the Act. The bill as it was allowed people who had invested $500000 in the past 12 months where the rights privileges limitations and conditions attached to the further securities are identical to those attached to the initial securities to make incremental investments without the protection of the Act. 
Experienced investors were also considered and amendments were recommended. We recommended amendments to clause 7 of the bill to allow a new subclause requiring experienced investors who are made an offer of a security to additionally sign written acknowledgment that they will not receive information usually provided by an issuer particularly in investment statements and registered prospectuses. 
Sitting suspended from 6 p.m. to 7.30 p.m. 
CLARE CURRAN 
: Wealthy investors were also considered in this bill and although members of the select committee did not oppose the specific amendment some were concerned that changes were being made to the wealthy investor exemption when that exemption may be repealed as part of the review of the Securities Act noting that the relevant Review of Financial Products and Providers discussion document described it as “the least principled of all of the exemptions.” 
During the submission process the Commerce Committee noted some other issues where there were no amendments; it is important to touch on some of these. Streamlining the disclosure regime was one issue raised. No amendments were put forward in relation to this but it is important to comment on it. The cornerstone of the disclosure regime for listed issuers is the obligation of continuous disclosure imposed by the Securities Markets Act 1988 in combination with stock exchange listing rules. This bill will not reduce the amount of information available to investors but rather the duplication between two forms of disclosure. Weight was also given in the committee to the potential gap between all information that is material to new securities being issued and that which is “material information”. Information that may be material to the issued securities but not to the securities already listed could include information about the terms of the new securities such as interest rates conversion rights reset rates and pricing. 
The select committee amendments to Part 2 of the bill which amends the Financial Advisers Act 2008 were of a minor technical nature. The committee recommended the insertion of clause 16A in the bill which clarifies that the disclosure statements retirement villages must make under the Retirement Villages Act 2003 do not constitute financial advice for the purposes of the Financial Advisers Act. The Commerce Committee also recommended the insertion of new clause 16D and 16E in the bill to clarify liability and disclosure obligations. These obligations would apply to an employee of a qualifying entity when he or she provides advice about the products issued by that entity. The amendment corrects an oversight and aligns the liability and disclosure obligations that apply to an employee of a qualifying financial entity when advising on different financial products. The committee also recommended that these new clauses confirm that disclosure and conduct obligations of authorised financial advisers apply whether or not they are employed by or are agents of a qualifying financial entity. 
Clause 19A was also inserted into the bill to remove an unintended conflict between the registration requirements under the Financial Advisers Act and the Financial Service Providers (Registration and Dispute Resolution) Act 2008. The result of the amendment is that employees of financial services providers would not be required to register and belong to a dispute resolution scheme unless the individual were required to register under the Financial Advisers Act. The proposed amendment preserves the status quo and aligns the two Acts. 
As mentioned at the beginning Labour will be supporting this bill. The bill responds to the current international financial crisis by removing unnecessary impediments to raising capital while ensuring the timely disclosure of relevant information to prospective investors. The proposed requirements do not reduce the information required to be disclosed but rather remove the duplication of information already provided under continuous disclosure. This bill tidies up the rules for exempt persons and people deemed by the Act not to be members of the public for the purposes of disclosure. As a member of the Commerce Committee I support the amendments it has put forward and I look forward to participating in the Committee of the whole House.