No Enron/Worldcom Changes in Securities Markets
No Enron/Worldcom Changes in Securities Markets Act
ACT Justice Spokesman Stephen Franks deplored today's forced passage in urgency of all remaining stages of the Securities Markets & Institutions Bill.
"The Bill is a disgraceful Government stunt. In debate Minister Dalziel and former Commerce Minister Swain kept referring to Enron and Worldcom to justify it. Yet it has nothing to touch the causes of those debacles. Indeed, volatility and hype conditions could be exacerbated by the new Aussie style continuous disclosure law. The Bill was originally introduced as a smokescreen for Helen Clark's market manipulation of Air New Zealand's share price, which led to Australian derision of New Zealand's market.
"In Select Committee, ACT shamed the Government into reinstating the right for small shareholders to get independent legal advice in insider trading cases that the establishment would rather cover up. We reduced the stupidity of some provisions which ape Australian law, but this Bill is still a political stunt. It curries favour ineffectually with the Aussies. Because it is not a complete copy they are more likely to despise our law than if we were to openly pursue a less costly, simpler and tougher line. In practice this legislation will give New Zealand investors more, not less, reason to be suspicious about the integrity of the wheelers and dealers and the regulators in our markets.
"The Bill completes an unplanned partial nationalisation of securities exchanges. The rules of an exchange create the value of listing. And competition between exchanges, or the potential for competition, has been a vital constraint on exchange high-handedness, or bulletproofing in the rulebook.
Now the rules are ultimately the responsibility of the Minister, so the cynical political rule will govern: "cover your back and look after your votes, whatever it may cost the punters". Stock Exchange incompetence, as well as the Government's lack of capital market knowledge, led the Government more in that direction than any cunning plot, but the result is the same: Australianisation.
"There is no evidence that Australia has been more successful than New Zealand in jailing fraudsters or enforcing honesty in securities markets, though Australia has clearly paid far more for its huge rule books. We saw no evidence that anyone mistakes Australian law for international best practice.
"The long-overdue reform of insider trading law has been postponed for yet another review. Instead the Government tried to sneak in repeal of two provisions that make it feasible for small shareholders to chase big fish even when the authorities don't want that. The Bill still abolishes one of these two rights - last year's court decision that the Securities Commission must help by providing relevant information in its possession.
"Sensible provisions are submerged among unsound new law.
Markets won't have reputation for honesty unless
commitment to enforcement is shown by action, not
multiplying the powers, discretions and nominal penalties
in the regulators' hands," Mr Franks said.