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Investor Protection Provided by Corporate Trustees

News Release 17 May 2005

Trustee Corporations Association Highlights Investor Protection Provided by Corporate Trustees

The Trustee Corporations Association (TCA), the industry association for New Zealand’s trustee corporations, is drawing attention to the role its members play in providing protection to investors.

James Douglas, TCA’s chairman says, “We want to remind people about the protections afforded to investors by corporate trustees and statutory supervisors. This becomes particularly important to the increasing numbers of New Zealanders planning for savings or their retirement, who want to boost the returns on their investments or revise their portfolios to take advantage of higher returns.

“Investors looking for a higher return need to consider that, in the majority of cases, these investments carry much greater risk; risk of not providing the promised return or risk of total failure and losing the capital invested as well.”

Trustee companies are most often associated with drawing up wills and handling estates. Less well known is their role in providing protection for investors. Financial institutions offering debt securities, unit trusts, superannuation funds or participatory securities to the public are legally required to appoint an independent trustee or a statutory supervisor. Only a trustee company authorised by its own Act of Parliament or a trustee or statutory supervisor approved by the Securities Commission can undertake this role.

“Our members provide independent oversight of all public investment in the securities market other than shares and bank deposits. This oversight or supervision is comprehensive with the corporate trustee required to act as a watchdog, solely in the interests of the investors; not the issuer of the investment.”

New Zealand has five authorised statutory trustee corporations established under an Act of Parliament: New Zealand Guardian Trust; Perpetual Trust; Public Trust and New Zealand Permanent Trustees, part of the Public Trust group; and Trustees Executors. All are TCA members. Covenant Trustee Company is an associate member and is authorised by the Securities Commission to act as a trustee and statutory supervisor.

Corporate trustee supervision spans all stages of investment starting with ‘due diligence’ and includes the establishment and offer stage, continuing throughout the life of the investment and, should it become necessary, enforcement and an orderly distribution of the assets. The trustee also has the responsibility of alerting public regulators to any potential problem.

The TCA is currently working with the Ministry of Economic Development and Securities Commission reviewing the regulation of non-bank financial products and providers, and the role of trustee corporations in the regulation of such investments.

While acknowledging the potential for improvement, the TCA believes the current regulatory system works very well.

Mr Douglas says, “The supervisory regime is proven, effective and efficient. It has an excellent record with the failure rate of issuers over the past 100 years being very low by international comparison. The trustee corporations that belong to TCA can take credit fostering the strength and integrity of New Zealand’s securities markets.”

ENDS

For further information about the TCA, visit the website www.tca.org.nz

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