Annual Report 30 June 1999

We surveyed readers of the Commission's quarterly newsletter. This showed that The Bulletin achieves its aim to provide useful and relevant information about the law and practice of securities.

Visitor activity on our web site doubled in the past year. There is significant interest from other countries, particularly the USA, Australia and Canada.

We established a practice of publishing on the web site an Exemption Note on each new exemption from securities law. This contains a statement of the Commission's reasons for granting an exemption and should lead to a better understanding of the Commission's policies. We developed and promoted a guide to exemption applications. We believe this will help people to ensure that their applications are clearly presented and include all necessary information.

The Commission uses the news media to publicise warnings to the public and to promote a better understanding of securities law. We respond to many requests for information both from within New Zealand and from overseas.

The Commission was party to one action in the Courts in the course of the year. This arose from the assistance that we were giving to the United States Securities and Exchange Commission in relation to share dealing in McCollam Printers Limited. Proceedings were taken by R. A. Johnston and G. C. Joynt (associates of E. J. Watson) to challenge our decision to provide assistance. The challenge was unsuccessful. However it raised a matter of considerable importance to the Commission in its ongoing work and its ability to cooperate with overseas commissions on mutual assistance. The Court gave a clear and helpful review of the nature of the Commission's powers and how they worked in practice.

Funding    The Commission was unable to make a reliable estimate of its income for the year at the beginning of the year. The Government grant had been reduced on the understanding that the Commission would have power to charge reasonably fully for exemption and authorisation work. However it was not at all clear when, or indeed whether, new fees regulations would be enacted. The Commission kept all expenditure under close scrutiny and, where practical, deferred project work to keep costs down.

In the event the new Regulations took effect in mid January 1999. This has enabled a more equitable cost recovery for exemptions and authorisations and increased revenue to the Commission.

Staff    Two members of staff left during the year and one retired. Two full time staff were appointed. We currently have 13 full time and three part time staff. One staff member attended the Australian Securities and Investments Commission's Summer School in Melbourne. Various staff members attended professional development courses during the year.

Information Technology    The office computer network was upgraded during the year. An electronic document management system was installed to give easy access to and retrieval of electronically stored information. The project, including staff training, was successfully completed on time and within budget.

Year 2000    We have taken steps to identify the potential impact of the Year 2000 issues on our information systems and general operations. We have conferred with our major product and service providers. We are satisfied that the issues are being addressed.

On the basis of assurances given, we believe that our internal operating systems are Year 2000 ready. A principal reason for upgrading the computer system has been to ensure that it is Year 2000 ready.

We continue to secure such assurances as we can from external service providers, in particular our bankers, landlord, payroll agent, telecommunications company and internet service provider.

The Commission depends on the information it receives from its providers. It is therefore unable to give assurances to those who depend on its services that its systems and those of third parties on which it directly or indirectly relies will be Year 2000 ready.

The Ministry of Commerce has completed its review of our role and functions and reported to the Minister for Enterprise and Commerce. The Minister has informed us that he considers the Commission to be a cost-effective and efficient regulator of New Zealand securities. The role and functions of the Commission include:

• to keep under review the law relating to bodies corporate, securities and unincorporated issuers of securities and to recommend changes to the Minister for Enterprise and Commerce,

• to keep under review practices relating to securities and to comment to any appropriate body,

• to cooperate with overseas securities commissions,

• to promote public understanding of the law and practice of securities, and

• to perform any other functions conferred by statute law.

To perform these functions we have a number of powers. These include:

• to receive evidence as to securities law and practice, with power for this purpose to summon any person to appear before us,

• to publish any report or comment made by us in the course of the exercise of our functions,

• to exempt persons from compliance with provisions of the Securities Act or of regulations under the Act,

• to suspend or cancel a registered prospectus,

• to suspend or prohibit an investment statement,

• to prohibit advertising of any securities,

• to approve trustees and statutory supervisors,

• to inspect the documents of issuers and promoters of securities and of investment advisers,

• to hear appeals against certain decisions of the Registrar of Companies,

• to recommend regulations,

• to administer aspects of insider trading and substantial security holder law,

• to administer the law relating to futures contracts,

• to recommend approval of electronic systems for the transfer of securities,

• to receive financial statements of issuers which do not comply with the Financial Reporting Act 1993.

The Commission may also consider certain matters arising under the Corporations (Investigation and Management) Act 1989 (in particular, directions to "at risk" corporations and declarations of statutory management), and under the Companies Act 1993 (in particular, the prohibition of directors, promoters and managers of companies).

J. Farrell
Chief Executive