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Annual Report 30 June 1998

Title Page

Statement of Purpose

Notable Events

Members

Chairman's Review

Chief Executive's Report

Work Programme 1998/99

Financial Statements

Statement of Objectives

Statement of Service Performance

Report of Audit Office

Staff

Statement of Objectives

Statement of Service Performance

Statement of Objectives

Funds are to be appropriated in the year ending 30 June 1999 for the purposes of the Commission on the basis that we perform the following functions:

" Considering and deciding on the exercise of the Commission's statutory powers.
Reviewing practices relating to securities and commenting to any appropriate body, reviewing the law relating to bodies corporate, securities, and unincorporated issuers of securities and making recommendations to the Responsible Minister for changes to the law.
Promoting public understanding of the law and practices relating to securities.
Considering and deciding upon applications for exemption from the Securities Act 1978 and regulations made under that Act."

(Estimates of Appropriations for the Government of New Zealand for the year ending 30 June 1999, volume 1, page 211.)

For management and reporting purposes we have divided our work into the following categories:

Exemptions,
Market authorisations,
Enforcement,
Reform,
Public understanding,
Administration.

Statement of Service Performance

A. Performance Standards and Measures

Exemptions - considering and deciding on applications for exemptions from the provisions of the Securities Act and Regulations
Outcome	To encourage innovation and to promote confidence in securities markets.
Quantity	The Commission considered 159 general exemptions (budget 100 applications). The Commission considered 16 life insurance companies (budget 9 applications).
Quality	The Commission considered applications in accordance with legal requirements including, where appropriate, the rules of natural justice and fairness.
Timeliness	The Commission considered applications which were accepted for consideration in a timely manner, taking account of the needs of market participants and available resources.
Cost	The Commission allocated 32% (budget 28%) of its total funding to this output.
Market Authorisations - considering and deciding applications for authorisation of market participants, for example, futures exchanges and dealers, trustees and statutory supervisors .
Outcome	To encourage innovation and to promote confidence in securities markets.
Quantity	The Commission considered 6 applications (budget 6 applications) for authorisation.
Quality	The Commission considered applications in accordance with legal requirements including, where appropriate, the rules of natural justice and fairness.
Timeliness	The Commission considered applications in a timely manner, taking account of the needs of market participants and available resources.
Cost	The Commission allocated 3% (budget 2%) of its total funding to this output.
Enforcement - observing securities market activity and intervening in the interests of investors in accordance with statutory powers .
Outcome	Improved compliance with laws administered by the Securities Commission.
Quantity	The Commission completed 47 enforcement inquiries (budget 30 inquiries) and approved the prohibition of 25 company directors and managers (budget 40 approvals).
Quality	The Commission acted in accordance with market requirements and in compliance with legal requirements including, where appropriate, the rules of natural justice and fairness.
Timeliness	Subject to resources and work priorities the Commission completed inquiries promptly in order to minimise the commitment of resources by both market participants and the Commission and to ensure that, where appropriate, results were communicated to market participants and the public generally in a timely manner.
Cost	The Commission allocated 31% (budget 35%) of its total funding to this output.
Reform - reviewing securities law and practice and making recommendations for reform
Outcome	Improved operation of securities law and practices.
Quantity	The Commission issued statements or comments or reports on 16 matters (budget 25). It commented on an IOSCO preliminary consultative draft statement of objectives and principles of securities regulation. It led an IOSCO project on competition policy and securities regulation.
Quality	The Commission complied with its obligations under the Securities Act 1978 and with other relevant legislation. Any law reform work was carried out in consultation with the Ministry of Commerce and was based on accurate research into, and analysis of, the existing law and practice. Any recommendations applied the relevant values and principles, including where appropriate, the costs and benefits of the Commission's proposals according to the best available information and method of analysis. An objective was to simplify the expression and content of the law, so far as possible. The process was based on wide and open consultation with all affected interests, including the general public, or organisations representing sections of the public, to the full extent appropriate and practicable in the particular case. The Commission acted independently when making its recommendations.
Timeliness	Subject to resources and work priorities the Commission acted promptly when undertaking reform work.
Cost	The Commission allocated 23% (budget 27%) of its total funding to this output.
Public Understanding - promoting public understanding of the law and practice of securities
Outcome	To increase the community's awareness and understanding of securities market practice and the policy of the law.
Quantity	The Commission established a quarterly bulletin. It produced speeches, papers and reports as appropriate. It redesigned and expanded its web site to provide more information to the public. It supported other bodies promoting public understanding.
Quality	The Commission based its work on sensible interpretation of securities law and its application in a constructive and practical way to securities market practice.
Timeliness	The Commission met production deadlines for The Bulletin and other public understanding projects.
Cost	The Commission allocated 11% (budget 8%) of its total funding to this output.

B. General Observations

The activities of the Commission are described more fully in the main part of the Annual Report. The following additional comments may be helpful in assessing the performance of the Commission during the year.

Quantity

The commitment to exemption work was greater than expected. The full review of exemptions was a bigger task than expected. A number of exemptions were also necessary for classes of persons who had not previously been subject to the Securities Act, most importantly the trustees and managers of employer-sponsored superannuation schemes.

As a result, the time committed to enforcement work was reduced. There were delays in completing the major inquiry work which we were able to undertake. We are endeavouring to put ourselves in a position to increase resources available for enforcement work in the new year. Similarly, our level of work on reform was lower than budgeted. Most importantly, there was little progress on the proposed review of the Securities Regulations. We have asked the Ministry of Commerce to make proposals for the funding of this review, whether undertaken by the Commission or the Ministry.

Quality

All work was kept under continuing review by monthly reporting to Commission Members, by the frequent meetings of the Commission, a total of 124 during the 1998 financial year (including telephone conferences with decisions confirmed by resolutions in writing), and by the supervision of staff exercised by the Chief Executive. In addition we reported quarterly to the Minister of Commerce.

The Commission Members are appointed by the Governor General on the recommendation of the Minister having regard to their qualifications, experience, skill and reputation for integrity in the public market for securities.

There was one challenge to the work of the Commission, on a question of jurisdiction. Court proceedings were threatened as at balance date.

Timeliness

We reviewed our priorities at each monthly meeting of the Commission and our complete work programme quarterly.

We assessed all requests for new work promptly. Where we were unable to undertake work, because it was not within the Commission's terms of reference, because it was not within our established priorities or because we believed another agency may be able to provide more relevant or more effective service, we said so promptly.

Priority was given to items within work categories 1 and 2, Exemptions and Market Authorisations, to the extent that resources were available. We need to ensure that the activities of market participants are not delayed or inhibited because we are not able to provide a prompt, relevant and effective service.

Priority was also given under work category 3, Market Intervention, to proposals for the suspension of prospectuses or investment statements and the prohibition of advertisements where these were thought to be misleading. The benefit to the investing community of this type of action where an offer of securities is still current can be very great.

Priority was also given under category 3 to the requests of the Registrar of Companies, particularly requests relating to the inspection of documents of issuers or promoters of securities

Major achievements included:

completing review of all exemption notices by 30 September 1997 before the Securities Amendment Act 1996 came into force, and

completing consideration of all exemption notices required by 31 March 1998 when the transitional period under the Securities Amendment Act 1996 expired.