Lobby call for changes to Securities Act
Committee recommends Auckland City lobby for changes to Securities Act
Auckland City Council’s Finance and Corporate Business Committee today recommended that Auckland City lobby the Ministry of Economic Development for an amendment to the Securities Act.
As part of the process of selling half of its shares in Auckland International Airport Limited (AIAL), Auckland City originally planned to offer shares to Auckland City residents and ratepayers. This wasn’t possible as a small number of councillors failed to confirm that they would sign a required prospectus.
As the Securities Act 1978 currently stands, if the sale is assisted by the original allotter (the company that first issued the shares – in this case AIAL) shares can’t be sold to retail investors without a prospectus signed by all directors of the issuer. In the case of local authorities, directors are deemed to be the elected council.
“The Act does not currently achieve its aim of protecting public interests as it doesn’t recognise the ‘majority decision of Council’ system used by local authorities,” says Councillor Douglas Armstrong, Chairperson Finance and Corporate Business committee.
“The committee feels that, rather than being compared with company directors, local government councillors are closer in role to central government MPs who are exempt from the prospectus requirement.”
“As the airport share sale example illustrates, the current requirements have the potential to stonewall a fully democratic process.”
The committee believes that an amendment to the Act in the case of local authorities would strengthen the democratic process whilst retaining the same protection of the public interest.
“One possible option would be that the decision to offer securities to retail investors is made by majority decision of council. The prospectus would then need to be signed by the Mayor or Deputy Mayor and the Chief Executive rather than all councillors,” says Councillor Armstrong. “If the prospectus is signed in this way it is fully backed by the $5.8 billion assets of council.”
The committee’s recommendation that
council approach the Securities Commission regarding their
decision not to grant an exemption in the AIAL share sale
and lobby concurrently the Ministry of Economic Development
for an amendment to the Act will be put to full council next