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Annual Report

Statement of Purpose
Notable Events
Role, Functions And Powers

CONTENTS:

STATEMENT OF PURPOSE

Our purpose is to strengthen confidence in New Zealand's capital markets, both in New Zealand and overseas, by promoting:

the efficiency of these markets,

the integrity of these markets,

the cost-effective regulation of these markets,

and thereby fostering capital investment in New Zealand.

The results we aim for are:

good standards of disclosure,

reliable and ethical procedures for effecting transactions,

flexibility in development of best regulatory practice,

sound principles for market regulation,

cost-effective rules of law,

compliance with the law,

good working relationships with overseas regulators,

public understanding of the law and practice of securities.

NOTABLE EVENTS

DURING THE YEAR

PARLIAMENT:

adopted a Takeovers Code and empowered the Commission to provide administrative services to the Takeovers Panel by agreement,

amended the rule of law about the qualifications of Commission Members including that the Chairperson need not be a lawyer,

discontinued the requirement that the Commission approve the prohibition of directors,

introduced the New Zealand Stock Exchange Restructuring Bill to facilitate the demutualisation of the Stock Exchange.

GOVERNMENT:

began a first principles review of insider trading law and market manipulation and whether to implement criminal penalties,

proposed new procedures for prevention, detection and enforcement of the insider trading regime,

proposed strengthened enforcement powers more generally for the Commission,

initiated a review of the functions of the Commission and the Takeovers Panel.

COMMISSION:

completed 13 insider trading inquiries,

published a report on insider trading law and practice,

published discussion papers on:

- the authorisation of trustees and statutory supervisors,

- an exemption for scrip offers in a takeover,

issued warnings about:

- the quality of offer documents for forestry schemes,

- cold calling by overseas brokers,

devoted significant enforcement effort to contributory mortgage schemes,

took part in an international Surf Day organised by the International Organisation of Securities Commissions to search for fraudulent schemes on the internet.

ROLE, FUNCTIONS AND POWERS

The role and functions of the Commission are determined by the Securities Act 1978 and the Securities Amendment Act 1988.The functions include:

to keep under review the law relating to bodies corporate, securities and unincorporated issuers of securities and to recommend changes to the Minister of Commerce,

to keep under review practices relating to securities and to comment to any appropriate body,

to cooperate with overseas securities commissions,

to promote public understanding of the law and practice of securities,

to perform any other functions conferred by statute law.

To perform these functions we have a number of powers. These include:

to receive evidence as to securities law and practice, with power for this purpose to summon any person to appear before us,

to publish any report or comment made by us in the course of the exercise of our functions,

to exempt persons from compliance with provisions of the Securities Act or of Regulations under the Act,

to suspend or cancel a registered prospectus,

to suspend or prohibit an investment statement,

to prohibit advertising of any securities,

to approve trustees and statutory supervisors,

to inspect the documents of issuers and promoters of securities and of investment advisers,

to hear appeals against certain decisions of the Registrar of Companies,

to recommend regulations,

to administer aspects of insider trading and substantial security holder law,

to administer the law relating to futures contracts,

to recommend approval of electronic systems for the transfer of securities,

to receive financial statements of issuers which do not comply with the Financial Reporting Act 1993.

The Commission may also consider certain matters arising under the Corporations (Investigation and Management) Act 1989 (in particular, directions to "at risk" corporations and declarations of statutory management).