Annual Report

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INTERNATIONAL LIAISON

The Commission is an active member of the International Organisation of Securities Commissions (IOSCO). This comprises 166 regulatory and self-regulatory agencies including representatives of all significant securities jurisdictions. The work of IOSCO is divided into five areas:

	multi-national disclosure of information including harmonisation of international accounting and audit standards,
	regulation of secondary securities markets including examining the implications of the use of the internet and other electronic communication networks,
	regulation of market intermediaries and their products,
	enforcement and exchange of information, in particular across national borders,
	investment management.

We continue as a member of the committee implementing IOSCO's Statement of Objectives and Principles of Securities Regulation. We promote a concept of high regulatory standards on a global basis which takes account of the values and principles of small but highly reputable countries such as New Zealand.

The International Monetary Fund and the World Bank are jointly conducting Financial Sector Assessment Programs (FSAPs) which are designed to promote the soundness of financial systems of all their member countries. The FSAP assesses the banking, corporate governance, insurance, superannuation and securities markets for observance of relevant financial sector standards and codes. The IOSCO Objectives and Principles are being used as a benchmark for the securities markets assessment. The FSAP for New Zealand is under discussion.

On 15 January 2001 IOSCO and the Committee on Payment and Settlement Systems published recommendations for the design, operation and oversight of securities systems. The recommendations were proposed to promote worldwide implementation of measures to reduce risks, increase efficiency and provide adequate safeguards for investors. The Commission assisted the Reserve Bank of New Zealand to respond to the recommendations.

A report of the Multidisciplinary Working Group on Enhanced Disclosures, published on 26 April 2001, sets out recommendations on how public disclosure practices of financial institutions might be improved. The recommendations are the product of a joint venture sponsored by the Basel Committee on Banking Supervision, a committee of the Central Banks, the International Association of Insurance Supervisors and IOSCO.

The International Accounting Standards Committee has been reconstituted as the International Accounting Standards Board. The objective of the new body is to achieve a single set of internationally consistent, high-quality global accounting standards.

The Commission subscribes to IOSCO's 1986 Rio Declaration under which signatories are to give reciprocal assistance in gathering information related to market oversight and protection of investors against fraudulent securities transactions. The Commission is party to memorandums of understanding on information sharing and related matters with the Australian Securities and Investments Commission, the United States Commodity Futures Trading Commission, the Hong Kong Securities and Futures Commission, the Chinese Taipei Securities and Futures Commission and the Papua New Guinea Securities Commission. The Commission has an exchange of letters with the United States Securities and Exchange Commission. We are discussing the terms of a memorandum of understanding with the China Securities and Regulatory Commission. We confer with these organisations and other regulators in the course of market inquiries.

New Zealand is a signatory to the IOSCO-sponsored Declaration on Cooperation and Supervision of International Futures Markets and Clearing Organisations. The Declaration reinforces understandings reached between international futures exchanges and clearing houses signed in Florida in 1996. These enable participating exchanges and clearing houses to share information relating to the financial resources and trading positions of people active in futures contracts. An important aim is to identify large exposures which may potentially have an adverse effect on markets.

"SURF DAY"

We took part in a "Surf Day" in March organised by IOSCO. The objective was to "surf" the internet and identify sites which appeared to be making offers of securities that were fraudulent or dubious. We identified a number of sites for follow up action. We took particular interest in websites promoting forestry syndicates, the quality of which has attracted international attention.

PUBLIC UNDERSTANDING

The Commission enjoyed a higher media profile than in previous years. This resulted partly from involvement in highly newsworthy inquiries and partly from an increase in media interest in the Commission's public statements about overseas brokers and dubious schemes. This enabled us to warn the public about the dangers of investing overseas using people only known to the investor by telephone.

Consequently, perhaps, the number of requests from the public for information continued to increase.

Visitor activity on our website more than doubled again this year. We improved the site by adding a search function and a site map. There are significant numbers of visitors to the site from the United States, Australia, the United Kingdom, Canada and Japan.

The number of people receiving the Commission's quarterly newsletter, The Bulletin, also increased during the year. The Bulletin keeps people informed of relevant information on securities law and practice and the work of the Commission.

We provided speakers to industry conferences and other meetings.

LITIGATION

The Commission was party to several actions in the Court this year. Waltus Property Finance Limited sought to injunct us from publicising our prohibition and cancellation of the company's offer documents. The action was unsuccessful. The company lodged an appeal against the Commission's prohibition and cancellation decisions but did not pursue this.

It is very important for the Commission's effectiveness in carrying out its functions, that it can assure people that material they provide to a Commission inquiry will be treated in confidence where this is justified. Often this material relates to commercial transactions that are highly sensitive. On the other hand the Commission wishes to assist individuals, as far as it can, who take proceedings in the Court about securities malpractice. These policies can come into conflict as they did this year in an application for non-party discovery by shareholders of Fletcher Challenge Limited in insider trading proceedings. The obligations of the Commission to make available the confidential information of a third party were reviewed by the Court in these proceedings.

In one matter, proceedings were issued to restrain the Commission by Court order from undertaking an inquiry. The action was settled by agreement and the inquiry proceeded.

We are presently a defendant in judicial review and damages proceedings brought in respect of the statutory management of corporations responsible for a retirement village called the Peninsula Club. These corporations were placed in statutory management in 1994. The proceedings are yet to be determined. We consider the claims of the plaintiffs do not have merit.

SERVICES TO THE TAKEOVERS PANEL

Under the Securities Amendment Act (No 2) 2001 the Commission has been given an additional function , "by agreement with the Takeovers Panel, to provide administrative and support services to the Panel". The Commission and the Panel have agreed to sign a Memorandum of Understanding which sets out the basis for achieving this.The Amendment Act also provides for full information sharing between the Commission and the Panel. Staff members have worked hard within a tight time frame to establish the necessary structures and procedures. These services were in place for the coming into force of the Takeovers Code on 1 July 2001.

ADMINISTRATION AND STAFFING

The Commission assumed the task of providing administrative and support services to the Takeovers Panel by agreement. Several staff members now do work for both organisations.

Three staff left during the year. Four full time and two part time staff were appointed and one part time employee became full time. We currently have 18 full time and two part time staff. One staff member attended the Australian Securities and Investments Commission's Summer School in Melbourne. Various staff members attended professional development courses during the year.

We continued our review of occupational health procedures and took corrective action where appropriate.

J. FARRELL CHIEF EXECUTIVE