Annual Report

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STATEMENT OF OBJECTIVES

for the year ended 30 June 2000

Funds were appropriated by Parliament for the year to 30 June 2001 for the stated purpose of:

"		Exemptions - considering and deciding on applications for exemptions from the provisions of the Securities Act and Regulations.
		Authorisations - considering and deciding on applications for authorisation of market participants, for example futures exchanges and dealers, trustees and statutory supervisors.
		Enforcement - maintaining oversight of securities market activity and intervening in the interests of investors in accordance with statutory powers.
		Reform - reviewing securities law and practice and making recommendations for reform.
		International Liaison - promoting New Zealand as a well-regulated country. Keeping abreast of developments in global standard setting and contributing the Commission's view to this process.
		Public Understanding - promoting public understanding of the law and practice of securities."

(The Estimates of Appropriations for the Government of New Zealand for the year ending 30 June 2001, volume 1, page 181.)

STATEMENT OF SERVICE PERFORMANCE

for the year ended 30 June 2000

A.   PERFORMANCE STANDARDS AND MEASURES FOR THE OUTPUTS OF THE COMMISSION

OUTPUT 1	ENFORCEMENT - TO MAINTAIN OVERSIGHT OF SECURITIES MARKET ACTIVITY AND TO INTERVENE IN THE INTERESTS OF INVESTORS IN ACCORDANCE WITH STATUTORY POWERS
Outcome	To maintain and improve standards of behaviour in securities markets, increase compliance with securities law and thereby enhance integrity and strengthen confidence.
Activities included
	To observe securities market activity. To inquire into and if necessary take action, in particular, on: offer documents, financial statements of public issuers, insider trading, substantial security holder disclosure, practices of investment advisers, practices of fund managers, requests from overseas commissions. To initiate inspections of the documents of issuers and promoters of securities and investment advisers. To consider whether to authorise the Registrar of Companies to prohibit persons from directing, promoting or managing companies. To undertake special projects.
Quantity	The Commission completed 195 surveillance and enforcement actions (budget for the year 60).
Quality	The Commission acted in response to market needs and in accordance with the law including, where appropriate, the rules of natural justice. It based its work on sensible interpretations of securities laws and their application in a constructive and practical way to securities market practice. It acted independently.
Timeliness	The Commission endeavoured to complete its enforcement work promptly and, by doing this, minimised the resources committed by both market participants and the Commission. It ensured, where appropriate, that results of its inquiries were communicated promptly to market participants and the public so that they derived maximum benefit. It met agreed timetables for activity on behalf of other commissions.
Cost	The Commission allocated 42.0 percent of its expenditure to this output (budget for the year 40 percent).

OUTPUT 2	AUTHORISATIONS - TO CONSIDER AND DECIDE ON APPLICATIONS FOR AUTHORISATION OF MARKET PARTICIPANTS
Outcome	To enhance the integrity of and strengthen confidence in securities markets.
Activities included
	To authorise futures dealers and exchanges. To consider amendments to futures exchange rules. To approve trustees and statutory supervisors.
Quantity	The Commission considered seven applications (budget for the year six).
Quality	The Commission considered applications in accordance with legal requirements including, where appropriate, the rules of natural justice.
Timeliness	The Commission generally gave high priority to authorisation work. It considered applications in a timely manner taking into account the needs of individual applicants and timetables agreed with them.
Cost	The Commission allocated 2.8 percent of its expenditure to this output (budget for the year 2 percent).

OUTPUT 3	EXEMPTIONS - TO CONSIDER AND DECIDE ON APPLICATIONS FOR EXEMPTIONS FROM THE PROVISIONS OF THE SECURITIES ACT AND REGULATIONS
Outcome	To remove impediments to the offering of securities in New Zealand, to promote flexibility in the development of best regulatory practice and to strengthen confidence in securities markets.
Activities included
	To receive and consider applications. To review existing exemptions. To undertake special projects.
Quantity	The Commission completed 85 exemption applications (budget for the year 80).
Quality	The Commission based its work on sensible interpretations of securities law and its application in a constructive and practical way to securities market practice. It consulted extensively on new policy and on its formal expression in exemption notices. It acted independently and in accordance with the law including, where appropriate, the rules of natural justice.
Timeliness	The Commission generally gave high priority to exemption work. From time to time the Commission deferred taking an immediate decision on an exemption application to allow for careful consideration of the underlying policy questions. Subject to this it considered applications in a timely manner taking into account the needs of individual applicants and timetables agreed with them.
Cost	The Commission allocated 13.2 percent of its expenditure to this output (budget for the year 20 percent).

OUTPUT 4	REFORM - TO REVIEW AND COMMENT ON SECURITIES LAW AND PRACTICE FOR THE PURPOSE OF MAKING RECOMMENDATIONS FOR REFORM
Outcome	To improve the efficiency of New Zealand securities markets and to enhance integrity and strengthen public and institutional confidence, by promoting principled and cost effective regulation and market practice.
Activities/Quantity
	The Commission worked, often with the Ministry of Economic Development, on a number of projects and reviews including work on: the Securities Regulations 1983, the Securities Act 1978: - administration and efficiency, - surveillance and detection powers, - exemption powers, communication of offer documents by electronic means, exposure drafts of financial reporting standards of Institute of Chartered Accountants of New Zealand and Accounting Standards Review Board, insider trading law, retirement village schemes, a binding rulings power for the Commission.
Quality	The Commission complied with its obligations under the Securities Act 1978 and with other relevant legislation. It based its work on accurate research into, and analysis of, the existing law and practice. Any recommendations set out and applied the relevant values and principles, including where appropriate the costs and benefits of the Commission's proposals according to the best available information and method of analysis. The Commission aimed to simplify the expression and content of the law. The process was based on wide and open consultation with all affected interests, including the general public or organisations representing sections of the general public. The Commission acted independently.
Timeliness	The Commission aimed to meet the timetables of all those to whom its communications were addressed. The Commission met agreed timetables when working on specific projects with other agencies.
Cost	The Commission allocated 15.2 percent of its expenditure to this output (budget for the year 14 percent).

OUTPUT 5	INTERNATIONAL LIAISON - TO PROMOTE NEW ZEALAND AS A WELL REGULATED COUNTRY AND TO KEEP ABREAST OF DEVELOPMENTS IN GLOBAL STANDARD SETTING AND CONTRIBUTE THE COMMISSION'S VIEWS TO THIS PROCESS
Outcome	To increase New Zealand's standing in the international community as a responsible and well regulated country. To ensure that domestic policy and practice are developed in the context of a sound understanding of best international policy and practice. To maintain good working relations with overseas regulators. To strengthen public and institutional confidence in New Zealand markets.
Activities
	The Commission participated actively in the work of IOSCO's Asia Pacific Regional Committee and Committee on the Implementation of Objectives and Principles of Securities Regulation. The Commission promoted improved communication through regulatory agencies globally in relation to: overseas regulatory practices, market malpractice, in particular in respect of cross border offers of securities. The Commission met with overseas regulators, particularly the Australian Securities and Investments Commission, and institutional investors.
Quality	The Commission presented itself as a constructive and cooperative member of the international community of regulators. Any views expressed to IOSCO and others took into account the relevant New Zealand values and principles.
Timeliness	The Commission aimed to meet the timetables of all those to whom its communications were addressed. The Commission met agreed timetables when working on specific projects with other agencies.
Cost	The Commission allocated 5.6 percent of its expenditure to this output (budget for the year 9 percent).

OUTPUT 6	PUBLIC UNDERSTANDING - TO PROMOTE PUBLIC UNDERSTANDING OF THE LAW AND PRACTICE OF SECURITIES
Outcome	To increase the community's awareness and understanding of securities market practice, the policy of the law and the importance of the Commission's work. To strengthen public and institutional confidence in New Zealand markets.
Activities included
	To publish The Bulletin, annual report and other documents. To maintain and develop the website. To publish exemption notes on the website. To respond to public inquiries. To maintain contacts with the news media and otherwise provide information to the public. To produce speeches, articles and presentations.
Quantity	The Commission published four issues of The Bulletin (budget for the year four issues). The Commission published 51 exemption notes on the website. The Commission satisfied 1607 miscellaneous inquiries from members of the public (budget for the year 1200). The Commission issued 22 statements to the news media.
Quality	The Commission based its work on observed market practice and on sensible interpretations of securities law. It aimed to simplify the expression and content of the law. Material in The Bulletin and on the website was current, relevant and useful.
Timeliness	The Bulletin and other public understanding projects were completed on time. Public inquiries were actioned within five working days of receipt.
Cost	The Commission allocated 11.7 percent of its expenditure to this output (budget for the year 11 percent).

OUTPUT 7	TAKEOVERS PANEL - ADMINISTRATIVE SERVICES
	In addition to its primary outputs the Commission provided administrative services to the Takeovers Panel. The Commission allocated 9.5 percent of its expenditure to this work (budget for the year 4 percent).

B.   GENERAL OBSERVATIONS

Governance	The Commission Members are appointed by the Governor-General on the recommendation of the Minister having regard to their qualifications, experience, skill and reputation for integrity in the public market for securities. New appointments are made only after extensive advertising in the newspapers and personal interview by representatives of the responsible Minister and the Commission. All aspects of our work are kept under continuing review by regular reporting to Commission Members, by the frequent meetings of the Commission, a total of 165 during the 2001 financial year (12 regular monthly meetings and 153 quorum meetings including telephone conferences with decisions confirmed by resolutions in writing), and by supervision of staff by the Chief Executive. Where matters of significant policy arise at quorum meetings they are referred to a full meeting for further consideration by all Commission Members. The Commission reports quarterly to the Minister of Commerce. The Commission has an Audit Committee. This is chaired by a chartered accountant. It met on five occasions during the year.
Work Priorities	We review our priorities at each monthly meeting of the Commission and our complete work programme quarterly. We assess all requests for new work promptly. Where we are unable to undertake work, because it is not within the Commission's terms of reference, because it is not within our established priorities or because we believe another agency might be able to provide more relevant or more effective service, we say so promptly. Particular priority is given to work on exemptions and authorisations. We need to ensure that the activities of market participants are not delayed or inhibited because we are not able to provide a prompt, relevant and effective service. Priority was given under enforcement to the review of offer documents, the activities of investment advisers and insider trading.