Hudson BrettBRETT HUDSON (National): Thank you Madam Speaker. As I rise to speak on this bill in its first reading I just want to note that both the bill itself and some comments we've heard tonight—both on this bill but also in the one immediately preceding it—show that this is a Government that's always on the lookout for perceived problems and that's—ASSISTANT SPEAKER (Hon Ruth Dyson): Sorry to interrupt—BRETT HUDSON: You needed to do the thing yes.ASSISTANT SPEAKER (Hon Ruth Dyson): I forgot to say The question is that the motion be agreed to." My apologies. Carry on Mr Hudson.BRETT HUDSON: Thank you. Well we'll get to whether we agree to the motion in a few minutes I think. This is a Government that clearly is always on the lookout for perceived problems. Now looking for problems itself is not necessarily a bad thing. The problem with them is that they see the solution to any problem real or perceived as more Government. More and more often which is even worse they see the solution for more Government as being regulation-making power sidestepping the authority and role of this Parliament in the setting of rules legislation in this country. This bill is another example of precisely that.I want to start by referring back to the work undertaken and the reports issued by the Reserve Bank of New Zealand (RBNZ) with respect to banks and by the RBNZ and the Financial Markets Authority together with respect to the insurance industry. Both of those reports make it very clear that they did not find many actual instances of bad behaviour. They didn't find evidence in many cases that bad things had taken place. What they say they found was a lack of process and documentation to satisfy them that the conduct—the way the banks and insurance companies go about managing their business and particularly through those sales channels—did not satisfy them that it looked robust enough for their purposes or for their desires.Now business controls are a good thing in any business particularly a larger business. They help to ensure that the business is run well and that instances such as this where they interface with customers are run appropriately. But having come from at least actually more than one multinational business in my history I can tell this Parliament that when business controls take over and the controls become the outcome in themselves rather than the governance of the behaviour or the actual business outcome then they are merely an anchor on a business creating enormous amounts of work and compliance activities and cost and often—mostly in fact—yielding no tangible benefit for the end customer.Ultimately because they add cost and effort and time they add no real benefit—true benefit—to the business either. But what they do and why they come about and why more and more of them get layered on is because a group of people feel more confident within the business that they can prove that something was done the right way—the way they see the right way as being. Now we need to be focused across the economy but even here in our financial institutions on making sure the outcome is right that our institutions are offering products that are fit for purpose and that they're fit for the customers that they are selling them to and that they behave appropriately in that process.Now arguably that doesn't need a whole rule book of processes and documents to evidence that. The Minister himself in charge of this bill actually saw through to conclusion the Financial Services Legislation Amendment Bill which the previous National Government introduced which had a very simple way of dealing with—well I would argue—the exact matters he wishes to address in this bill. It placed a duty an obligation on those financial advisers to act in the best interests of the customer.Now you could achieve the same thing here with what he's doing about what he calls his fair conduct programme simply by having a provision that the institution is responsible for ensuring that the actions of the institution and its employees and intermediaries are in the interests of the customer. There are already provisions to deal with transgressions such as under the Financial Markets Conduct Act the provision for the company to be fined up to three times the gain made or loss avoided up to a maximum $5 million for such transgressions. They could do that. There you go. Don't need a big long rule book. Don't need tons and tons of compliance proof and behaviour. Place the obligation on the institution. Make it clear that it applies to employees and how they want to do it with intermediaries. The tools are already there.Because if an institution is going to suffer that sort of penalty for getting it wrong they're going to make sure they don't get it wrong. If they're going to suffer that sort of potential penalty if one or more of their employees or intermediaries takes actions for personal gain ahead of the interests of the customer which I'd argue are also actually the long-term interests of the business then they're going to make sure that they've got the management and process oversight to make sure it doesn't happen.And that flows on to the point I also want to spend some time on which is this regulation-making power which the Minister's own words tells us pretty strongly is all about banning incentives. Well first problem is it's simply a blanket regulation-making power which means that if we agree to this then the Minister and their officials will fundamentally be able to decide at their whim what incentives can be curtailed or banned what roles they can apply to at any time—any time at all. So it's signing a very blank cheque for that sort of power-making to what in effect is officials because this Government won't argue with their officials on these sorts of matters.But first of all even the fact that the regulation-making power they want is far too powerful. The first problem with it is that it actually shows a lack of understanding of business certainly in the Government but I worry also with officials. Because here's the reality—how are these businesses going to transact if they don't have people actually selling their wares to customers? It's how businesses operate. Whether they're a product business or a services-based business someone's actually got to sell the offering to the client or customer. The reality is the people that put themselves in that position as salespeople tend to be people that value the risk and reward that comes with being successful. They tend to sacrifice some salary up front with the possibility of overachieving if they deliver against a set of sales targets—all of which should be and normally are managed by controls across the business referring back to my earlier point about the obligation to act in the interests of the customer.So this idea of regulating sales incentives to the extent that one the Government might ban some or potentially all of them simply cuts across a fundamental necessity of operating a business. Now I met with a business in the industry. I won't name them. They had voluntarily taken sales incentives from their own sales staff. Guess what happened? Sales dropped. Well that comes as no surprise to anyone who's worked in business. There are better and less onerous ways of ensuring an obligation to ensure the outcome that a customer is not going to be harmed simply because there is a person who may have some salary incentive to sell certain products.Also to that point of course which worries me deeply because I've heard this before—the Minister tonight said that the sales incentives they want to ban are the ones that are based on volume or value. Well here's a challenge which backs up my immediate previous point. I challenge anyone to name me a sales incentive that is not either based on value of sale or sales or volume. It's fundamental. So if his intention is to ban sales incentives to do with volume or value he's basically just said to us all his intention is to ban every sales incentive he possibly can. It's ludicrous.There are better ways to deal with this. There are better ways to ensure that businesses are transacting and behaving appropriately with their customers. I fear that this is rooted in this belief on the other side that if you're doing something for profit you're bad and if you make profit it only comes at the expense of doing over your customer. That is not the case in the real world at least. It might seem so in some of the hallowed halls in this place but it's not the case in the real world. The simple solution as I have said would be to place an obligation of the best interests of the customer certainly on the institution—it could be done down to an employee or someone with a sales incentive—and then let the mechanisms and the penalties which exist in our law today cover that. Get it right. Get the penalty right. Every incentive will be there for the business its management and the employees to act—ASSISTANT SPEAKER (Hon Ruth Dyson): I'm very very sorry to interrupt the member but the time has come for the House to adjourn for the dinner break. Sitting suspended from 6 p.m. to 7.30 p.m.BRETT HUDSON: Well this bill is actually a lot like the Prime Minister's speech today: very very long on promises and good intentions but woefully let down in the execution. We'll be constructive on the select committee but we will not support the bill in the form it's currently in."