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For a hardcopy of the annual report please email: seccom@seccom.govt.nz. Securities Commission 8th Floor, Unisys House, 56 The Terrace, PO Box 1179, Wellington, New Zealand. Telephone (64-4) 472 9830 Facsimile (64-4) 472 8076 Email seccom@seccom.govt.nz Website www.seccom.govt.nz |
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The Securities Commission is New Zealand's main regulator of investments.
Investors can have confidence in New Zealand's securities markets so that the markets increasingly attract investment from New Zealand and overseas.
To strengthen investor confidence and foster capital investment in New Zealand by promoting the efficiency, integrity and costeffective regulation of our securities markets.
Contributes to robust and vibrant capital markets in which investors, both domestic and overseas, can have confidence. This in turn is important for New Zealand's sustainable economic development.
The integrity of New Zealand's securities markets is improved and confidence in these markets is strengthened.
Bad market practice is seen to be unacceptable and the law is complied with.
The regulatory environment is relevant and effective.
The securities law regime is tailored to the needs of the markets.
New Zealand's markets and regulatory environment are respected internationally, creating a climate for increased investment and good relationships with overseas regulators.
Public understanding of the law and practice of securities is increased.
The Commission is established under the Securities Act 1978 which determines its powers and functions. The Commission is an independent Crown entity in terms of the Crown Entities Act 2004. Other legislation the Commission works with includes the Securities Markets Act 1988, the Investment Advisers (Disclosure) Act 1996, the Securities Regulations 1983, the Securities Act (Contributory Mortgage) Regulations 1988, and the Securities (Fees) Regulations 1998. The Commission may also consider certain matters arising under the Corporations (Investigation and Management) Act 1989 (in particular, directions to "at risk" corporations and recommendations about statutory management).
The role and functions of the Commission include:
To perform these functions we have a number of powers. These include:
A number of themes have emerged from the Commission’s work this year. It has been an exciting and challenging year in relation to the need for a well-informed market of listed issuers and for uniform disclosure to investors in New Zealand’s listed companies. Our relationship with the NZX has matured and our oversight of the exchange’s regulatory function has proceeded. Disclosure in relation to finance companies and the need for investors to understand more fully the risks and rewards of their investment have been highlighted. The enforcement focus has been strengthened, and the Commission has continued its leadership role on the international scene.
The Commission has given guidance to New Zealand market participants. We highlighted the need for broking firms to have good controls to regulate flows of confidential information between their investment banking and client advisory divisions. We published our reviews of financial reporting by issuers showing where improvements could be made. The aim is to help companies improve their financial reporting and thereby increase the integrity of the markets by providing complete and accurate information for investors. Following our 2005 report on disclosure by finance companies we reviewed prospectuses registered by finance companies since our report. Generally the standard of these documents had improved, and those who needed to address shortcomings were willing to do so. This should mean that investors in these companies are better informed than in the past.
Disclosure by issuers is only part of the process for an informed market. Investors, both institutional and individual, and investment advisers need to read the disclosure documents so that they understand the investment and the risks associated with it. The need to educate people to make wise investment decisions to achieve their investment goals is recognised both in this country and overseas. The Commission continued its education programme. Of particular importance is our sponsorship of Enterprise New Zealand Trust’s work in schools. We look forward to financial education gaining NCEA accreditation and the encouragement that it will bring for schools to provide these courses. This will lead to a generation of young people who will be ready to take part in the securities markets.
Changes to the Securities Markets Act 1988 which came into force in late 2004, established coregulatory roles for the Commission and the NZX in relation to NZX’s markets. This important relationship matured during the year. The Securities Act 1978 requires the Commission to review and comment on NZX’s performance of its obligations as a registered exchange. We reported on the performance by NZX of its regulatory functions prior to the collapse of Access Brokerage. Although there were some shortcomings in the early operation of the NZX broker compliance programme, NZX has made significant progress since demutualization to increase its focus on regulation in the listed market. We undertook the first oversight review of NZX and will report on this early in the new financial year.
We achieved strong regulatory outcomes that benefit investors and the markets. We used enforceable undertakings as a flexible and practical means to address breaches of the law. We have granted exemptions that allow new products to be offered without excessive costs for issuers and broaden the choices for investors. Futures dealers have the option of relying on a class authorisation by becoming NZX participants. There have also been good results in the insider trading cases. It is always a question of judgement to decide when and whether to settle a case. In the two settlements in the Tranz Rail case and the settlement of the Provenco case positive results were achieved for investors and the markets more generally.
It will become easier for issuers and investors to take part in the trans-Tasman securities markets. We continued to work towards trans-Tasman alignment that will reduce costs for issuers and increase choices for investors. The government’s moves towards mutual recognition of securities offerings between the two countries and the memorandum of understanding on coordination of business law are welcome. The relationship between the Commission and the Australian Securities & Investments Commission was enhanced by regular meetings between the two Commissions, as well as by our close operational interaction.
In the wider regulatory community New Zealand continued its leadership role. As Chairman of the Executive Committee of the International Organisation of Securities Commissions (IOSCO) it has been a privilege to see the advances made since that organisation set a new strategic direction in 2005. The strategy has two principal objectives. They are to encourage jurisdictions to implement the IOSCO Principles of Securities Regulation and thereby raise the standard and consistency of regulation worldwide, and to increase the number of signatories to the IOSCO MMoU which enables exchange of information between regulators to combat international fraud. Considerable progress has been made on these. As a signatory to the IOSCO MMoU the Commission has obtained useful assistance from overseas regulators in several investigations, and has provided assistance to our counterparts overseas.
Further significant developments have been IOSCO’s constructive relationships with the World Bank, the IMF and the Financial Stability Forum, and its dialogue with the business community. I have been re-elected to chair IOSCO’s Executive Committee for a further two year term. It is a great honour for New Zealand to participate at such an important international level, and an affirmation that our regulatory framework is in line with international best practices. It enables the New Zealand market to have exposure at an international level.
The Commission is reporting this year under New Zealand equivalents of International Financial Reporting Standards in its annual financial statements to 30 June 2006. The Commission is the first public sector entity to adopt NZ IFRS. We believed we had an obligation to set standards for public entities and decided to be an early adopter of the new standards. We committed to making the transition this year in our 2004 annual report.
This year of achievements was made possible by the dedicated work of the Members and staff of the Commission. I am grateful to them. In the Unlimited/JRA Best Places to Work in New Zealand Survey this year we were ranked 2nd out of 69 small workplaces. This is a reflection of the vibrant and friendly culture of our workplace and the commitment by all staff to achieve excellent results.
Jane Diplock AO
Chairman
The Securities Commission consists of not less than five and not more than ten Members appointed by the Governor-General on the recommendation of the Minister of Commerce. Members are appointed for their knowledge or experience in industry, commerce, economics, law, accountancy, public administration or securities. At least one Member must be a barrister or solicitor of not less than seven years’ practice. Members hold office for a term not exceeding five years and may be reappointed.
We have had a full complement of Members during the 2005-2006 year. The Commission held 11 regular monthly meetings and 78 division meetings. There were an additional 43 resolutions in writing. The Audit and Risk Review Committee (Joanna Perry (chair), Cathy Quinn and Keitha Dunstan) met on five occasions.
The Commission’s goals in this key result area are that bad market practice is seen to be unacceptable, that the law is complied with, and that the integrity of and confidence in the markets are improved.
Insider Trading - Tranz Rail Holdings Limited
The Commission reached a settlement of its insider trading case against Berkshire Fund III and Carl Ferenbach. They agreed to pay the full compensatory amount sought by the Commission, namely $7,030,509 plus $350,000 as a contribution to the Commission’s costs. The two defendants agreed to make these payments without any admission of liability. They considered they had defences to the claims made against them. The settlement was approved by the High Court and no judgment was entered against the defendants. The remaining defendants in the case are Midavia Rail Investments and David Richwhite. The Commission is preparing for the action against these two
parties to come to trial.
Insider Trading - Provenco Group Limited
The second insider trading action that was instituted by the Commission in the High Court (in December 2004) was settled in October 2005. This related to trading in the shares of Provenco Group Limited (formerly Advantage Group Limited) by the company itself and by various directors. The company agreed to pay $300,000. Anthony Bradley agreed to pay $150,000, Nicholas Gordon $130,000 and David Wolfenden $42,000. The sums represented in each case an amount for compensation, a component for penalties and a contribution to the Commission’s costs. The defendants contended that they had good defences to the claims. No judgment was entered against them.
Enforcement and monitoring matters completed
Other insider trading inquiries
The Commission completed 26 other insider trading inquiries.
Suspensions and prohibitions
The Commission aims for high standards of disclosure so that investors can make informed
decisions on whether or not to invest. The key to this is the quality of offer documents. We give
high priority to our surveillance and enforcement work in this area.
The Commission prohibited the advertisements of one issuer where, in its opinion, they were likely to deceive, mislead or confuse investors or otherwise did not comply with the law. Five cases were resolved by accepting enforceable undertakings. Other non-compliant offer documents were remedied by the issuer without formal action being taken.
In October 2005 the Commission prohibited the distribution of advertising by Global FX Secure Pte Limited (incorporated in Singapore). The directors and controlling shareholders of this entity were Dr Nico and Mrs Irine Francken who are New Zealand residents. They operated a Dunedin-based company called WKF Asset Management Limited which was referred to in the advertising. The Commission considered that the activities did not comply with the law, in particular, by not having a registered prospectus and an investment statement. The Commission also considered the advertising was likely to have misled investors.
We warn people about paying money to investment schemes which do not have the required offer documents. A registered prospectus and investment statement give important information about how the money is being invested and about the people involved in the investment.
Enforceable undertakings
Enforceable undertakings are used when a party who has breached securities law agrees to rectify
the breach. This provides an enforcement solution that can be tailored to fit the circumstances of
a situation and avoids the cost and time of court proceedings. The text of each undertaking is published
on our website. If a party fails to fulfil the undertaking it can be enforced in Court.
Enforceable undertakings have again proved to be an effective enforcement solution. In the course
of the year the Commission accepted undertakings from:
Inspections
Inspections are useful means of investigating schemes that are brought to our attention and
ascertaining whether securities laws apply and whether they have been breached. These inspections
are carried out by staff at the Companies Office and by our own staff. In the course of the year
eight inspections were conducted.
Review of NZX’s performance of its regulatory functions - Access Brokerage
The Commission published its review of the performance by NZX of certain of its regulatory functions
as a registered exchange during 2003 and 2004, in the context of the collapse of Access Brokerage. The
Commission's inquiry did not seek to establish the cause of the collapse of Access Brokerage. It focused
on NZX's broker compliance programme during the early stages of its development, in particular in
2003 when an inspection of Access Brokerage was conducted. The report concluded that there were
some shortcomings in the development and early operation of the NZX broker compliance
programme. The Commission recognised the significant progress made by NZX, since its
demutualization, to increase its focus on regulation in the listed market.
Information control in market participant firms
We published a report highlighting the need for market participants to have good information controls (Chinese walls). This followed our inquiry into trading in shares of Wrightson Limited in June 2004. The report concerns activities of ABN AMRO Craigs Limited, an NZX firm, during a takeover offer in 2004. The firm, acting for the offeror in the takeover, received non-public information that a substantial security holder intended to accept the takeover offer. It passed this information on to two other NZX firms, and to its own client advisers, before the information was released to the market. The decision by ABN AMRO Craigs Limited to distribute non-public and potentially sensitive information about the takeover to select firms and to its client advisers, ahead of the market being informed, was inappropriate. Selective disclosure of information in this way, while not unlawful, is not acceptable practice on the part of a market participant. The inquiry highlighted that market participants not only need to have policies and procedures in place, but also to ensure that peo
ple handling non-public and
price sensitive assignments are aware of and adhere to these procedures.
Financial reporting surveillance programme
The Commission published reports of two cycles of its Financial Reporting Surveillance Programme. The aim of the programme is to encourage New Zealand issuers to improve the quality of their financial reporting. This will enable investors to have confidence in the credibility of financial information provided by issuers, and contribute to the integrity of New Zealand’s securities markets. The first cycle covered audited full-year financial reports of 40 issuers with balance dates from 31 March 2004 to 31 July 2004. The second covered reports of 46 issuers with balance dates from 31 December 2004 to 31 March 2005. The reviews also included financial statements in prospectuses, substantial security holder information, and continuous disclosure notices. The reviews sought to identify the level of compliance with Financial Reporting Standards and other elements of Generally Accepted Accounting Practice and to assess the overall quality of financial reporting. Neither review found serious problems but each identified issuers (16 in cycle 1 and 19 in cycle 2) whose reports had shortcomings which needed to be addressed. We wrote to these issuers. The Commission has been pleased with the cooperation from issuers and their willingness to improve the quality of their financial reporting. The review also identified some inconsistencies in directors' and officers' relevant interests and substantial security holder disclosures that required us to write to issuers and security holders. Some non-disclosures of NZX waivers were also identified and referred to NZX.
The Commission is continuing its Financial Reporting Surveillance Programme. In cycle 3 we are reviewing the financial reports of early adopters of New Zealand equivalents of International Financial Reporting Standards with a 31 December 2005 balance date. This is part of the Commission's plan to review disclosures and adjustments made by issuers as they move to NZ IFRS.
Review of NZX’s performance of its obligations as a regulated exchange
The Commission published terms of reference and commenced an oversight review of NZX. We have statutory functions to review practices relating to securities and activities on securities markets, and to comment on these. In relation to NZX, performance of these functions requires the Commission to keep under review and comment on NZX’s performance of its obligations as a registered exchange. We expect to publish a report of this review early in the new financial year.
Review of disclosure by finance companies
The Commission published a report on disclosure by finance companies in April 2005. We subsequently reviewed disclosure documents of 20 finance companies that had registered new prospectuses after our 2005 report. We reviewed them for compliance with the Securities Act and Regulations and the guidance provided in the report. Generally the standard of disclosure had improved since the earlier review. Some still had shortcomings that we considered needed to be addressed and those companies readily amended their disclosure documents. Many other companies agreed to make improvements in accordance with our suggestions the next time they revised their offer documents. This should mean that investors in these companies are better informed than in the past.
Inquiry into effects on the market of certain statements made in May 2006 concerning telecommunications The Commission began an inquiry into whether the conduct and circumstances surrounding: (a) the release of the Government's Telecommunications Stocktake Paper on 3 May 2006; and (b) comments reported to have been made on 16 May 2006 by Communications Minister Hon David Cunliffe about Telecom’s dividend policy, affected the transparent and orderly functioning of the securities markets.
The Commission is considering whether:
The Commission expects to report early in the new financial year on any issues of securities law and/or securities market practices arising from the conduct and circumstances surrounding the Paper's release.
Corporate governance reporting by listed issuers
The Commission developed a database to record its monitoring of corporate governance practices of listed issuers. The monitoring programme followed the publication of Corporate Governance in New Zealand: Principles and Guidelines and its associated Corporate Governance Handbook for Directors and Officers. These set out the Commission’s nine principles of good corporate governance and provide guidelines for entities reporting against them. Additional print runs of the handbook have been required to keep up with the demand.
Telephone share scams
Callers from overseas continued to plague New Zealanders with fraudulent offers to trade or buy shares. In most cases they were follow up calls to victims holding worthless shares bought several years ago. This scam has evolved over many years and has taken many millions of dollars out of the country. The Commission continued its enforcement efforts by endeavouring to contact the callers and the regulator in the jurisdictions they purported to be operating from. Invariably the callers were found to be fraudulent and we named these people on our website. Currently there are 223 names on this list. The fraudsters change their names often to avoid detection and a recent trend has been to use the names of genuine firms in the United States. The Commission conducted an education campaign, Don’t be sucked in by share scams, to alert people in small businesses who are specifically targeted by these fraudsters. This appears successful in that most of the people who contacted us during the campaigns were not going to send more money.
Illegal and dubious investment schemes
The Commission warned people against investment scams being hawked on the internet as High Yield Investment Programmes (HYIP's). Pureinvestor and People in Profit Systems (PIPS) were schemes identified by the Commission and other regulators around the world. One PIPS company, PIC Trust, was incorporated in New Zealand but appeared to have no presence here. PIPS was being investigated by the Central Bank of Malaysia, where its founders were based, and was subject to scrutiny by regulators in Australia, United States of America and the United Kingdom. These schemes are typically Ponzi scams in which money from new investors is used to pay returns to earlier investors to give the illusion that the scheme is successful. When the supply of new investors dries up the scheme collapses. The fraudsters have in the meantime invariably siphoned money off, spending it on themselves or banking it offshore. The websites are sophisticated, visually impressive, and interactive. They provide chat forums for virtual communities of investors who swap tips and rate schemes. Inevitably, hot tips give way to alarm when the returns no longer materialise.
Bill Papple was sentenced to two years in prison for his part in a Ponzi scheme which defrauded Rotorua people of some $14.6 million. In May 2005 his wife, Margarite Papple, and Tina West were sentenced to five years in prison. The Commission initially acted against the scheme by carrying out an inspection and making a prohibition order. It issued a public warning and referred the matter to the Serious Fraud Office.
The Commission’s goal in this key result area is that the regulatory environment is relevant and effective.
Securities Legislation Bill
The Securities Legislation Bill is before Parliament, having been reported back from select committee
on 15 June 2005. This Bill introduces reforms relating to
The Commission has worked with government officials on amendments that may be needed to this Bill before it is passed. Meanwhile the Commission worked with officials and commented on a discussion document proposing regulations to be made under this Bill once it is passed.
Financial Sector Review - Review of Financial Products and Providers
In late May 2005 the Minister of Commerce announced a review of regulation in the financial sector.
This is a wide-ranging review that considers the current regulation of securities offerings, collective
investment schemes, superannuation, life insurance, and the regulation of non-bank financial
institutions such as finance companies, credit unions, friendly societies, and building societies.
The Commission was represented on a working group which assisted the Ministry of Economic Development with the first stage of this review, to report to the Minister of Commerce with options for reform in late 2005. Following this the Ministry of Economic Development established industry working groups, including Commission representation, to provide them with advice and expertise on options development, costs and benefits of various proposals and implementation. These advisory groups have met on a regular basis during the first six months of 2006.
The Commission understands that public discussion documents relating to this review will be released by the Ministry of Economic Development in August 2006.
Financial intermediaries
The Financial Intermediaries Taskforce reported in August 2005. It recommended a regulatory
framework under which industry bodies ("approved professional bodies") and the government (through
legislation and government entities such as a Minister and a regulator) set standards, rules and
obligations for financial intermediaries and carry out dispute resolution and disciplinary functions. On
12 December 2005, Cabinet agreed to the Taskforce’s proposed co-regulatory framework under which
industry-led approved professional bodies and the Securities Commission (as the public regulator)
would work together to regulate financial intermediaries. The Commission has been involved in
ongoing discussions with officials of the Ministry of Economic Development and with industry on the
design of the intended regime. A discussion paper will be released in July 2006.
International Financial Reporting Standards and New Zealand Financial Reporting
and Auditing Standards
The Commission commented on six exposure drafts issued by the Financial Reporting Standards Board
and the International Accounting Standards Board.
Financial Reporting Act 1993
The Commission commented on proposed changes to the Financial Reporting Act 1993.
Securities Regulations
Our ongoing project to review the Securities Regulations 1983 remains on hold pending the enactment
of the Securities Legislation Bill.
Other matters
The Commission also:
The Commission’s goal in this key result area is that the securities law regime is tailored to the needs of the market.
Exemptions
The Securities Act and the Securities Markets Act empower the Commission to exempt people from
compliance with various provisions of securities law. The power to grant exemptions from the law is
very significant. We aim to base all exemptions soundly on the policy of securities law. Conditions of
exemption provide alternative compliance procedures so that the spirit of the law is complied with,
particularly the requirement to provide investors with relevant information on which to base
investment decisions. Directors and advisers of issuers who are granted exemptions, or who rely on
class exemptions, should be aware of this.
We use our exemption power to remove rigidities in the law for traditional investment products and to facilitate offers of new products, and products offered by overseas issuers, so that they are available to the public cost-effectively and without delay. We prefer to grant class exemptions rather than individual exemptions. When time allows we consult publicly, particularly where an application involves significant policy questions. We recognise that an applicant may incur costs in time and resources for this public benefit and we are grateful for this.
The continuing high demand for exemptions, often required urgently, placed pressures on the resources of both the Commission and the Parliamentary Counsel Office. We have endeavoured to meet the reasonable needs of market participants when considering exemptions. The Commission considered 60 new applications for exemption during the year. It granted 45 individual exemptions, two class exemptions, and renewed four class exemptions.
Specific work on exemptions
Employee share purchase schemes
The Commission granted a class exemption for unlisted companies operating employee share schemes.
This exemption allows unlisted companies to operate employee share schemes on a continuous basis
with an "evergreen" prospectus, and update the information via their annual reports and annual and
interim financial statements. The exemption reduces the ongoing compliance costs associated with
preparation and registration of prospectuses, and provides employees with up to date information about
the company and its financial affairs. Companies using the notice must provide an exit mechanism for
people who want to sell their shares upon leaving employment. This can be effected through an
established market for trading in the shares or by an offer by the company to repurchase the shares from
shareholders who cease to be employees.
The Commission also renewed its exemption for employee share schemes operated by listed companies. This exemption also allows the use of an "evergreen" prospectus, but does not require additional disclosure in annual reports, recognising instead that investors can remain informed about the company by way of continuous disclosures made by listed companies under the NZX Listing Rules.
NZX issuers share and unit purchase plans
NZX issuers can make limited offers of securities to existing shareholders without a registered
prospectus or investment statement under a class exemption granted in November 2005. This
exemption applies to listed companies and unit trusts, and permits offers of shares or units up to a
maximum of $5,000 per shareholder in any 12-month period. This gives listed issuers a means to
undertake limited capital raisings with few compliance costs, and allows shareholders and unit-holders
to purchase securities at discounted prices. The exemption recognises that existing shareholders and
unit-holders in listed companies have access to information about the company or unit trust through
periodic reporting and the continuous disclosure rules of the Securities Markets Act 1988 and the NZX
Listing Rules. The exemption is designed to allow offers to be extended to people who hold shares or
units through custodians, requiring any custodian to certify, and the issuer to be reasonably satisfied,
that no beneficial owner of shares or units will receive more than the individual limit permitted under
the exemption in any 12-month period.
Class exemption renewals
The Commission renewed its class exemption for financial institutions. This allows these issuers to
disclose their accounts in prospectuses using the financial reporting standard for financial institutions,
FRS-33. The exemption was updated to also allow reporting in accordance with the New Zealand
equivalent to International Accounting Standard 30, which is the standard applying to financial
institutions that have adopted NZ IFRS. Disclosure under these reporting standards provides investors
with more comprehensive information about asset quality and risk management than the disclosure
ordinarily required for issuers under the Securities Regulations. It also reduces compliance costs for
these issuers by allowing them to use the same accounts for their prospectuses as they prepare for general
purpose reporting.
The Commission also renewed its class exemptions for dividend reinvestment schemes, retirement villages, and unit trust short form prospectuses.
Authorisations
The Commission authorised three futures dealers, made two futures contract declarations and approved
10 trustees and statutory supervisors during the year.
Specific work on authorisations
Regulation of futures dealers
Futures dealers are regulated either by the Securities Commission or under class authorisations granted to NZX Futures and Options Participants and to Sydney Futures Exchange (SFE) Participants. The class authorisation for SFE Participants only authorises these dealers for SFE-traded contracts. SFE Participants wishing to trade in New Zealand in other types of futures contracts (including contracts traded on any futures exchange other than SFE) must either seek additional authorisation from the Commission or apply to be accredited as an NZX Futures and Options Participant.NZX is the frontline regulator of futures dealers who operate under the NZX Futures and Options Rules. These Rules are designed primarily for firms dealing in futures contracts that are derived from securities. NZX regulation is likely to be most suitable for firms that:
The NZX Futures and Options Rules are unlikely to be suitable for dealers who:
These dealers need to seek authorisation from the Commission.
Foreign exchange futures contracts
The Commission proposes to declare certain foreign exchange contracts, known as margined foreign
exchange contracts, or "rolling spots", to be futures contracts under the Securities Markets Act. The
effect of this would be that dealers in these contracts will need to be authorised as futures dealers. We
sought comments on this proposal in a discussion paper. These submissions are currently under
consideration.
Trustees and statutory supervisors
The Commission considered and approved 10 new applications for trustees and statutory supervisors
during the year.
The Commission’s goal in this key result area is that New Zealand’s markets and regulatory environment are respected internationally, creating a climate for increased investment and good relationships with overseas regulators.
IOSCO
IOSCO is the global forum for securities regulators and is recognised as the international standard
setter for securities regulation. Some 184 regulatory and other agencies are members of IOSCO.
Together they regulate more than 90 percent of the world’s securities markets.
Executive Committee of IOSCO
The Executive Committee is the governing body of IOSCO responsible for achieving the objectives of
the organisation. The Commission was re-elected to the Executive Committee for a third term.
Chairman Jane Diplock was elected chair of this Committee two years ago and was re-elected for a
second two year term in June 2006. This role enables New Zealand to raise its international profile as
a market regulated in accordance with the IOSCO Objectives and Principles of Securities Regulation
(IOSCO Principles). It also gives New Zealand a key role in IOSCO’s work to raise the standard of
securities regulation world wide.
IOSCO strategic direction After the adoption of the strategic direction in April 2005, IOSCO has encouraged its member jurisdictions to improve standards of securities regulation and cross-border enforcement. The strategic direction is designed to:
The 30 IOSCO Principles are based on three objectives - the protection of investors, ensuring that the markets are fair, efficient and transparent, and reducing systemic risk. The IOSCO Principles are used by the International Monetary Fund and the World Bank in the financial sector assessment programmes when evaluating a jurisdiction’s securities regulation. Wider implementation of the Principles will make the regulatory standards and practices consistent across member jurisdictions. The IOSCO MMoU enables signatories to exchange information across borders for enforcement purposes, which is vital for combating financial crime.
Under IOSCO’s strategic plan various forms of assistance are available to members seeking to implement the IOSCO Principles as well as to help them prepare for the scrutiny they must undergo before being accepted as signatories to the IOSCO MMoU. The Presidents Committee set a deadline of 1 January 2010 for all IOSCO member regulators to commit to joining the IOSCO MMoU. With the help of training seminars and technical assistance more members have been able to implement the IOSCO Principles and to make progress in joining the IOSCO MMoU this year. There are now 34 signatories and a further nine regulators are listed on Appendix B which commits them to undertaking reforms needed to become signatories.
IOSCO meetings
We hosted meetings of IOSCO’s Executive and Technical Committees and its Emerging Markets
Advisory Board in Wellington in February 2006. The Commission was re-elected Deputy Chair of the
Asia Pacific Regional Committee (APRC). We attended other IOSCO meetings during the year
including the annual conference, a Technical Committee Conference, and a training seminar hosted by
the China Securities Regulatory Commission (CSRC) where our Chairman was a keynote speaker.
Other international liaison
The Commission hosted visits of representatives from the Securities and Exchange Board of India (SEBI), the CSRC, the Securities and Exchange Commission of Sri Lanka, the Financial Services Agency of Japan, the Israel Securities Authority and the Islamic Financial Services Board.
The Chairman took part in meetings with the Financial Stability Institute, the International Monetary Fund, the World Bank, the Financial Stability Forum, the International Accounting Standards Board, the IOSCO General Secretariat, the United States Commodity Futures Trading Commission and the United States Securities and Exchange Commission (SEC). The Chairman visited SEBI, the Malaysia Securities Commission, the Thailand Securities and Exchange Commission, the French Autorit&#eacute; des March&#eacute;s Financiers, and the Financial Services Authority in London. As Chairman of the Executive Committee of IOSCO, the Chairman was appointed to the Trustee Appointments Advisory Group of the International Accounting Standards Committee Foundation.
The Chairman took part in the first academic Trans-Atlantic Dialogue on Financial Regulatory Policy at Cambridge University, the 17th Asian Pacific Conference on Accounting Issues, Corporate Governance and Auditing, and the Corporate Corruption, Integrity and Governance Symposium in Hong Kong hosted by the Independent Commission Against Corruption. She also spoke to regulators and industry representatives at a meeting hosted by SEBI in Mumbai. Commission Members spoke at the OECD Roundtable on Capital Market Reform in Asia, the Australian Law Teachers’ Association Conference, and the Australasian Institute of Banking and Finance Forum. Staff attended the US SEC’s International Institute on Securities Enforcement and Market Oversight, an executive course at Harvard Business School, and visited the Ontario Securities Commission. We assisted in an evaluation of New Zealand’s compliance with the Convention Against the Bribery of Foreign Public Officials in International Business Transactions carried out by the OECD, and the New Zealand Financial Action Task Force Inter-agency Working Group for establishing an appropriate supervisory regime to combat money laundering and the financing of terrorism.
International standard setting
The Commission contributed to an IOSCO survey on regulation of non-audit services provided by
auditors and an APRC survey on regulation of collective investment schemes. We contributed to, coordinated
and analysed an APRC survey on the IOSCO MMoU and the IOSCO Assessment
Methodology.
Trans-Tasman relationships
The Commission continued to work towards trans-Tasman alignment that will promote investment in
both New Zealand and Australia, reduce compliance costs for issuers, and increase the choice for
investors. We welcomed the announcements by the Minister of Commerce on progress with the mutual
recognition of securities offerings between the two countries and the MOU on coordination of business
law. The Chairman is a member of the Australia New Zealand Leadership Forum.
The Commission signed a revised bilateral MoU with the Australian Securities & Investments Commission (ASIC). We held three meetings with ASIC to develop closer working relationships and to maximise opportunities for cooperation in areas of mutual interest. The Chairman was a keynote speaker at ASIC’s Summer School. As usual, some members of staff attended the Summer School followed by a short secondment to ASIC.
Bilateral agreements
As well as signing a revised MOU with ASIC, the Commission entered into new bilateral arrangements
with the Israel Securities Authority and the Financial Services Agency of Japan.
Requests for assistance
The Commission received a number of requests for regulatory assistance from counterparts overseas.
These emanated from the Hong Kong Securities and Futures Commission, ASIC, the United States
Commodity Futures Trading Commission and the Financial Supervisory Commission of the
Cook Islands. They were all made under the IOSCO MMoU with the exception of the Cook Islands.
We give priority to any request for assistance from overseas. We see this as critical in discharging our
international obligations.
The Commission’s goals in this key result area are that public understanding of the law and practice of securities and the Commission’s presence in the markets is increased.
Investment education
The Commission’s education programme is delivered via well-defined projects which target clearly
identified audiences with specific messages. The overall aim is to help New Zealanders make better
investment decisions. We continued to sponsor Enterprise New Zealand Trust’s financial literacy
programmes for schools. This included funding to introduce a new paper in financial studies (FSP) for
senior secondary school students which was developed under Commission sponsorship last year. The
paper was tested during 2005 and introduced more widely in 2006. A further sponsorship was
approved in May for Enterprise New Zealand Trust to develop teacher resource materials and undertake
teacher training for the FSP. The New Zealand Qualifications Authority is developing unit standards
for financial studies. When these are registered Enterprise New Zealand Trust’s financial studies courses
will attract more students because they will earn credits on the National Qualifications Framework,
which will show on their record of learning and count towards University Entrance.
Telephone share scams
The Commission undertook a media and internet education campaign, Don’t be sucked in by share
scams, from June to September 2005. The campaign targeted small businesses throughout the country
because of their vulnerability to share scams promoted by telephone callers from overseas. The campaign included advertising and editorial in relevant newspapers and magazines, and messages in relevant internet newsletters. The advertisements directed people to a dedicated website, www.sharescams.org.nz. Responses to the campaign in the form of inquiries to the Commission and visitors to the website confirmed that these fraudsters were very active. We ran the campaign a second time from November to January and were pleased to find that people who contacted us were generally aware of this scam and they did not intend to send good money after bad. During the campaigns the Commission continued its enforcement efforts by endeavouring to contact the callers and the regulator in the jurisdiction they purported to be operating from. Inevitably the callers were found to be fraudulent and we named these people on our website. Reports of overseas telephone callers died down towards the end of the financial year. The scam has evolved over many years and has taken many millions of dollars out of this country. As it has been so lucrative for the fraudsters it is likely that it will reappear again in the future.
Review of website
We further developed our website www.seccom.govt.nz after it was reviewed by e-Gov Watch, an agency contracted by the State Services Commission to evaluate government websites. e-Gov Watch rated our website 4th of 25 Crown entity sites and 8th of 57 government sites. The website brings together all the Commission’s efforts to increase public understanding of securities law and practice including publications, news releases and investor information. More than 2250 people are registered to receive email alerts to new items on the site. More that 30,000 visits are made to the website each month.
Communications
The Commission also communicates with its various stakeholders through the quarterly newsletter The Bulletin, news releases, speeches and presentations, and by responding to public inquiries. The Commission issued 23 media releases, initiated media interviews, and responded to inquiries from the news media. The Chairman, Members and staff spoke to groups in New Zealand and overseas on 24 occasions about the Commission and its work. Staff handled 1454 inquiries from the public.
Takeovers activity was high during the year. The Panel’s work has involved several complex and controversial exemption applications and some important enforcement matters. A considerable amount of management time has been required on legislative developments, particularly the Crown Entities Act 2004 and the Securities Legislation Bill. The Panel was recently given increased funding for more resources to handle additional work that will arise from forthcoming legislative changes. As a consequence the number of full-time staff working for the Panel increased to five near the end of the year. An additional lawyer is being sought. This appointment will increase the full-time staff working to Senior Executive Officer, Kerry Morrell, to one counsel, one senior lawyer and three lawyers. Administrative and communications staff provide support to the Panel on a part-time basis. The Commission and the Panel have a good working relationship.
The Commission values its relationships with other government agencies including the Ministry of Economic Development, Registrar of Companies, Reserve Bank of New Zealand, Serious Fraud Office, Commerce Commission, Retirement Commission and State Services Commission.
The Commission was rated second out of 69 small workplaces in the Unlimited/JRA Best Places to Work in New Zealand Survey 2005. The Commission undertakes a range of good employer initiatives and fosters a supportive, collegial and enthusiastic work environment. We believe we are able to deliver high quality outcomes for New Zealand capital markets because of the calibre and dedication of our staff.
The Commission thanks its staff for their outstanding contributions during the 2005-2006 year. It remains committed to preserving its staff capabilities through professional training programmes. It is committed to being a good employer. Staff numbers increased to 42 (38 full-time, three part-time and one on maternity leave) during the year to meet the demands of higher workloads, particularly in enforcement and monitoring and market oversight work.
The Commission encourages corporate governance reporting in annual reports. To assist with this the Commission published Corporate Governance in New Zealand - Principles and Guidelines in 2004. We report on how the Commission achieved each of these corporate governance principles in the year to 30 June 2006.
The Commission is funded by the appropriation of money by Parliament and the payment of fees by the users of its services. It is responsible for the allocation of the money. It sets priorities with care and reviews them constantly to ensure that the money is used to best advantage.
We acknowledge responsibility for the preparation of these financial statements and for the judgements used in them.
We acknowledge responsibility for establishing and maintaining a system of internal control designed to provide reasonable assurance as to the integrity and reliability of the Commission’s financial reporting.
In our opinion these annual financial statements fairly reflect the financial position and operations of the Securities Commission for the year ended 30 June 2006
 2006 Budget $ |
|
|
Note |
2006 Actual $ |
2005 Actual $ |
|
| ||||||
|
REVENUE | |
||||
| 5,983,000 | |
Government grant | |
5,478,000 | 5,240,889 | |
| 1,050,280 | |
Administrative services to the Takeovers Panel | 5 | 1,115,956 | 888,621 | |
| 250,000 | |
Exemptions and authorisations fees | |
260,914 | 267,970 | |
| 70,000 | |
Interest | 117,839 | 79,370 | ||
| - | |
Other income | 4 | 12,987 | 7,658 | |
| 1,243,000 | |
Litigation fund income | 7 | 785,010 | 1,724,140 | |
|
|
|
||||
| 8,596,280 | |
Total income | |
7,770,706 | 8,208,648 | |
|
|
|
||||
|
EXPENSE | |
||||
| 4,293,347 | |
Personnel expenses | 4 | 3,892,863 | 3,657,052 | |
| 500,500 | |
Occupancy expenses | |
497,283 | 500,858 | |
| 434,369 | Depreciation and amortisation | 4 | 428,933 | 410,684 | ||
| 2,143,500 | |
Other operating expenses | 4 | 1,755,734 | 1,894,202 | |
1,760,874 |
Litigation fund expenses | 785,010 |
1,724,140 |
|||
|
|
|
||||
| 9,132,590 | Total expense | 7,359,823 | 8,186,936 | |||
|
|
|
||||
|
|
|
||||
| (536,310) | |
Surplus (deficit) | 410,883 | 21,712 | ||
|
|
|
||||
|
COMPRISING | |
||||
| (18,436) | |
Operating surplus (deficit) | |
410,883 | 21,712 | |
| (517,874) | |
Litigation fund surplus (deficit) | |
- | - | |
|
|
|
||||
| (536,310) | |
410,883 | 21,712 | |||
|
|
|
||||
The accompanying Notes form part of these Financial Statements.
Budget $ |
|
|
Note |
Accumulated Funds $ |
Litigation Fund $ |
Total Equity $ |
| ||||||
|
At 1 July 2004 | |
2,277,789 | 843,750 | 3,121,539 | |
| Surplus (deficit) for year | 21,712 | - | 21,712 | |||
|
|
|||||
|
Total recognised income/expense for the year | 21,712 | - | 21,712 | ||
|
|
|||||
| 3,143,251 | |
At 30 June 2005 | |
2,299,501 | 843,750 | 3,143,251 |
|
|
|
||||
| (536,310) | |
Surplus (deficit) for year | |
410,883 | - | 410,883 |
| (536,310) | Total recognised income/expense for the year | 410,883 | - | 410,883 | ||
|
|
|
||||
| 2,606,941 | |
At 30 June 2006 | 7, 8 | 2,710,384 | 843,750 | 3,554,134 |
|
|
|
||||
The accompanying Notes form part of these Financial Statements.
2006 Budget $ |
|
|
Note |
2006 Actual $ |
2005 Actual $ |
| |||||
|
CURRENT ASSETS | |
|||
| 880,131 | |
Cash and cash equivalents | |
1,454,543 | 172,188 |
| - | |
Term deposits | |
- | 500,000 |
| 417,898 | Cash and cash equivalents – litigation fund | 7 | 618,837 | 842,774 | |
| 49,362 | |
GST receivable | |
49,369 | 49,362 |
| 58,043 | |
Trade and other receivables | 10 | 327,074 | 365,112 |
|
|
|
|||
| 1,405,434 | |
Total current assets | |
2,449,823 | 1,929,436 |
|
|
|
|||
| Non-current assets | |||||
| 1,580,389 | Property, plant and equipment | 11 | 1,554,040 | 1,822,252 | |
| 32,339 | |
Computer software | 12 | 33,216 | 29,845 |
|
|
|
|||
| 1,612,728 | |
Total non-current assets | |
1,587,256 | 1,852,097 |
|
|
|
|||
|
|
|
|||
| 3,018,162 | |
Total assets | |
4,037,079 | 3,781,533 |
|
|
|
|||
|
CURRENT LIABILITIES | |
|||
| 325,693 | |
Trade and other payables | 13 | 397,417 | 539,762 |
| 12,992 | Rent holiday liability | 6 | 12,992 | 12,992 | |
|
|
|
|||
| 338,685 | |
Total current liabilities | |
410,409 | 552,754 |
|
|
|
|||
|
NON-CURRENT LIABILITIES | |
|||
| 72,536 | Rent holiday liability | 6 | 72,536 | 85,528 | |
|
|
|
|||
| 411,221 | |
Total liabilities | |
482,945 | 638,282 |
|
|
|
|||
|
EQUITY | |
|||
| 1,763,191 | |
Accumulated funds | |
2,710,384 | 2,299,501 |
| 843,750 | |
Litigation fund | 7 | 843,750 | 843,750 |
|
|
|
|||
| 2,606,941 | |
Total equity | 8 | 3,554,134 | 3,143,251 |
|
|
|
|||
| 3,018,162 | |
Total equity and liabilities | |
4,037,079 | 3,781,533 |
|
|
|
|||
The accompanying Notes form part of these Financial Statements.
2006 Budget $ |
|
|
Note |
2006 Actual $ |
2005 Actual $ |
| |||||
|
|
CASH FLOWS FROM OPERATING ACTIVITIES | |||
|
Cash was provided from: | ||||
| 5,983,000 | |
- Government grant | |
5,478,000 | 5,240,889 |
| 1,550,069 | |
- Government grant - litigation fund | 839,679 | 1,496,020 | |
| 250,000 | |
- Exemptions and authorisations fees | |
238,089 | 331,603 |
| - | |
- Miscellaneous income | |
11,187 | - |
| 70,000 | |
- Interest | |
118,807 | 74,869 |
| 1,050,280 | |
- Administrative services to the Takeovers Panel | 1,110,786 | 883,395 | |
|
Cash was applied to: | ||||
| (5,009,962) | |
- Suppliers | |
(3,631,466) | (4,183,556) |
| (3,915,320) | |
- Employees | (3,444,366) | (3,301,120) | |
| - | |
- Net GST | (6) | 20,549 | |
|
|
|
|||
| (21,933) | |
Net cash flows from operating activities | 9 | 720,710 | 562,649 |
|
|
|
|||
| CASH FLOWS FROM INVESTING ACTIVITIES | |||||
|
Cash was provided from: | ||||
| - | |
- Sale of fixed assets | |
1,800 | 7,658 |
| 500,000 | |
- Decrease in term deposits | 500,000 | - | |
| - | - Decrease in term deposits (litigation) | - | - | ||
|
Cash was applied to: | ||||
| (163,000) | |
- Purchase of property, plant and equipment |
(137,937) | (400,127) | |
| (32,000) | - Purchase of computer software | (26,155) | - | ||
| - | |
- Increase in term deposit | |
- | (500,000) |
| - | |
- Increase in term deposit (litigation) | - | - | |
|
|
|
|||
| 305,000 | |
Net cash flows from investing activities | 337,708 | (892,469) | |
|
|
|
|||
|
CASH FLOWS FROM FINANCING ACTIVITIES | ||||
|
Cash was provided from: | ||||
| - | |
- Capital contribution | - | - | |
|
|
|
|||
| - | |
Net cash flows from financing activities | |
- | - |
|
|
|
|||
| 283,067 | |
Net increase (decrease) in cash balances | 1,058,418 | (329,820) | |
| 1,014,962 | |
Add opening cash and cash equivalents balance |
1,014,962 | 1,344,782 | |
|
|
|
|||
| 1,298,029 | |
Closing cash and cash equivalents balance carried forward | 2,073,380 | 1,014,962 | |
|
|
|
|||
|
COMPRISING | ||||
880,131 |
|
Cash and cash equivalents | 1,454,543 |
172,188 |
|
417,898 |
|
Cash and cash equivalents - litigation fund | 618,837 |
842,774 |
|
|
|
|
|||
1,298,029 |
|
2,073,380 |
1,014,962 |
||
|
|
|
|||
The accompanying Notes form part of these Financial Statements.
The financial statements of the Securities Commission for the year ended 30 June 2006 were authorised for issue by the Commission on 20 July 2006.
The financial statements presented here for the reporting entity, the Securities Commission, are prepared pursuant to section 30 of the Securities Act 1978 and section 198 of the Crown Entities Act. The Commission is a Crown entity for legislative purposes and a public benefit entity for financial reporting purposes.
These financial statements have been prepared in accordance with New Zealand generally accepted accounting practice (NZ GAAP). They comply with New Zealand equivalents to IFRS (NZ IFRS) and other applicable Financial Reporting Standards, as appropriate for public benefit entities.
The accounting principles recognised as appropriate for the measurement and reporting of results and financial position on a historic cost basis have been applied.
These financial statements are presented in New Zealand dollars rounded to the nearest dollar.
These are the Commission’s first financial statements complying with NZ IFRS and NZ IFRS 1 has been applied. On 1 July 2005 the Securities Commission adopted NZ equivalents to IFRS for the first time. This required retrospective application of all NZ IFRS to comparative information. The impact of adoption of NZ IFRS is outlined in the accounting policies below.
The accounting policies set out below have been applied consistently to all periods presented in these financial statements and in preparing an opening NZ IFRS statement of financial position as at 1 July 2004 for the purpose of transition to NZ IFRS.
Statement of financial performance
Other than presentational changes, the change to NZ IFRS has not impacted the statement of financial performance.
Statement of financial position
Previously library collections were revalued regularly. The Commission has decided for cost/benefit reasons to change to an accounting policy of recording these collections at cost. The Commission has elected under NZ IFRS 1 to use a previous GAAP revaluation of library collections as deemed cost at the date of transition. This is the only option that the Commission has elected to take under NZ IFRS 1. This change in accounting policy does not affect total equity but simply involves the transfer of the revaluation reserve to accumulated funds of $44,330. The aggregate of the fair value of the library collections viewed as deemed cost as at 1 July 2004 was $155,754.
Software that is not integral to the running of computer hardware has been reclassified as a separate intangible. The amount of property, plant and equipment reclassified as software was $28,912 at 1 July 2004 and at 30 June 2005 was $29,845.
As part of the change to NZ IFRS the Commission now reflects term deposits with maturities less than or equal to three months as part of cash and cash equivalents. Term deposits with maturities greater than three months are classified on their own. Previously all term deposits regardless of their maturity were classified a part of short term deposits. The aggregate of term deposits reclassified as cash and cash equivalents at 1 July 2004 was $500,000 and $763,876 for the litigation fund. The aggregate of term deposits reclassified as cash and cash equivalents at 30 June 2005 was $100,000 and $325,716 for the litigation fund.
Statement of cash flows
As part of the change to NZ IFRS, the statement of cash flows for the year ended 30 June 2005 presents the increase and decrease in term deposits on a gross rather than a net basis and short term deposits are now included as part of cash and cash equivalents.
This change and the reclassification of term deposits to cash and cash equivalents have impacted on the statement of cash flows for the year ended 30 June 2005 as follows:
- the net increase in term deposits of $100,000 has changed to a net increase in term deposits of $500,000; and
- the net decrease in term deposits for litigation fund of $438,110 now becomes nil.
The Commission has made the following critical accounting estimates and judgements when preparing these financial statements.
The Commission estimates there are no significant impairment issues in respect of the carrying values of its library collection.
The Commission has filed proceedings in the High Court in an insider trading case. The Commission has relied on advice from legal counsel in forming a view on contingent assets, as per note 17.
The budget figures are those approved by Commission Members on 22 September 2005. The budget figures are prepared in accordance with generally accepted accounting practice and are consistent with the accounting policies adopted by Commission Members for the preparation of the financial statements.
| 2006 Budget $ |
Note | 2006 Actual $ |
2005 Actual $ |
||
| |||||
| Other income | |||||
- |
Gain on disposal of fixed assets | 1,800 |
7,658 | ||
- |
Miscellaneous income | 11,187 | - | ||
|
|
|
|
||
- |
12,987 | 7,658 | |||
|
|
|
|
||
| Personnel expenses | |||||
3,604,560 |
Staff expenses | 3,242,719 | 3,013,217 | ||
688,787 |
Members’ fees | 18 | 650,144 | 643,835 | |
|
|
|
|
||
4,293,347 |
3,892,863 | 3,657,052 | |||
|
|
|
|
||
| Depreciation and amortisation | |||||
404,863 |
Depreciation | 11 | 406,149 | 389,692 | |
29,506 |
Amortisation | 12 | 22,784 | 20,992 | |
|
|
|
|
||
434,369 |
428,933 | 410,684 | |||
|
|
|
|
||
| Other operating expenses | |||||
12,000 |
Auditors – audit fees | 12,600 | 12,000 | ||
- |
Auditors – fees for transition to NZ IFRS | 10,000 |
- |
||
- |
Auditors – assurance and related services | 960 |
1,200 |
||
- |
Bad debts | - |
3,797 |
||
65,000 |
Communication charges | 58,205 |
50,163 |
||
- |
Litigation | - |
1,850 |
||
315,000 |
Printing and stationery | 328,568 |
321,953 |
||
639,000 |
Professional services | 370,654 |
566,536 |
||
770,500 |
Services and supplies | 577,929 |
603,531 |
||
342,000 |
Travel and accommodation | 396,818 |
333,172 |
||
|
|
|
|
||
2,143,500 |
1,755,734 |
1,894,202 |
|||
|
|
|
|
||
Audit New Zealand carried out an assurance related assignment for the Commission relating to the financial delegations policy. This was compatible with the independence requirements of the Auditor-General which incorporated the independence requirements of the New Zealand Institute of Chartered Accountants. No other non-audit work was undertaken by Audit New Zealand for the Commission.
The Commission provides administrative services to the Takeovers Panel. For each financial year the Commission and the Panel agree on the level of services required and on the fees to be paid to the Commission for these services. The costs involved in providing these services are part of total expenditure.
This represents amounts received from the landlord for a rent holiday. The accrual is being released having regard to the expected life of the lease of 9 years.
The Government has agreed to fund a litigation fund of $843,750 and to make top-ups as necessary to maintain the fund. It represents government funding to cover the costs incurred by the Securities Commission in taking or defending eligible cases. The fund is restricted for this purpose only.
2006 $ |
2005 $ |
||
| |||
| Opening balance | 843,750 |
843,750 |
|
|
|
||
| Government grant revenue | 458,913 |
1,692,368 |
|
| Interest | 37,435 |
29,636 |
|
| Other income |
288,662 |
2,136 |
|
|
|
||
| Litigation income | 785,010 |
1,724,140 |
|
| Expenditure on eligible litigation | (785,010) |
(1,724,140) |
|
|
|
||
| Closing balance | 843,750 |
843,750 |
|
|
|
||
| Comprising | |||
| Cash and cash equivalents |
|||
- |
Current account | 69,163 |
517,058 |
- |
Short term deposits |
549,674 |
325,716 |
|
|
||
618,837 |
842,774 |
||
| Trade and other receivables | 279,427 |
308,045 |
|
|
|
||
898,264 |
1,150,819 |
||
| Trade and other payables | (54,514) |
(307,069) |
|
|
|
||
|
843,750 |
843,750 |
|
|
|
||
The Commission seeks to maintain sufficient equity to enable it to be able to manage its on-going operations and obligations. Surplus funds are invested having regard to the cash flow profile of future commitments. The Commission is not subject to any externally imposed equity requirements.
2006 $ |
2005 $ |
||
| |||
| Reported surplus (deficit) | 410,883 |
21,712 |
|
|
|
||
| Add (less) non-cash items: |
|
||
- |
Allocation of receipt of rent free period | (12,992) |
(12,992) |
- |
Depreciation/amortisation | 428,933 |
410,684 |
|
|
||
415,941 |
397,692 |
||
|
|
||
| Add (less) movement in working capital: | |||
- |
Increase (decrease) in creditors | (142,346) |
304,569 |
- |
Decrease (increase) in receivables | 38,032 |
(153,666) |
|
|
||
(104,314) |
150,903 |
||
|
|
||
| Add (less) investing activity items: | |||
- |
Gain on sale of assets | (1,800) | (7,658) |
|
|
||
| (1,800) | (7,658) |
||
|
|
||
| Net cash flows from operating activities |
720,710 |
562,649 |
|
|
|
||
2006 $ |
2005 $ |
||
| |||
| Trade receivables | 68,804 |
51,204 |
|
| Receivables from the Crown | 251,848 | 307,069 | |
| Interest receivable | 6,422 |
6,839 |
|
|
|
||
|
327,074 |
365,112 |
|
|
|
||
| Office equipment $ |
Office furniture $ |
Leasehold improvements $ |
Library $ |
Motor vehicle $ |
Total $ |
|
| ||||||
| At 1 July 2005 net of accumulated |
||||||
depreciation |
266,774 | 280,041 | 1,051,781 | 168,189 | 55,467 | 1,822,252 |
Additions |
114,941 | 1,632 | - | 21,364 | - |
137,937 |
Disposals (NBV) |
- | - | - | - | - | - |
Depreciation charge for the year |
(179,337) | (56,841) | (138,989) | (18,182) | (12,800) | (406,149) |
|
||||||
| At 30 June 2006, net of accumulated depreciation |
202,378 | 224,832 | 912,792 | 171,371 | 42,667 | 1,554,040 |
|
||||||
At 30 June 2005 |
||||||
Cost |
686,427 | 435,488 | 1,250,897 | 185,443 | 64,000 | 2,622,255 |
Accumulated depreciation |
(419,653) | (155,448) | (199,116) | (17,253) | (8,533) | (800,003) |
|
|
|||||
| Net book value | 266,774 | 280,040 | 1,051,781 | 168,190 | 55,467 | 1,822,252 |
|
||||||
At 30 June 2006 |
||||||
Cost |
748,168 | 437,120 | 1,250,897 | 206,806 | 64,000 | 2,706,991 |
Accumulated depreciation |
(545,790) | (212,288) | (338,105) | (35,435) | (21,333) | (1,152,950) |
|
||||||
Net book value |
202,378 | 224,832 | 912,792 | 171,371 | 42,667 | 1,554,040 |
|
||||||
At 1 July 2004 |
||||||
net of accumulated depreciation |
266,949 | 301,169 | 1,081,070 | 155,754 | 28,800 | 1,833,742 |
| Additions | 161,426 | 43,472 | 104,148 | 29,689 |
39,467 |
378,202 |
Disposals (NBV) |
- | - | - | - |
- |
- |
Depreciation charge for the year |
(161,601) | (64,602) | (133,436) | (17,253) |
(12,800) |
(389,692) |
|
||||||
At 30 June 2005, net of accumulated depreciation |
266,774 | 280,039 | 1,051,782 | 168,190 |
55,467 |
1,822,252 |
|
||||||
| At 30 June 2004 | ||||||
| Cost | 536,920 | 392,015 | 1,146,749 | 155,754 | 64,000 | 2,295,438 |
| Accumulated depreciation |
(269,972) | (90,846) | (65,679) | - | (35,200) | (461,697) |
|
||||||
| Net book value | 266,948 | 301,169 | 1,081,070 | 155,754 | 28,800 | 1,833,741 |
|
||||||
| At 30 June 2005 | ||||||
Cost |
686,427 | 435,488 | 1,250,897 | 185,443 |
64,000 |
2,622,255 |
| Accumulated depreciation |
(419,653) | (155,448) | (199,116) | (17,253) | (8,533) | (800,003) |
|
||||||
Net book value |
266,774 | 280,040 | 1,051,781 | 168,190 |
55,467 |
1,822,252 |
|
||||||
Included as part of cost for library collections is deemed cost of $155,754 which was the fair value of the library collection as at 1 July 2004 that was taken as deemed cost under the election option in NZ IFRS 1.
Disposals above are nil because the assets disposed of during the year were for items that were fully depreciated.
2006 $ |
2005 $ |
||
| |||
| Gross carrying amount | 110,630 | 84,475 | |
| Accumulated amortisation | (77,414) | (54,630) | |
|
|
||
| Net carrying amount | 33,216 |
29,845 |
|
|
|
||
2006 $ |
2005 $ |
||
| |||
| Opening accumulated amortisation | (54,630) |
(33,638) | |
| Amortisation | (22,784) | (20,992) | |
|
|
||
| Closing accumulated amortisation | (77,414) | (54,630) | |
|
|
||
2006 $ |
2005 $ |
||
| |||
| Opening net carrying amount | 29,845 | 28,912 | |
| Additions | 26,155 | 21,925 | |
| Amortisation | (22,784) | (20,992) | |
|
|
||
| Closing net carrying amount |
33,216 |
29,845 |
|
|
|
||
2006 $ |
2005 $ |
||
| |||
| Trade payables | 285,815 | 438,747 | |
| Employee entitlements | 111,602 | 101,015 | |
|
|
||
| 397,417 | 539,762 | ||
|
|
||
Credit risk
Financial instruments which may subject the Commission to credit risk consist of bank balances, bank term deposits and accounts receivable. The maximum exposure to credit risk at the reporting date is the carrying amount of those instruments.
There is limited credit risk for the Commission because most of the financial assets are the Commission’s cash or investments. These are deposits with a registered bank in New Zealand.
The Commission does not require collateral or security to support financial instruments.
There is no significant concentration of credit risk pertaining to accounts receivable.
Liquidity risk
Trade and other payables mainly comprise creditors. The Commission aims to pay these within normal commercial terms that is, by the 20th of the month, if not earlier. Employee entitlements comprise obligations for employee accumulated leave. This obligation is extinguished when leave is taken. Staff are encouraged to take leave within the year in which it vests.
The Commission has cash and other short term deposits that it can use to meet its ongoing payment obligations.
Market risk
The only market risk that the Commission is subject to is interest rate risk. Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Details are as follows:
| Effective Interest Rate |
Total $ |
Maturities 3 months or less $ |
Maturities greater than 3 months $ |
|
| ||||
| 2006 | ||||
| Cash and cash equivalents | - | |||
| - Current account | 3.50% | 54,543 | 54,543 | - |
| - Short term deposits | 7.23% | 1,400,000 | 1,400,000 | - |
|
|
|||
| 1,454,543 | 1,454,543 | - | ||
|
|
|||
| Cash and cash equivalents - litigation fund | - | |||
| - Current account | 3.50% | 69,163 | 69,163 | - |
| - Short term deposits | 7.03% | 549,674 | 549,674 | - |
|
|
|||
| 618,837 | 618,837 | - | ||
|
|
|||
| 2005 | ||||
| Cash and cash equivalents | - | |||
| - Current account | 0% | 72,188 | 72,188 | - |
| - Short term deposits | 6.35% | 100,000 | 100,000 | - |
|
|
|||
| 172,188 | 172,188 | - | ||
|
|
|||
| Term deposit | 6.95% | 500,000 | - | 500,000 |
|
|
|||
| Cash and cash equivalents - litigation fund | ||||
| - Current account | 0% | 517,058 | 517,058 | - |
| - Short term deposits | 6.78% | 325,716 | 325,716 | - |
|
|
|||
| 842,774 | 842,774 | - | ||
|
|
|||
Term deposits are made for varying periods of up to, and including, three months depending on the immediate cash requirements of the Commission, and earn interest at the respective short term deposit rates.
The Commission interest rate risk is limited to interest on term investments, the maturities of which are shown above.
Fair values
All financial instruments are recognised in the statement of financial position and are stated at carrying amounts that are also a reasonable approximation of their fair values.
The Commission has the following operating lease commitments. These amounts are the total of minimum future lease payments under the Commission’s non-cancellable operating leases.
2006 $ |
2005 $ |
||
| |||
| - Not later than 1 year | 514,500 | 514,500 | |
| - Later than 1 year and not later than 5 years | 2,058,000 | 2,058,000 | |
| - Later than 5 years | 814,625 | 1,329,125 | |
The Commission rents its premises under an operating lease that ends on 1 February 2013. This lease gives the Commission the right to renew the lease for 3 years subject to a mutually agreed re-determination of the lease rental. The lease specifies that the Commission is required to make good the premises to the original condition on termination of the lease. The make good amount is estimated at $20,000.
Estimated capital expenditure contracted for at balance date but not provided for: NIL (2005 - NIL).
Contingent liabilities
There are no contingent liabilities at balance date. (2005 - NIL).
Contingent assets
The Commission filed proceedings against six defendants for insider trading (Securities Commission v Midavia Rail Investments and Others) on 13 October 2004. Since then the Commission has reached a settlement agreement with four of the defendants. The settlement proceeds are presently held on trust by Toll NZ. Under section 19 of the Securities Markets Act 1988 the Commission has first claim against money recovered in the proceeding (including in a settlement) for its costs of the proceeding. The final amount of any distribution to the Commission or the Crown under section 19 is contingent on a decision of the High Court.
Transactions with other entities within the Crown
The Commission is an independent Crown entity under the Crown Entities Act 2004. The Commission is wholly owned by the Crown and the government is its major source of revenue.
The Commission has entered into a number of transactions with other entities within the Crown on an arm’s length basis. Where those parties are acting in the course of their normal dealings with the Commission, related party disclosures have not been made for transactions of this nature. NZ IFRS provides an exemption for public benefit entities from having to make disclosures in respect of transactions between related parties subject to common control or significant influence by the Crown for transactions that would occur within a normal supplier or client/recipient relationship on terms and conditions no more or less favourable than those which it is reasonable to expect the entity would have adopted if dealing with that entity at arm’s length in the same circumstances. Therefore, in accordance with NZ IFRS such transactions are not disclosed in these financial statements.
As indicated in the statement of financial performance income is received from a Government grant and from administrative services provided to the Takeovers Panel.
Transactions with suppliers
During the year the Commission paid expenses to:
These transactions are on normal commercial terms and there are no other material transactions between Members and the Commission in any capacity other than that to which they were appointed.
There were no amounts outstanding at year end relating to these transactions.
No related party debts have been written off or forgiven during the year.
Compensation of key management personnel
Key management personnel comprise the Chairman and other members of the Commission, and the senior management team.
| 2006 $ |
2005 $ |
|
|
||
| Short term employee benefits: | ||
| Chairman’s remuneration | 345,989 | 330,000 |
| Members’ fees | 304,155 | 313,835 |
|
||
| 650,144 | 643,835 | |
| Senior management team remuneration | 1,020,102 | 810,299 |
|
||
| 1,670,246 | 1,454,134 | |
|
||
Members fees are paid on the basis of time spent on the work of the Commission.
Members’ fees for the year ended 30 June 2006 were:
2006 $ |
2005 $ |
||
| |||
| C.A.N. Beyer | 42,425 | 44,467 | |
| F.R.S. Clouston | - | 46,985 | |
| M. Chen | 18,566 | 28,115 | |
| A.M. Cotton | 36,129 | 45,090 | |
| K.D. Dunstan | 32,551 | 33,384 | |
| D.A. Jackson | 20,137 | 2,140 | |
| L.A.J. Kavanagh | 43,699 | 22,967 | |
| J.M.G. Perry | 37,834 | 22,082 | |
| C.A. Quinn | 36,010 | 37,825 | |
| R.M. Spiller | - | 28,640 | |
| N.O. Todd | 36,804 | 2,140 | |
|
|||
| 304,155 | 313,835 | ||
|
|||
Employee remuneration
During the year, the number of employees of the Commission, not being Members, who received remuneration and other benefits in excess of $100,000, were:
Number of Employees 2006 |
Number of Employees 2005 |
||
| |||
| 190,001 to 200,000 | 1 | - | |
| 180,001 to 190,000 | 1 | - | |
| 170,001 to 180,000 | 1 | - | |
| 160,001 to 170,000 | 2 | 1 | |
| 150,001 to 160,000 | - | 3 | |
| 140,001 to 150,000 | 2 | - | |
| 130,001 to 140,000 | - | - | |
| 120,001 to 130,000 | 1 | - | |
| 110,001 to 120,000 | - | 2 | |
| 100,001 to 110,000 | 3 | - | |
Income
Significant variances from budget were:
Expenditure
Significant variances from budget were:
Litigation fund
Significant variances from budget were the reduced litigation expenses, and hence income, due to lower than anticipated litigation activity.
Funds are to be appropriated by Parliament for the year to 30 June 2006 for the stated purpose of:
| " |
|
(The Estimates of Appropriations for the Government of New Zealand for the year ending 30 June 2006, Volume 1 : 195).
For the year ending 30 June 2006 (2005/06), the performance standards and measures reported for quantity, quality and timeliness are combined for outputs 1 and 2 - enforcement and monitoring and market oversight. This is because 2005/06 is the transition year, being the first year for which the Commission has separated its monitoring and market oversight output from its enforcement output. From next year (2006/07) onwards, the Commission will track and report the measures for the two outputs separately, basing it on its actual experience during the current year.
| OUTPUT 1 | Enforcement - inquiring into suspected breaches of securities law and intervening in the interests of investors in accordance with statutory powers. |
| Outcome | Bad market practice is seen to be unacceptable and the law is complied with. |
| Activities | Inquire into and if necessary take enforcement action, in particular, on:
This is done by:
|
| OUTPUT 2 | Monitoring and market oversight - maintaining oversight of securities market activity and taking actions in accordance with statutory powers. |
| Outcome | The integrity of and confidence in the markets are improved. |
| Activities | Maintain oversight of securities market and take appropriate action, in the following areas:
This is done by:
|
| Quantity | The Commission completed 145 enforcement and monitoring and market oversight inquiries with a focus on insider trading, substantial security holder disclosure, illegal / unacceptable practices, offer documents, and financial reporting by issuers (budget for the year 160). The Commission commenced 6 significant enforcement and monitoring and market oversight inquiries (budget for the year 6). The Commission had two cases in the High Court, one of which was settled during the year (budget for the year 2). The Commission considered and commented on continuous disclosure applications under the MoU with NZX 14 times (budget for the year 8). As no changes to the Conduct Rules of the NZX were proposed, the Commission did not advise the Minister on any proposed changes on these rules (budget for the year 2 times). |
| Quality | The Commission acted in response to the needs of investors and other market participants 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 applied them in a constructive and practical way to securities market practice. It acted independently. |
| Timeliness | The Commission endeavoured, consistent with the interests of investors, to carry out its enforcement and monitoring and market oversight work making best use of resources committed by both market participants and the Commission. It gave priority to inquiries raising significant issues for investors and the market. The Commission completed 5 significant enforcement and monitoring and market oversight inquiries within an average of 6.4 months (excluding court cases) (budget 6 months). The Commission completed other enforcement and monitoring and market oversight inquiries within an average of 3.1 months (budget 3 months). Where appropriate, results of its inquiries were communicated without delay to market participants and the public so that they derived maximum benefit. The Commission met agreed timetables for activity on behalf of other commissions. |
| Cost | The Commission allocated 6% of its expenditure to enforcement (budget 7%). The Commission allocated 32% of its expenditure to monitoring and market oversight (budget 35%). |
| OUTPUT 3 | Enforcement-based law and practice reform - reviewing securities law and practice and making recommendations for reform. |
| Outcome | The regulatory environment is relevant and effective. |
| Activities |
Work, generally with the Ministry of Economic Development, on projects and reviews of:
Work, generally with NZICA and ASRB, on reviews of:
|
| Quantity | The Commission made recommendations for securities law reform in compliance with its obligations under the Securities Act 1978 and other relevant legislation. The Commission commented to the Ministry of Economic Development on draft Cabinet papers and draft legislation on the Securities Legislation Bill and on Securities Act reforms. The Commission contributed to the financial products and providers review being undertaken by the Minister of Economic Development and to the work arising from the report of the Financial Intermediaries Taskforce. The Commission liaised with the Ministry of Economic Development on the continuing review of the Securities Regulations and statutory amendments needed to complete that review. The Commission also contributed to reviews of domestic financial regulators and trans-Tasman regulatory coordination being led by the Treasury and the Ministry of Economic Development. The Commission also reviewed 6 exposure drafts of financial reporting and auditing standards of NZICA and ASRB. |
| Quality | The Commission complied with its obligations under the Securities Act 1978 and with other relevant legislation. It based its work on thorough and accurate research into, and analysis of, the existing law and practice. It took into account the regulatory impact and business compliance costs of reforms. The Commission aimed to simplify the expression and content of the law. It consulted widely and acted independently. |
| Timeliness | The Commission provided information and responses to the Ministry of Economic Development and others within agreed timeframes on all projects (budget 100%). |
| Cost | The Commission allocated 5% of its expenditure to this output (budget 5%). |
| OUTPUT 4 | Exemptions and authorisations - considering and deciding on applications for exemptions from the provisions of the Securities Act 1978, Securities Markets Act 1988 and the Securities Regulations 1983; considering and deciding on applications for authorisation of market participants, for example, futures exchanges and dealers, trustees and statutory supervisors; reviewing existing authorisations. |
| Outcome | Securities law regimes are tailored to the needs of the market. |
| Activities |
|
| Quantity | The Commission considered 60 new applications for exemption from securities law (budget for the year 70). We granted 45 individual exemptions. We granted or reviewed 6 class exemption notices (budget for the year "as required"). The Commission completed 2 special projects relating to its policy on existing or potential new exemptions (budget for the year 2). The Commission authorised 10 persons as trustees and/or statutory supervisors (budget for the year 10). The Commission authorised 3 people as futures dealers. The Commission made 2 futures contract declarations. |
| Quality | All notices were issued in accordance with the law including, where appropriate, the rules of natural justice (budget 100%). The Commission based its work on sensible interpretations of securities law and applied them in a constructive and practical way to securities market practice. It consulted extensively on new policy. It acted independently. |
| Timeliness | The Commission considered and decided on all applications within 6 weeks or within timeframes agreed with applicants (budget 100%). |
| Cost | The Commission allocated 8% of its expenditure to this output (budget 11%). |
| OUTPUT 5 | International liaison - promoting New Zealand as a well-regulated country; keeping abreast of developments in global standard setting and contributing the Commission’s views to this process. |
| Outcome | New Zealand’s markets and regulatory environment are respected internationally, creating a climate for increased investment and good relationships with overseas regulators. |
| Activities |
Take part in the work of IOSCO’s:
Meet and confer with overseas regulators and institutional investors.
|
| Quantity | The Commission participated in IOSCO meetings of its Executive Committee, Technical Committee and Emerging Markets Committee (EMC) Advisory Board held during the period, also a Technical Committee conference, an EMC meeting, and an Asia - Pacific regional meeting. It fulfilled its commitment to IOSCO for the period (budget 100%). The Chairman participated in meetings with the Financial Stability Institute, Bank for International Settlements, Australian Securities & Investments Commission, International Monetary Fund, World Bank, US Commodity Futures Trading Commission and the US Securities and Exchange Commission, and also a meeting of the Financial Stability Forum. The Chairman was appointed a member of the Trustee Appointments Advisory Group of the International Accounting Standards Committee Foundation. The Commission hosted visits from the Securities and Exchange Commission of Sri Lanka, the Securities and Exchange Board of India, the Israel Securities Authority, and the China Securities Regulatory Commission. A revised bilateral MoU was signed with ASIC. New cooperative arrangements were signed with the Israel Securities Authority and the Financial Services Agency of Japan. A Commission Member participated in the OECD Roundtable on Capital Market Reforms. |
| Quality | The Commission presented itself as a constructive and cooperative member of the international community of regulators. Views expressed to IOSCO and others took into account relevant New Zealand values and principles. |
| Timeliness | The Commission attended meetings and responded to requests for assistance within agreed timeframes on 100% of occasions (budget 100%). |
| Cost | The Commission allocated 19% of its expenditure to this output (budget 15%). |
| OUTPUT 6 | Public understanding - promoting public understanding of the law and practice of securities. |
| Outcome | People understand the law and practice of securities and the Commission’s role in the markets. |
| Activities |
Publish The Bulletin, annual report and other documents,
|
| Quantity | The Commission published 4 issues of The Bulletin (budget for the year 4). The Commission dealt with 1454 miscellaneous inquiries from the public (budget for the year 1400). The Commission maintained and improved the website, and maintained relationships with the news media as required (budget "as required"). The Commission implemented and repeated the share scams / small business sub-project of its public education programme, and continued the youth sub-project. |
| Quality | Material in The Bulletin was interesting and relevant. Public inquiries were dealt with effectively. Information on the website was relevant and accurate. Relationships with the news media were constructive. The education subprojects successfully met their target objectives. |
| Timeliness | The Bulletin was published in July, October, January and April (budget July, October, January and April). 98 % of public inquiries not associated with ongoing work were actioned within 5 working days of receipt (budget 100%). Information on the website was up to date, and liaison with and responses to the news media met agreed timetables (budget "at all times"). Sub-projects of the public education programme were implemented and met agreed timetables. |
| Cost | The Commission allocated 13% of its expenditure to this output (budget 13%). |
| OUTPUT 7 | Takeovers Panel - providing administrative and support services by agreement. |
| Outcome | Services are provided to the Takeovers Panel in accordance with an annual agreement under the terms of a Memorandum of Understanding between the Panel and the Commission. |
| Activities | Provide services related to the Panel’s outputs including:
|
Quantity, Quality and Timliness for services were as provided for in the |
|
Memorandum of Understanding between the Panel and the Commission. |
|
| Cost | The Commission allocated 17% of its expenditure to this output and recovered this amount from the Panel (budget 14%). |
| B | GENERAL OBSERVATIONS |
|
Work Priorities Work priorities were established under the Commission’s strategic planning process. Work on hand was reviewed by the Commission monthly and new priorities set where necessary. All requests for new work were assessed promptly. When new work could not be undertaken because it was not within the Commission's terms of reference, because it was not within established priorities or because another agency might be able to provide more relevant or more effective service, applicants were notified promptly. Priority was given to enforcement and monitoring and market oversight, in particular to insider trading, the review of offer documents, and securities markets oversight. Priority was given to work on exemptions and authorisations. The Commission aimed to provide a prompt, relevant and effective service so that the reasonable expectations of market participants were met and their activities were not delayed or inhibited. |
|
The Auditor-General is the auditor of the Securities Commission. The Auditor-General has appointed me, Robert Cox, using the staff and resources of Audit New Zealand, to carry out the audit of the financial statements of the Securities Commission, on his behalf, for the year ended 30 June 2006.
Unqualified opinion
In our opinion the financial statements of the Securities Commission comprising the Statement of Financial Performance, Statement of Changes in Equity, Statement of Financial Position, Statement of Cash Flows, Notes 1 to 19 to the Financial Statements, Statement of Objectives, and the Statement of Service Performance:
The audit was completed on 20 July 2006, and is the date at which our opinion is expressed.
The basis of the opinion is explained below. In addition, we outline the responsibilities of the Members of the Commission and the Auditor, and explain our independence.
Basis of opinion
We carried out the audit in accordance with the Auditor-General’s Auditing Standards, which incorporate the New Zealand Auditing Standards.
We planned and performed our audit to obtain all the information and explanations we considered necessary in order to obtain reasonable assurance that the financial statements did not have material misstatements, whether caused by fraud or error.
Material misstatements are differences or omissions of amounts and disclosures that would affect a reader’s overall understanding of the financial statements. If we had found material misstatements that were not corrected, we would have referred to them in the opinion.
The audit involved performing procedures to test the information presented in the financial statements. We assessed the results of those procedures in forming our opinion.
Audit procedures generally include:
We did not examine every transaction, nor do we guarantee complete accuracy of the financial statements.
We evaluated the overall adequacy of the presentation of information in the financial statements. We obtained all the information and explanations we required to support our opinion above.
Responsibilities of the Members of the Commission and the Auditor
The Members of the Commission are responsible for preparing financial statements in accordance with generally accepted accounting practice in New Zealand. Those financial statements must fairly reflect the financial position of the Securities Commission as at 30 June 2006. They must also fairly reflect the results of its operations and cash flows and service performance achievements for the year ended on that date. The responsibilities of the Members of the Commission arise from the Public Finance Act 1989.
We are responsible for expressing an independent opinion on the financial statements and reporting that opinion to you. This responsibility arises from section 15 of the Public Audit Act 2001 and the Public Finance Act 1989.
Independence
When carrying out the audit we followed the independence requirements of the Auditor General, which incorporate the independence requirements of the Institute of Chartered Accountants of New Zealand.
In addition to the audit we have carried out an assurance related assignment in the area of financial delegations, which is compatible with those independence requirements. Other than the audit and this assignment, we have no relationship with or interests in the Securities Commission.
Matters relating to the electronic presentation of the audited financial statements
This audit report relates to the financial statements of the Securities Commission for the year ended 30 June 2006 included on the Securities Commission's website. The Members of the Securities Commission are responsible for the maintenance and integrity of the Securities Commission's website. We have not been engaged to report on the integrity of the Securities Commission's website. We accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website.
We have not been engaged to report on any other electronic versions of the Securities Commission's financial statements, and accept no responsibility for any changes that may have occurred to electronic versions of the financial statements published on other websites and/or published by other electronic means.
The audit report refers only to the financial statements named above. It does not provide an opinion on any other information which may have been hyperlinked to/from these financial statements. If readers of this report are concerned with the inherent risks arising from electronic data communication they should refer to the published hard copy of the audited financial statements and related audit report dated 20 July 2006 to confirm the information included in the audited financial statements presented on this website.
Legislation in New Zealand governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
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MURRAY AITKEN
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LAUREN CHRONICAN
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POLY BANERJEE
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CAROLINE COLE
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KAREN BARNES
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PRU CRAIG
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TOM BARNES
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TRACEY CROOKSTON
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MARGARET BEARSLEY
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ZOE DREVANYA
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MEGAN BLENKARNE
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MONIQUE EGLI COSTI
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RONELLE BOLTON
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TUI FARRELL
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ALASTAIR BOULT
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MARION HEMPHILL
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GEOFF BROWN
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NICOLA INGHAM
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NIGEL BRUNSDON
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SANJIV JETLY
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CATHERINE CHAPMAN
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JOCELYN MCKENZIE
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LIAM MASON
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JENNY PUGH
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GRAHAM MILLER
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REBECCA RIDDELL
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NORMAN MILLER
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PHILIP RODRIGUES
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KERRY MORRELL
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KATHRYN ROGERS
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NATALIE MUIR
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GAYLE STEERE
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JOHN MULRY
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JOYCE STEVENS
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JULIE MYERS
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DANIEL TAN
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NARMADA PATEL
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KEEGAN TOFT
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MEREDITH PEARSON
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DAVID TSAI
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JENNIFER FAWCETT LAWYER (TAKEOVERS PANEL) AND
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Printed from: http://www.seccom.govt.nz/publications/annrep-06/print-whole.shtml on Wednesday, 25-Nov-2009 17:31:43 NZDT