Financial Markets (Regulators and KiwiSaver) Bill

Part 3 of the Financial Markets (Regulators and KiwiSaver) Bill relates to the general information-gathering and enforcement powers. The reason I want to speak on it relates to the point my colleague Charles Chauvel made in relation to Part 2—it flows into Part 3, as well—which is that one of the reasons for having the Financial Markets Authority is to gather together the different enforcement functions of our various regulators in this area, in order to give the authority some teeth. I support that approach 100 percent. That is why, generally speaking, Labour supports the bill.

But what has not really been resolved is that a number of the hold-ups in the investigations around the financial company failures have related to the involvement of the serious fraud task force. Nothing in the bill changes that involvement, at all. I do not know how the problem will be resolved without revisiting the fraud aspects of the serious fraud task force. I think we could have done that if we had proceeded with the reintegration of the serious fraud task force into the police, as Labour had been planning to do prior to the 2008 general election. Then, extensive criminal investigation work could have been shifted from the serious fraud task force to the Financial Markets Authority. I am sure that that approach would give the authority the teeth we are really looking for.

The problem that I had at the time when we were considering the reality of the financial company failures was that every time somebody raised a question about why a particular issue was not being investigated, the answer was always that it was because the matter had been referred to the serious fraud task force. I cannot see how this legislation will fix that fundamental flaw in our system. I hope the Government takes an opportunity, when it reviews this legislation later on down the track through the Securities Trustees and Statutory Supervisors Bill, to decide whether that flaw could be remedied by way of that particular legislation. I know that this legislation needs to be reviewed, but maybe the serious fraud task force legislation needs to be reviewed, as well. It seems to me that everything goes on hold while the serious fraud task force does its work.

The work of the sharing of information that is contained within the bill should free things up a bit, but it is not clear to me—maybe the Minister of Commerce would like to put on record the Government’s position on how the legislation will apply in practice—whether the fact that the serious fraud task force is investigating a particular allegation of fraud means that the Financial Markets Authority will have to hold back its investigation while the fraud investigation is being conducted. That is the question. If the Minister can give us an absolute assurance that the Financial Markets Authority will be able to continue its investigation unimpeded by the investigation of the serious fraud task force, then I would have some comfort. But I do not know whether that comfort can be given, because there is an essential conflict between the two roles, even though they both have very similar functions, in terms of bringing wrongdoers to account, as it were—one from a regulatory perspective, and the other from that of the criminal law. Now that we have brought in criminal liability, I wonder whether we have that absolutely right.

I really would be interested to hear some of the Government members participate in the debate and explore this issue. We did discuss it at the Commerce Committee a little, but we did not really get to a conclusion that gives me the assurance that this legislation will be able to take on that particular issue. To me that is the main thing in relation to that issue.

There is another very important subpart in Part 3, which is the provision relating to the Financial Markets Authority, and which for me, in some ways, is actually the most important part of the bill. It is that the Financial Markets Authority may exercise a person’s right of action. This power was absent from the previous regime, and I think it will give people confidence that the new regime can step into play in a way that the previous regime could not. That power is a tremendous advance in terms of the interests of the mum and dad investors whom we talk about from time to time, because it enables the Financial Markets Authority to take action and step into the shoes of those who otherwise may be prevented from—they may be ill-equipped, or impecunious—exercising their capacity to take proceedings to seek damages or other relief for fraud, negligence, default, breach of duty, or other misconduct.

I think that is the strength of this bill. I am delighted that we were able to reach an agreement across party lines that this was an essential feature of the future. If we did not have this provision, the reality would still be that people would miss out on having their cause of action proceeded with on their behalf when they were not in a position to do so.

This provision also enables people to take some comfort from the fact that when avoidance techniques are used to ensure that companies’ assets are not traced back to those who have taken them inappropriately for themselves, the searching can carry on regardless of the interests that would otherwise be protected by our company laws. That says to me that we are, essentially, in this legislation putting the right of people to be treated with fairness and dignity in these circumstances ahead of some of the legal niceties of the corporate veil, as people call it. That is an extremely positive move, and one that I am very supportive of.

We had a lot of debate around this provision in the select committee. There were a lot of submissions on it, and very strong views were expressed about its appropriateness for the legislation. I was actually quite disappointed in a number of people, in terms of their representations to the select committee about removing this provision, but I think we have done the right thing. I think that the advice that we have received on this, at the end of the day, is the correct advice, and I believe that this provision will stand our country, and our financial markets, in good stead for a very, very long time to come.

Those were the main points that I wanted to make in relation to this particular part. I know there are a number of other provisions in it, but I think those are the two provisions that are essential to the successful operation of the Financial Markets Authority. I am very, very pleased that we have been able to play a role in making sure that we have created a very workable resolution of the issues that were put in front of us on that matter.

The question was put that the amendments set out on Supplementary Order Paper 222 in the name of the Hon Simon Power to Part 3 be agreed to.

Amendments agreed to.

Part 3 as amended agreed to.

Part 4 Miscellaneous provisions

The question was put that the amendments set out on Supplementary Order Paper 222 in the name of the Hon Simon Power to Part 4 be agreed to.

Amendments agreed to.

Part 4 as amended agreed to.

Part 5 Amendments to Securities Act 1978

The question was put that the amendments set out on Supplementary Order Paper 222 in the name of the Hon Simon Power to Part 5 be agreed to.

Amendments agreed to.

Part 5 as amended agreed to.

Part 6 Amendments to Securities Markets Act 1988

The question was put that the amendments set out on Supplementary Order Paper 222 in the name of the Hon Simon Power to Part 6 be agreed to.

Amendments agreed to.

Part 6 as amended agreed to.

Part 7 Amendments to KiwiSaver Act 2006