The Regulator Report lists recent key changes, decisions and developments at the main New Zealand corporate, commercial, competition and energy regulatory bodies as well as selected Australian developments. This edition of the Regulator Report covers the period from 21 April to 7 May 2010.

Reserve Bank of New Zealand

Handling our economic recovery
New Zealand's recovery from the Global Financial Crisis is entering a new, less fragile stage, which will allow monetary policy stimulus to be removed, Reserve Bank Governor Alan Bollard said in a speech to the Otago and Southland Zones of Local Government New Zealand in Dunedin. "New Zealand has been fortunate in some respects, allowing most of our crisis liquidity and guarantee measures to be terminated. Conventional monetary policy will now guide the stages of recovery," Dr Bollard said.
Click here to read the full speech

March 2010 Reserve Bank Bulletin released
The March 2010 Reserve Bank Bulletin includes articles on the following:

• the debate around whether monetary policy should have leant more strongly against economic imbalances in the lead-up to the Global Financial Crisis, and whether the policy toolkit for macroeconomic stabilisation needs to be expanded;
• a summary of some of the issues discussed at a recent monetary policy conference marking the 20th anniversary of inflation targeting;
• an interview with Mark Gertler who offers his thoughts on a variety of topics, including inflation targeting and the Global Financial Crisis; and
• lessons from past US recessions and recoveries, and some predictions on how the US economy might recover out of the current recession.

Click here to read the Bulletin

Ministry of Economic Development (MED)

Simon Power on "Rebuilding Confidence" at the INFINZ awards
Minister of Commerce, Simon Power in a speech to the Institute of Financial Professionals New Zealand annual awards in Auckland on 28 April, announced some major developments for the financial industry "to restore the confidence of mum and dad investors in [New Zealand's] capital markets". These include:

• the establishment of a new regulator, to be named the Financial Markets Authority; and
• improvements to the KiwiSaver regulatory regime.

He also announced that the new financial advisers' regime would not come into force fully until July 2011 to allow the industry a further six months to ensure that all training and education requirements are completed.
Click here to read a full transcript of the speech

Government announces 'super-regulator' for financial markets
Legislation to establish a new single regulator, the Financial Markets Authority (FMA), for New Zealand's financial markets will be introduced this year with the objective of having the new regulator up and running early next year. The FMA will take over responsibility for:

• the powers and functions of the Securities Commission;
• those parts of the Companies Office that deal with offer documents, financial statements and financial service providers;
• some of the functions of the National Enforcement Unit of MED;
• the functions of the Government Actuary (monitoring and supervising superannuation and KiwiSaver schemes); and
• insurance supervision (temporarily, before this role is moved to the Reserve Bank).

The FMA will also have an auditor oversight function, which was to have been the responsibility of the reconstituted Accounting Standards Review Board. Specifically, the FMA will have the sole responsibility for:

• enforcing securities, financial reporting and company laws as they apply to financial services and securities markets; and
• regulating and overseeing trustees, auditors, directors of financial service providers, and financial advisers.

In addition, the FMA will be responsible for approving NZX's conduct rules, and may request changes to existing rules. NZX will continue to enforce its own rules, but the functions of the NZ Markets Disciplinary Tribunal will be transferred to a new statutory rulings panel serviced by the FMA. The Government will also have a power to make market conduct regulations that will replace or be inserted into NZX rules.
Click here for the full press release, which includes a Q&A section

Government to improve KiwiSaver regulation
The Government is to make changes to improve the governance and management of KiwiSaver schemes. "Mum and dad investors need to be certain that KiwiSaver is well governed and that those managing their hard-earned savings will be held accountable if there is wrong-doing," said Commerce Minister Simon Power. The key changes include the following:

• The Securities Act will be changed to provide that the manager of a retail KiwiSaver scheme is the "issuer". This will mean that the manager is primarily responsible for false and misleading statements made in prospectuses, investment statements, and advertisements, rather than trustees as at present. The manager will also owe a legal duty of care to investors, and will be required to act in their interests.
• Retail KiwiSaver schemes are to be brought within the model of the Securities Trustees and Statutory Supervisors Bill currently before Parliament. Under this model, all retail KiwiSaver schemes will be required to operate under a licence set by the FMA.
• The regulation of trustees of retail KiwiSaver schemes will be brought into line with the new regime that will apply for other types of managed funds.
• Managers will have to regularly provide ongoing information to the public and regulators regarding their performance, their fees, and what they have invested in.

At this stage, the changes will not apply to non-retail KiwiSaver schemes, that is, employer-based and some other vocational based schemes, or non-KiwiSaver superannuation schemes.
Click here for the press release, which includes a Q&A section

Financial adviser compliance pathway announced
Financial advisers are being given extra time to fully comply with the new financial advisers' regime. The compliance pathway will still require all financial advisers to be registered under the Financial Service Providers (Registration and Dispute Resolution) Act and to have become a member of an approved dispute resolution scheme by 1 December of this year. Financial advisers will also have to have submitted their applications for authorisation (or in the case of a qualifying financial entity (QFE)), have submitted their applications for QFE status) and started undertaking any training necessary. However, they will then have an additional six months (until 30 June 2011, when the regime comes into effect) to complete any required training and have applications for authorisation and qualifying financial entity status processed by the Securities Commission. Financial service providers who do not provide financial advice will need to be registered and be a member of an approved dispute resolution scheme by December 2010. If a financial service provider is not registered or has not become a member of a dispute resolution scheme by this time, they will not be permitted to continue providing those financial services.

 

Summary of key dates	>
1 July 2010	Applications for registration as a financial service provider and authorisation as a financial adviser opens at www.fspr.govt.nz
1 December 2010	Financial Service Providers (Registration and Dispute Resolution) Act fully in force; financial service providers must: be registered and be a member of an approved dispute resolution scheme; and applications for authorisation must have been received (or in the case of a QFE, applications must have been submitted for QFE status), otherwise financial service providers and financial advisers cannot legally provide services.
1 July 2011	Financial Advisers Act fully in force – financial advisers must be authorised. Similarly organisations seeking QFE status will have to have been approved. Any entity or individual wanting to provide advice after this time will need to do so in full compliance with the law.

It is expected that both the Financial Service Providers (Pre-Implementation Adjustments) Bill and the Code of Conduct for Financial Advisers will be finalised by July this year.
Click here for the full press release, which includes a Q&A section
Click here for further information and links

Auditor oversight in hands of FMA
Commerce Minister Simon Power has announced that auditor oversight as it relates to audits of issuers of securities, along with banks, insurance companies and other entities that take deposits or hold assets for broad groups of investors, is to be the responsibility of the new Financial Markets Authority (FMA). "It would be inconsistent with my consolidation aims to have a significant market-confidence function being carried out by an agency other than the FMA or the Reserve Bank" the Minister said. The oversight functions are not likely to come into force until mid-2012 to provide the FMA time to prepare for its auditor-related functions.
Click here for further details

Cabinet agrees to change financial adviser regime
Cabinet has agreed to policy changes in relation to the financial adviser regime, and has invited the Commerce Select Committee to consider them as part of the Committee's consideration of the Financial Service Providers (Pre-Implementation Adjustments) Bill, which makes amendments to the Financial Advisers Act 2008 (the FA Act). The changes cover three main issues, each of which has been the subject of submissions made by industry participants concerned at the inflexible and unworkable nature of the regime currently embodied in the FA Act and the Financial Service Providers (Registration and Dispute Resolution) Act 2008. The three main issues are:

• the application of the legislation to advice provided to wholesale clients;
• the relatively constrained scope of the qualifying financial entity (or QFE) model; and
• the application of the legislation to generic, non-personalised (or "class") advice.

The proposed changes would:

• reduce the obligations on advisers to wholesale clients such as institutional investors, large companies, and highly sophisticated individuals;
• allow institutions that operate as groups of related companies to use the 'qualifying financial entity' model efficiently;
• allow companies to issue generic advice such as brochures in their own name;
• increase the powers of the Securities Commission to grant limited exemptions from the regime; and
• increase the Government's ability to give total exemptions from the regime through regulations.

The Select Committee has decided to formally accept the Cabinet Paper and therefore issues raised in it can now be raised as part of submissions to the Select Committee on the Bill. The Committee is scheduled to report the Bill back to Parliament on 24 May.
Click here to read the Bell Gully article "Fundamental changes proposed to new financial advisers legislation – better late than never"
Click here for the Minister's press release
Click here to read the Cabinet Paper
Click here to view submissions made on the Financial Service Providers (Pre-Implementation Adjustments) Bill

Insolvency Practitioners Bill introduced
The Insolvency Practitioners Bill introduces a negative licensing system that gives the Registrar of Companies the power to prohibit individuals from providing corporate insolvency services, or to place them under supervision, for up to five years. The Bill primarily aims to make it easier for practitioners who are unfit to practise to be prohibited or placed under supervision, rather than the current system of a creditor or other party having to apply to the High Court to get a practitioner prohibited from practising. Mr Power said he hoped the law would be in force by July 2011.
Click here to read the press release
Click here to access the Bill

Consultation on maximising New Zealand's mineral potential extended
Minister of Energy and Resources Gerry Brownlee and Minister of Conservation Kate Wilkinson have announced an extension to the public submission period on the government's proposals outlined on March 22 in the discussion paper Maximising our Mineral Potential: Stocktake of Schedule 4 of the Crown Minerals Act and beyond. Submissions on the government's proposals will now close on 26 May 2010.
Click here for the press release

Submissions open for Copyright (Infringing File Sharing) Amendment Bill
The Commerce Select Committee has called for submissions on the Copyright (Infringing File Sharing) Amendment Bill. The Bill repeals section 92A of the Copyright Act, which would have required ISPs to adopt a policy providing for the termination of a repeat infringer's internet account, and introduces a new three stage approach for P2P copyright infringement. Submissions close on 17 June and the Committee is to report back on the Bill by 22 October 2010.
Click here to read Bell Gully commentary on the Bill

Electricity Industry Bill
The Finance and Expenditure Select Committee has invited limited submissions on a Supplementary Order Paper which introduces several substantive amendments to the Electricity Industry Bill.
Click here to read submissions on the Bill

 

Companies Office

Ready for FSPR
All financial service providers, including financial advisers, must be registered by 1 December 2010. Registration is expected to open from 1 July on the new Companies Office website for the Financial Service Providers Register. The costs to register and details of those fees are available on the website www.fspr.govt.nz.

Changes coming to the Companies Office
The Companies Office is replacing its current IT system with a purpose-built platform called Enterprise. Some of the new services and changes are:

• Personalised workplace/dashboard including a company watch and a task list ('Unfinished Business') that informs clients of their filing requirements;
• Address verification with NZ Post and the ability to include website addresses;
• New authority management for maintaining an entity - no more company keys;
• Mandatory registration to use transactional services.

The new Companies Office Register, based on the Enterprise platform, will be released on 28 June 2010.
Click here for further details

Securities Commission

The regulatory landscape - what needs to change
As a precursor to the regulatory changes announced by the Commerce Minister the following day, the chair of the Securities Commission Jane Diplock gave a presentation to the 4th Annual Regulatory Evolution Summit in Wellington on 27 April in which she addressed the gaps in the current regulatory framework and the need for reform. She noted that the following key points should be considered as part of any regulatory review:

• the oversight of managed funds;
• making company directors more accountable;
• providing regulators with the power to deal with new forms of financial products that are not covered by securities law (to deal with situations like Blue Chip); and
• timely enforcement.

Click here to read the full transcript of the speech

Report on Cycle 11 of the Financial Reporting Surveillance Programme
The Securities Commission has released its findings from Cycle 11 of its Financial Reporting Surveillance Programme. In general, the level of compliance with NZ IFRS was found to be appropriate for a developed capital market, but the Commission considers that there is still room for issuers to improve their compliance with NZ IFRS to ensure greater transparency in the New Zealand market. The results from Cycle 11 show a consistent series of technical breaches in financial reporting areas, which the Commission has highlighted in its earlier news releases and public reports. These include:

• inadequate or incorrect disclosure of credit risk and interest rate sensitivity in relation to financial instruments;
• the non-disclosure of an explicit and unreserved statement of compliance with IFRS;
• omissions from key management personnel compensation disclosures and the non-disclosure of consideration used to settle related party transactions;
• inadequate disclosure of assumptions underlying goodwill impairment testing;
• the non-disclosure of the nature of non-audit services provided by auditors; and
• inadequate disclosure of the specific assumptions underlying valuation of property, plant and equipment.

Click here to read the full report

The Bulletin
The April 2010 issue of the Securities Commission's quarterly publication "The Bulletin" has been released. This issue includes coverage of:

• the Capital + Merchant Finance and Lombard Finance & Investments charges;
• an update on financial adviser regulation;
• the civil proceedings against Nuplex Industries Limited and its directors;
• the withdrawal of Huljich Wealth Management (New Zealand) Limited's investment statement for the Huljich KiwiSaver Fund;
• advice given on employment opportunities being advertised to the public where new employees are required to purchase shares in the employing company as a 'working shareholder' or 'employee shareholder';
• the policy and guideline for designation of settlement systems;
• the new Guidance Note for KiwiSaver distribution and disclosure; and
• the Commission's report on Cycle 11 of the Financial Reporting Surveillance Programme.

Click here to read the Bulletin

Takeovers Panel

New Code Word published
The Takeovers Panel has published a new Code Word which:

• provides guidance as to when collateral arrangements with target company shareholders under a takeover offer have the effect of providing those shareholders additional or different terms or consideration in breach of Rule 20 of the Takeovers Code;
• contains a new Guidance Note on offering payment of foreign currency as consideration under a takeover offer in compliance with Rule 20;
• provides an example calculation of a "specified percentage" for a hypothetical partial offer to assist compliance with the application of Rule 9 of the Takeovers Code; and
• discusses the risks associated with extending the offer period for a partial offer if the offer is likely to become unconditional before the end of the extended offer period.

Click here to read Code Word No.26

New Zealand Exchange (NZX)

Class waiver for all NZSX and NZAX issuers from NZSX/NZAX Listing Rule 7.3.1
NZX has extended the expiry date for its class waiver from Rule 7.3.1 (issued in November 2009) from 30 April 2010 to 31 August 2010 or any earlier date on which Listing Rule 7.3.4(c) is amended.
Rule 7.3.4(c) has not yet been amended to reflect changes made to the Securities Act (NZX-Share and Unit Purchase Plans) Exemption Notice 2005 by the Securities Act (NZX-Share and Unit Purchase Plans) Exemption Amendment Notice 2009 which increased the annual monetary threshold for share purchase plans made under the 2005 Exemption Notice from $5,000 to $15,000. As a result, in the absence of prior shareholder approval, or a waiver, the issue of equity securities to shareholders having an aggregate value of more than $5,000 per annum will breach Rule 7.3.1.
NZX is providing interim relief to issuers by way of a class waiver from Rule 7.3.1, so as to allow all issuers to make an offer under the terms of the amended 2005 Exemption Notice without the need to seek specific waivers from Listing Rule 7.3.1 until its Listing Rules are amended.
Click here to access a copy of the NZX class waiver

For background reading on changes to the 2005 Exemption Notice refer to the Bell Gully article Increased monetary threshold for share purchase plans.

Electricity Commission

Under-frequency event causer determination
Under the Electricity Governance Rules 2003, the owner of a generation or transmission asset that "causes" the electricity supply system frequency to fall to less than 49.25 Hz must pay an under-frequency event charge. The Commission has released a discussion paper which addresses consistency around the purpose of the event charge regime. Submissions close on 21 May 2010.
Click here for further details

New Zealand Commerce Commission (NZCC)

Speeches

• The 2006 Amendments to the Telecommunications Act - three years on, presentation at TUANZ Telecommunications Day
  On 20 April 2010 Dr Ross Patterson, Telecommunications Commissioner, gave a presentation at TUANZ Telecommunications Day. He discussed the key findings in the NZCC's Telecommunications Monitoring Report for 2009.
  Click here for more

Media releases

The NZCC has issued the following media releases:

Mergers and acquisitions

• Hoyts granted clearance to buy Berkeley exhibition business
  The NZCC has granted clearance for Hoyts Corporation Holdings (NZ) Limited to acquire the Berkeley film exhibition business from Everard Entertainment Limited.
  Click here for more

• Statement of preliminary issues available for Tomarata Sand's clearance application
  The NZCC published a statement of preliminary issues relating to an application seeking clearance received from Tomarata Sand Limited, which is owned by Stan Semenoff. The application, received on 13 April 2010, sought clearance to acquire the assets and business of Coastal Resources Limited.
  Click here for more

• AMP applies for clearance to acquire AXA Asia Pacific
  The NZCC has received an application from AMP Limited seeking clearance to acquire the Australian and New Zealand assets and business of AXA Asia Pacific Holdings Limited.
  Click here for more

• Novartis granted clearance to acquire 52.15% shareholding in Alcon
  The NZCC has granted clearance for Novartis AG to acquire Nestlé S.A.'s 52.15 percent shareholding in Alcon, Inc.
  Click here for more

Market behaviour

• Gisborne Farmers Market agrees to remove pricing rule
  The NZCC has concluded its investigation into an allegation of price fixing by the Committee of Gisborne Farmers Market. A settlement has been reached which has resolved the issue without any need for court action, and ensures that prices at the market will be set by the individual stall holders.
  Click here for more

Telecommunications

• 2009 annual monitoring report shows increasing competition in telecommunications markets
  The NZCC has released its 2009 telecommunications monitoring report analysing the state of New Zealand telecommunications markets. As well as looking at developments in 2009, the report also assesses the progress seen since the 2006 amendments to the Telecommunications Act came into effect.
  Click here for more

• Commerce Commission process for reconsideration of mobile termination access services recommendation
  The NZCC has released a letter outlining its indicative process and timeline to reconsider its recommendation in the mobile termination access services investigation that undertakings from Telecom and Vodafone should be accepted as an alternative to regulation. The NZCC expects to complete the reconsideration process by early June 2010.
  Click here for more

Consumer issues

• 'Text to win' company pleads guilty to Fair Trading Act breach
  TMG Asia Pacific Pty Ltd has pleaded guilty to breaching the Fair Trading Act by not properly disclosing all the terms and conditions related to a series of text to win trivia competitions. It has been fined $125,000 and ordered to pay court costs of $1,560 in the Auckland District Court.
  Click here for more

• Court injunction granted against water filter companies
  Three companies involved in selling Love Springs branded water filters door to door have been restrained from engaging in conduct which is alleged to breach the Fair Trading Act, as a result of an interim injunction obtained by the NZCC.
  Click here for more

• Company executive fined for Fair Trading Act breach
  The former managing director of a timber company that has gone into liquidation has pleaded guilty to 36 charges of breaching the Fair Trading Act in relation to misleading timber retailers and consumers about the characteristics of timber frames and roof trusses. He has been fined a total of $15,000 and has been ordered to pay costs of $130 in the Auckland District Court.
  Click here for more

• Consumers misled by imported royal jelly passed off as NZ-made
  A company that sold a product made from royal jelly imported from China, with labels that implied the product was made in New Zealand, has been fined $15,000 in the Auckland District Court.
  Click here for more

Australian Competition and Consumer Commission (ACCC)

Selected ACCC media releases

The ACCC has issued the following media releases:

Mergers and acquisitions

• ACCC calls for comment on the proposed acquisition of Warrnambool Cheese and Butter Factory Company Holdings Limited
  The ACCC has issued a Statement of Issues on the proposed acquisition by Murray Goulburn Cooperative Limited of Warrnambool Cheese and Butter Factory Company Holdings Limited.
  Click here for more

Market behaviour

• WA air conditioning cartel prosecution finalised: $9 million penalties
  The Federal Court in Perth handed down its final orders in the long running Western Australian air conditioning cartel case which had involved bid-rigging and price fixing on projects valued at over A$100 million. Over the duration of the proceedings the Court imposed a total of A$9.2 million in pecuniary penalties, making it the largest trade practices case ever run in Western Australia.
  Click here for more

• New 'must read' for professionals and professional associations – Professions and the Trade Practices Act
  The ACCC has produced a guide Professions and the Trade Practices Act to enhance individual professionals and their associations' understanding of their trade practices responsibilities.
  Click here for more

Telecommunications

• ACCC invites comments on approach to DTCS pricing
  The ACCC has issued a discussion paper which reviews the pricing of the domestic transmission capacity service (DTCS).
  Click here for more

Consumer issues

• ACCC tells mobile providers to play fair with consumers
  Mobile telephone service providers have been warned to play fair with consumers whose handsets fail during the term of a service contract. "Consumers who buy a mobile telephone as part of their service contract have the right to expect that the handset will last the length of that contract" ACCC chairman Graeme Samuel has said.
  Click here for more

• ACCC brings Powerball "bogus" scam to a halt
  A scammer whose company claimed it had a secret method to predict future Powerball draws was found by the Federal Court to have engaged in false or misleading conduct following ACCC action.
  Click here for more

• ACCC institutes proceedings against PB Supplies Pty Ltd and Postage Meter Supplies Pty Ltd
  The ACCC has instituted proceedings in the Federal Court in Sydney against two suppliers of consumables for franking machines and postage meters.
  Click here for more

• Tour operator gives court enforceable undertaking after second all-inclusive pricing advertising failure
  Wendy Wu Tours Pty Limited has given the ACCC a court enforceable undertaking after a second breach of the 'all-inclusive pricing' provisions of the Trade Practices Act 1974.
  Click here for more

• Lift Shop and director 'misled consumers'
  The Federal Court has declared by consent that Lift Shop Pty Ltd and its director, Leslie Katz, engaged in misleading conduct in breach of the Trade Practices Act 1974.
  Click here for more

• Federal Court declares StoresOnline misled consumers
  The Federal Court has found that e-commerce marketing companies StoresOnline International, Inc. and StoresOnline, Inc made misleading and deceptive representations regarding the pricing of their products and services.
  Click here for more