Curran Clare: Financial Markets Conduct Bill — In CommitteeText is incorporated into the Bound VolumeCurran Clare: Financial Markets Conduct Bill — In Committee[Sitting date: 27 August 2013. Volume:693;Page:12986. Text is incorporated into the Bound Volume.]CLARE CURRAN (Labour—Dunedin South): It is a pleasure to speak in the Committee stage of the Financial Markets Conduct Bill—this bigkahuna of a bill which is what it has been described as. I was just looking at the second reading speeches on this bill. At that stage the bill was 500 pages long and now it appears that it is 700 pages long so in the intervening period an extra 200 pages have been added. I have just been reading the comments made by Minter Ellison Rudd Watts partner LloydKavanagh who was asked whether it was the bigkahuna of financial markets reform and who agreed with that sentiment. He said that it was a complete rewrite of New Zealand’s securities law and replaced the current Securities Act of 1978 which has obviously been around for more than 30 years. So this bill is a back-to-basics fundamental change and indeed it is a bigkahuna of a bill. I actually do not have the whole bill in front of me but I think it has also been described as a doorstopper.This is a one-stop shop for securities law. It has been designed to provide a more coherent structure and it replaces a number of pieces of legislation including the Securities Act the Securities Markets Act the Unit Trusts Act the Superannuation Schemes Act and the non-tax parts of the KiwiSaver Act. It is always important to look at the context of these pieces of legislation and the Minister of Commerce Craig Foss has acknowledged that ultimately this bill follows on from the work that was done in the previous Labour Government through the Capital Market Development Taskforce in 2008 which is more than 5 years ago now. So it has taken a long time for this bill to get to that point and to provide that blueprint and action plan for our financial system. Labour is supporting this bill. We are also supporting Supplementary Order Paper 220 which the Minister referenced which came about after my colleague Clayton Cosgroveproposed a Supplementary Order Paper to the Minister on behalf of the New Zealand Shareholders Association to increase the threshold for wholesale investors from $500000 to $750000 and many other amendments. So I am presuming that that Supplementary Order Paper actually equals the 200 extra pages—around about—that have seen this bigkahuna bill become even bigger.There are many aspects to this bill. There are a lot of things to discuss. There are 11 different parts and I am just going to mention some of those tonight in my first contribution on it. Firstly regulated financial products are going to be categorised as equity securities debt securities managed investment products and derivatives that are based on the economic substance of the financial product and not just its legal form. There is an exceptionally important requirement in this bill for issuers to prepare a prospectus and investment statement. That will be replaced with a requirement to prepare a single product disclosure statement tailored to retail investors and I would just like to highlight this as one of the single most important outcomes of this process.That means that for retail investors—these are the ordinary investors and this is one of the reasons that we have gone through this process—the document that they get will contain all the information that they need to make basic investment decisions. This harks back to the financial collapses and the impact that they have had on ordinary investors in New Zealand right throughout New Zealand and the absolute critical importance of people who are investing in a company having that basic information and being able to trust that information. For analysts and experts they will be looking to an online register which is like a website and that will also be critically important because transparency is a really important factor in this bill. It underpins it. There was an enormous amount of discussion around how to ensure that there could be trust in the system and trust for the ordinary investors the everyday investors out there.The bill also beefs up the Financial Markets Authority’s powers. It has a new role to license fund managers and the providers of discretionary investment management services. It also provides a new liability framework and it introduces criminal law which is reserved for conduct where there is knowing or reckless behaviour and also a greater use of civil remedies. But that criminal law component to this for the knowing and reckless behaviour is providing also an exceptionally important criminal aspect. This means that in respect of the people who have rorted the system in the past have put up prospectuses that have told people to invest in companies that have not been able to be proved trustworthy and who have put up celebrity endorsements around those prospectuses and sucked in those ordinary everyday investors—that behaviour will no longer be tolerated where that is knowing or reckless and there will be significant criminal penalties as a result. The Companies Act 1993 will be amended to introduce a new criminal offence in relation to the serious breaches of duty of directors to act in good faith and in the best interests of the company and the duty relating to reckless trading. As I said there will be additional powers granted to the Financial Markets Authority such as the power to designate financial products and make no action statements and the current regulatory regime for exchanges will be replaced with a licensing regime for significant non-wholesale markets.Labour started that financial markets reform process. We are very pleased to see that the Government is continuing that good work. I do want to acknowledge Lianne Dalziel who set up the Capital Market Development Taskforce in 2008 to develop a blueprint and action plan for the development of New Zealand’s financial system. This is an important part of her soon-to-be legacy in this Parliament and it is something that we should acknowledge. We are pleased that the Government is starting to act on the recommendations in the task force’s report one of which was having a single market regulator. This work has taken up the time of the Commerce Committee for some yearsnow on and off. There has been an enormous amount of work that went into it by officials. I want to acknowledge the officials in the Chamber tonight—very impressive and all respect to you. There is going to be a lot to talk about on this bill tonight and I look forward to taking another call.