Hague Kevin: Securities Trustees and Statutory Supervisors Bill — First Reading 
Hague Kevin: Securities Trustees and Statutory Supervisors Bill — First Reading 
[Volume:661;Page:9720] 
KEVIN HAGUE (Green) 
: 
 I rise to take probably a short call on the Securities Trustees and Statutory Supervisors Bill on behalf of my colleague David Clendon who I know is looking forward to speaking on this matter. The Green Party has taken quite an assertive stance in this House on the issues that have arisen relating to the serial collapse of many of our financial institutions during the course of the recession and on some of the practices that came to light and weaknesses that came to light as a result of scrutiny of those occurrences. I think it is probably fair to say that what I have to say tonight dovetails very well with what we have just heard from the Hon David Parker. 
The recession saw financial institutions collapsing like dominoes through New Zealand starving good businesses of capital and for many investors wreaking havoc with their savings including the life savings of many New Zealanders. It is conservatively estimated that several billion dollars of wealth was simply wiped from the collective balance sheets of New Zealanders. The problem is that in the good times the mark-to-market process serves to imbue the balance sheets of all with a rosy glow. That results in less scrutiny greater risk-taking—as the Hon David Parker has just been discussing—and effectively the creation of wealth out of nothing. That then sets up positive feedback loops that seem to inflate the apparent value of those assets still further which then creates greater risk-taking and the whole thing spirals out of control until it does not any more—it collapses. I am constantly reminded of the treatment of Iceland by the International Monetary Fund which less than a year before the total collapse of Iceland’s economy was lauding Iceland as one of the greatest success stories in the world economy. 
Since everything has gone south there has been much greater scrutiny of these investment vehicles and of the things that went wrong. Some of the things that went wrong have already been discussed in the House but here is my little list. One of the things we discovered was that many of the schemes being operated were no more than Ponzi schemes. We discovered many many shonky practices such as when a debt was going bad and was not being repaid. Rather than having that bad debt appearing on the balance sheet it was simply being rolled into a new debt which made the balance sheet look better. We also saw the practice of companies with bad debts which would otherwise have appeared on their books immediately prior to balance date selling off those debts to other entities many of which were related parties. I agree with David Parker’s assessment that that was certainly one of the most shameful practices we saw from these companies. Only 2 days after the balance date those same assets were sold back to the original entity. There were many other practices such as those. 
We saw a whole series of practices that made the inquiry into financial institutions something the Green Party wholeheartedly supported. We saw a cynical use of moratoria which may be something that my colleague John Boscawen wants to talk about in his contribution because it is one of the things that he has very valiantly and admirably in my view pursued in this House and in the select committee. We saw what I would call “active deceit” inappropriate disclosure and inappropriate marketing. I have reminded the House previously of the report of the Morningstar Group which found that New Zealand ranked absolute bottom of all the countries it assessed for investor friendliness. The reason we were ranked bottom was our inappropriate and inadequate disclosure and regulatory regimes. Most important in relation to this bill we saw inadequate scrutiny by those trusted with that task. I use that word “trust” because the business of trustee companies and official trustees is not simply a role; it is a duty that has a fundamental contract with investors. Investors have a right to trust that trustees will actually look after their interests. In many cases they did not. I lost count of the number of financial companies that collapsed through that time. I think I lost count when it hit about 50. Again John Boscawen may have an up-to-date number. 
We then come to what progress the Government has made in dealing with all the inadequacies that became manifest. There are Leonard Cohen lyrics that go: 
Sail on sail on  
O mighty Ship of State! 
which refers to the terrible momentum of the State. We saw a little bit of that when measures that were proposed before the recession still came into this House. The Green Party was highly critical of the Securities (Disclosure) Amendment Bill and the Financial Advisers Amendment Bill because in the face of this absolutely apparent inadequacy of the disclosure regime the Government moved to relax the disclosure requirements and we opposed that. But since that time the Government has unveiled an agenda of measures to deal with some of the inadequacies of the disclosure and regulatory regimes. The Green Party has been pleased to support those measures. We have been pleased to support for example the inquiry into the collapse of finance companies. I know the issue of Lianne Dalziel’s member’s bill has come up in the House tonight and I pledge the support of our party to that member’s bill. It will short-circuit the attempts to rob investors in the ANZ and ING frozen funds of their legitimate and moral legal remedies. That is disgraceful behaviour on the part of those companies and I applaud Lianne Dalziel’s attempts to block off the sneaky escape route that they intend to pursue. 
In relation to this bill we will be voting for it at the first reading. We note the concerns Labour has raised about it and to those concerns I add our caution that we wish to check with some of the smaller institutions like credit unions and similar institutions that this bill will not have unintended consequences for those institutions that in general do a fantastic job for New Zealanders. But with that proviso we look forward to the scrutiny of the bill at the select committee and we look forward to the greater protection for New Zealand investors that they so richly deserve.