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2007 Annual Report
STATEMENT OF OBJECTIVES
for the year ended 30 June 2007
Performance of Securities Market Functions
"This appropriation covers the cost of purchasing the following functions by the Securities Commission:
- Enforcement - inquiring into suspected breaches of securities law and intervening in the interests of investors in accordance with statutory powers.
- Monitoring and market oversight - maintaining oversight of securities market activity and taking actions in accordance with statutory powers.
- Enforcement-based law and practice reform - reviewing securities law and practice and making recommendations for reform.
- 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.
- International recognition - 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.
- Public understanding and market presence - promoting public understanding of the law and practice of securities."
(The Estimates of Appropriations for the Government of New Zealand for the year ending 30 June 2007, B.5 Vol.1 p149)
STATEMENT OF SERVICE PERFORMANCE
Performance standards and measures for the outputs of the Commission
for the year ended 30 June 2007
| 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 |
Take enforcement action in the following areas:
- futures dealers,
- insider trading,
- market manipulation,
- secondary market disclosures (substantial security holder disclosure,
continuous disclosure, disclosure of trading by directors and officers),
- offer documents,
- financial intermediaries,
- illegal offers,
- contributory mortgages.
This is done by
- prohibiting advertising,
- removing offer documents from the market,
- taking civil enforcement action in the Courts,
- referring for prosecution,
- acting on behalf of overseas commissions,
- making other compulsory orders.
| |
Performance standards |
Performance measures
Enforcement |
Actual
2007 |
Budget
2007 |
| Quantity |
|
|
| Complete the enforcement actions that meet the Commission’s
case selection criteria, relating to the above matters. We expect
there will be 5 such actions. |
5 |
5 |
| Quantity |
|
|
| There is no successful challenge to the Commission’s decisions
or actions under the rules of natural justice. |
100% |
100% |
| Enforcement actions comply with the Commission’s internal
processes. |
Met |
Full compliance |
| Timeliness |
|
|
| Progress civil enforcement actions from investigation to the filing
of proceedings. |
Nil |
On average, within 24 months
of commencing an investigation |
| Complete other enforcement actions. |
4 months |
On average, within 6 months
of commencing an action |
| Cost |
|
|
| Expenditure allocated to enforcement work. |
3% |
7% |
|
| OUTPUT 2 |
Monitoring and market oversight – maintaining
oversight of securities market activity and taking actions in accordance
with statutory powers. |
| Outcome |
Integrity of, and confidence in, the securities markets are improved. |
| |
| Activities |
Maintain oversight of securities markets and take appropriate action
in the following areas:
- insider trading,
- market manipulation,
- NZX oversight,
- secondary market disclosures (substantial security holder disclosure,
- continuous disclosure and disclosure of trading by directors and officers),
- offer documents,
- financial intermediaries,
- illegal offers,
- contributory mortgages,
- corporate governance,
- futures dealers,
- financial reporting,
- regulatory co-ordination.
This is done by:
- reviewing practices of market participants and issuers,
- overseeing the operation of NZX,
- assessing referrals from NZX,
- monitoring market disclosures,
- reviewing offer documents and advertisements for securities,
- responding to public complaints,
- using compulsory information-gathering powers (inspections, summons),
- commenting publicly on market practice,
- accepting enforceable undertakings,
- reviewing financial reporting by issuers,
- reviewing corporate governance reporting,
- acting on behalf of overseas commissions.
| |
Performance standards |
Performance measures
Monitoring and market oversight |
Actual
2007 |
Budget
2007 |
| Quantity |
|
|
| Complete the monitoring and market oversight matters
that meet the Commission’s case selection criteria, relating
to matters listed above. We expect there to be 200 of these. |
117 |
200 |
| Complete NZX oversight review. |
2 |
1 time in the year |
| Complete financial reporting surveillance programme.
|
2 |
2 cycles in the year |
| Complete the review of disclosure by finance companies. |
1 |
1 |
| Advise the Minister on proposed changes
to NZX Conduct Rules. |
3 |
3 times in the year |
| Consider and comment on continuous disclosure
applications under the MOU with the NZX. |
6 |
12 times |
| Participate in Securities Act allotment validation
proceedings. |
2 |
As required |
| Quality |
|
|
| There is no successful challenge to the Commission’s
decisions or actions under the rules of natural justice. |
100% |
100% |
| Monitoring and market oversight inquiries comply with the Commission’s internal processes |
Full compliance |
Full compliance |
| Timeliness |
|
|
| Complete monitoring and market oversight matters.
|
2.4 months |
Within 3 months of commencing inquiries |
| Complete NZX oversight review. |
5.6 months |
Within 6 months of commencing review |
| Complete financial reporting surveillance programme.
|
10.2 months |
On average, within 9 months of each cycle commencing |
| Complete the review of disclosure by finance companies.
|
11 months |
Within 12 months of review commencing |
| Advice is provided to the Minister on approvals
of, or proposed changes to, the Conduct Rules of NZX Ltd within timeframes
agreed with the NZX and allowing the Minister to exercise powers within
the timeframes specified in the Securities Markets Act 1988. |
100% |
100% |
| Participate in Securities Act allotment validation
proceedings. |
Met |
Meet Court timetables |
Cost
|
|
|
| Expenditure allocated to monitoring and market
oversight work. |
40% |
35% |
|
| OUTPUT 3 |
Law 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:
- the Securities Act 1978:
- administration and efficiency,
- surveillance, detection and enforcement powers,
- exemption powers,
- the Securities Regulations 1983,
- the Securities Legislation Bill,
- investment advisers,
- insider trading and market manipulation,
- substantial security holder disclosure,
- financial intermediaries,
- regulation of stock exchanges,
- corporate governance,
- the Financial Reporting Act 1993.
Work, generally with NZICA and ASRB, on reviews of:
- international financial reporting standards,
- exposure drafts of financial reporting and auditing standards,
- the Financial Reporting Act 1993.
| |
Performance standards |
Performance measures
Law reform |
Actual
2007 |
Budget
2007 |
| Quantity |
|
|
| Make recommendations for securities law reform
and improved market practice in accordance with obligations under
the Securities Act 1978 and other relevant legislation. |
No recommendations were deemed necessary |
The Commission will make recommendations to comply
with its obligations under the Securities Act 1978 and with other
relevant legislation. The Commission’s contributions to law
reform will arise in particular from its experience gained in the
course of its enforcement work |
| Review exposure drafts of financial reporting
and auditing standards, and Financial Reporting Act. |
4 |
Review as required |
| Contribute to projects and reviews with the Ministry
of Economic Development, other government departments and interested
parties. |
Contributed to Ministry of Economic Development
projects being:
- Securities Legislation Bill
- Review of Financial Products and Providers
- Review of Financial Intermediaries
- Business Law Reform Bill
- Non-bank deposit takers
|
Contribution as required |
| Quality |
|
|
| Recommendations are appropriate, given
the prevailing securities law and practice. |
No recommendations were deemed necessary |
The Commission will base its work on thorough
and accurate
research into, and analysis of, existing law and practice |
All recommendations comply with the Commission’s
internal processes. |
Not applicable |
Full compliance |
| Timeliness |
|
|
| Provide information and responses to the Ministry
of Economic Development and others within agreed timeframes. |
100% |
100% |
| Cost |
|
|
| Expenditure allocated to law and practice reform
work. |
6% |
7% |
|
|
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, including futures exchanges and dealers, trustees and statutory supervisors; reviewing existing authorisations. |
| Outcome |
Securities law regimes are tailored to the needs of the market. |
| |
| Activities |
Receive and consider applications for exemption from securities law.
Review existing exemptions.
Undertake special review projects relating to policy on exemptions.
Authorise futures dealers and exchanges.
Consider amendments to futures exchange rules.
Approve NZFOX participant rules.
Approve trustees and statutory supervisors.
Review existing authorisations.
| |
Performance standards |
Performance measures
Exemptions and authorisations |
Actual
2007 |
Budget
2007 |
| Quantity |
|
|
Consider applications for exemptions, authorisations
and approvals of market participants.
|
Exemptions 63
Authorisations 6
Approvals 9
Designations 1 |
Exemptions 75
Authorisations 15 |
| Review existing exemption notices and authorisations.
|
4 |
As required |
| Quality |
|
|
The Regulations Review Committee does
not disallow notices, and notices are not successfully challenged
under the rules of natural justice.
|
100% |
100% |
Proportion of notices issued which comply with
the Commission’s internal processes.
|
100% |
100% |
| Timeliness |
|
|
Percentage of exemption applications and authorisations
completed within 6 weeks of receiving all necessary information or
within otherwise agreed target period
|
100% |
100% |
| Cost |
|
|
| Expenditure allocated to exemptions and authorisations
work. |
9% |
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:
- Executive Committee (Jane Diplock is Chairman of this committee),
- Asia Pacific Regional Committee (the Commission is Vice-Chairman of this committee),
- Taskforce on the Implementation of the IOSCO Objectives and Principles of Securities Regulation,
- Communications Group.
Meet and confer with overseas regulators and institutional investors.
Contribute to implementation of the FSAP recommendations for New Zealand.
Respond to enquiries from overseas about New Zealand’s regulatory
regime.
Participate in the international standard setting process by completing
comparative surveys on securities law and regulation.
Fulfill the obligations of an Appendix A signatory under the IOSCO MMoU.
Contribute towards trans-Tasman initiatives.
| |
Performance standards |
Performance measures
International liaison |
Actual
2007 |
Budget
2007 |
| Quantity |
|
|
| Take part in the work of IOSCO’s Executive
Committee, Asia Pacific Regional Committee and Taskforce on the Implementation
of the IOSCO Objectives and Principles of Securities Regulation. |
Participated, as
required |
Participate, as
required |
Meet regularly with overseas regulators and institutional
investors. |
Met and conferred,
as required |
Meet and confer,
as required |
| Contribute towards trans-Tasman initiatives. |
Contributed |
Contribute |
Contribute towards implementation
of the Financial Sector
Assessment Program (FSAP) recommendations for
New Zealand. |
Contributed |
Contribute |
| Quality |
|
|
| The Commission will present itself as a constructive and cooperative
member of the international community of regulators. Views expressed
to IOSCO will take into account the relevant New Zealand values and
principles. |
The Commission presented itself constructively and cooperatively
at the international level. Views expressed to IOSCO were congruant
with New Zealand’s values and principles. |
The Commission bases its presentations and views to the international
community of regulators on sound research, consultation and analysis. |
| Timeliness |
|
|
| Attendance at key meetings and responses to committees
provided within agreed timeframes. |
100% |
100% |
| Contribute towards trans-Tasman initiatives, within
agreed time. |
100% |
100% |
| Contribute towards implementation of the Financial
Sector Assessment Programme (FSAP) recommendations for New Zealand,
within agreed time frames. |
100% |
100% |
| Cost |
|
|
| Expenditure allocated to international liaison
work. |
15% |
14% |
|
| OUTPUT 6 |
Public understanding - promoting public understanding of the law and practice of securities |
| Outcome |
People understand the law and practice of securities. |
| |
| Activities |
Publish The Bulletin, annual report and other documents.
Respond to public inquiries.
Manage the website.
Maintain relationships with the news media.
Develop and implement a public education programme.
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Performance standards |
Performance measures
Public understanding |
Actual
2007 |
Budget
2007 |
| Quantity |
|
|
| Publish The Bulletin. |
4 |
4 times a year |
| Deal with inquiries from the public. |
1,338 |
1,400 a year |
| Manage the Commission’s website. |
Website was
available |
Website is
available |
| Maintain relationships with the news
media. |
Approached & responded to news media |
Liaison as required |
| Continue the Commission’s public education
programme. |
Youth - teacher resources & teacher training
projects completed
Youth - student resource project
implemented
New law – 2 projects implemented |
Develop and implement approved projects |
| Quality |
|
|
| Readers respond that The Bulletin
is interesting and relevant. |
No responses sought – next survey July 2007 |
80% of reader response to survey |
| Education programme meets target objectives. |
Objectives for completed youth projects met |
Objectives for each project are met |
| Inquiries are dealt with effectively. |
No complaints received |
Absence of material number of complaints |
| Information on the website is relevant and accurate. |
Website information approved by the Commission |
Accuracy and relevance of content |
| Relationships with the news media are constructive. |
Initiated contacts and responded constructively
to inquiries |
Commission and media enjoy mutual respect |
| Timeliness |
|
|
| The Bulletin is produced on time. |
July/Oct/Jan/Mar |
July/Oct/Jan/Mar |
| Education programme development is achieved to
agreed timetable. |
Youth projects above achieved agreed milestones |
Achieve subprojects milestones |
| Inquiries are handled within 5 working days of receipt. |
100% |
95% |
| Information on the website is up-to-date. |
Information published within 2 working days of
approval |
At all times |
| Meetings with, and responses to, news media meet
agreed timetable. |
At all times |
At all times |
| Cost |
|
|
| Expenditure allocated to public understanding
and market presence work. |
12% |
11% |
|
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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:
- review of Takeovers Code,
- approvals,
- exemptions,
- enforcement,
- market practice,
- public understanding,
- international liaison,
- administration.
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Performance standards |
Performance measures
Enforcement |
Actual
2007 |
Budget
2007 |
| Takeovers Panel |
|
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| Quantity, Quality and Timeliness |
|
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| Services are provided as per the MOU between the
Panel and the Commission. |
In accordance with the MOU |
In accordance with the MOU |
| Cost |
|
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| Expenditure allocated to providing
administrative services to Takeovers Panel. |
15% |
15% |
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