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Annual Report 30 June 2000

IN THIS SECTION: STATEMENT OF OBJECTIVES STATEMENT OF SERVICE PERFORMANCE

CONTENTS: Statement of Purpose Notable Events Members Chairman's Review Chief Executive's Report New Zealand Securities Markets Enforcement Authorisations Exemptions Reform Internationl Liaison Public Understanding Administration and Staffing ----------------------------- Role, Functions and Powers Financial Statements Statement of Responsibility Statement of Objectives Statement of Service Performance Report of the Audit Office ----------------------------- Staff How to Contact Us

STATEMENT OF OBJECTIVES

for the year ended 30 June 2000

Funds were appropriated by Parliament for the year to 30 June 2000 for the stated purpose of:

"		Considering and deciding on the exercise of the Commission's statutory powers.
		Reviewing practices relating to securities, 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 2000, volume 1, page 193).

STATEMENT OF SERVICE PERFORMANCE

for the year ended 30 June 2000

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

OUTPUT 1	ENFORCEMENT - TO MAINTAIN OVERSIGHT OF SECURITIES MARKET ACTIVITY AND TO INTERVENE IN THE INTERESTS OF INVESTORS IN ACCORDANCE WITH STATUTORY POWERS
Outcome	To maintain and improve standards of behaviour in securities markets, increase compliance with securities law and thereby enhance integrity and strengthen confidence.
Activities included
	To observe securities market activity. To inquire into and if necessary take action including action on: offer documents, financial statements of public issuers, insider trading, substantial security holder disclosure, practices of investment advisers, practices of fund managers, requests from overseas commissions.
Quantity	The Commission completed 99 surveillance or enforcement actions (budget for the year 60).
Quality	The Commission acted in response to market needs and in accordance with the law including, where appropriate, the rules of natural justice. It based its work on what it considers to be sensible interpretations of securities laws and their application in a constructive and practical way to securities market practice. It acted independently.
Timeliness	The Commission endeavoured to complete its enforcement work promptly and, by doing this, minimised the resources committed by both market participants and the Commission. It ensured, where appropriate, that results of its inquiries were communicated promptly to market participants and the public so that they derived maximum benefit. It met agreed timetables for activity on behalf of overseas commissions.
Cost	The Commission applied an estimated 38.5 percent of its expenditure ($943,000) to this output (budget for the year 40 percent).

OUTPUT 2	AUTHORISATIONS - TO CONSIDER AND DECIDE ON APPLICATIONS FOR AUTHORISATION OF MARKET PARTICIPANTS
Outcome	To enhance the integrity of and strengthen confidence in securities markets.
Activities included
	To authorise futures dealers and exchanges. To consider amendments to exchange rules. To approve trustees and statutory supervisors.
Quantity	The Commission considered 20 applications (budget for the year 6).
Quality	The Commission considered applications in accordance with legal requirements including, where appropriate, the rules of natural justice.
Timeliness	The Commission accorded high priority to authorisation work. It considered applications in a timely manner taking into account the needs of individual applicants and timetables agreed with them.
Cost	The Commission applied an estimated 2 percent of its expenditure ($44,000) to this output (budget for the year 2 percent).

OUTPUT 3	EXEMPTIONS - TO CONSIDER AND DECIDE ON APPLICATIONS FOR EXEMPTIONS FROM THE PROVISIONS OF THE SECURITIES ACT AND REGULATIONS
Outcome	To remove impediments to the offering of securities in New Zealand, to promote flexibility in the development of best regulatory practice and to strengthen confidence in securities markets.
Activities included
	To receive and consider applications. To review existing exemptions. To undertake special projects.
Quantity	The Commission completed consideration of 80 applications (budget for the year 80) and issued 70 exemption notices.
Quality	The Commission based its work on what it considers to be sensible interpretations of securities law and its application in a constructive and practical way to securities market practice. It consulted extensively on new policy and on its formal expression in exemption notices. It acted independently and in accordance with the law including, where appropriate, the rules of natural justice.
Timeliness	The Commission accorded high priority to exemption work. From time to time it decided to consult publicly on exemption proposals. Subject to this it considered applications in a timely manner taking into account the needs of individual applicants and timetables agreed with them.
Cost	The Commission applied an estimated 19.5 percent of its expenditure ($482,000) to this output (budget for the year 26 percent).

OUTPUT 4	REFORM - TO REVIEW AND COMMENT ON SECURITIES LAW AND PRACTICE AND TO MAKE RECOMMENDATIONS FOR REFORM
Outcome	To improve the efficiency of New Zealand securities markets and to enhance integrity and strengthen public and institutional confidence, by promoting principled and cost-effective regulation and market practice.
Activities/Quantity
	The Commission published 7 papers and issued 6 comments on securities law and practice. The Commission also committed significant resources to: the Securities Act: - possible wider investigative powers, - possible wider exemption powers, - small and medium sized enterprises, communication of offer documents by electronic means, exposure drafts for financial reporting standards, substantial security holder disclosure law, review of the Securities Regulations with the Ministry of Economic Development, assistance to the Ministry on the implementation of a Takeovers Code, the rules of law for insider trading.
Quality	The Commission complied with its obligations under the Securities Act 1978 and with other relevant legislation. It based its work on accurate research into, and analysis of, the existing law and practice. Recommendations set out and applied the relevant values and principles including, where appropriate, the costs and benefits of the Commission's proposals according to the best available information and method of analysis. The Commission aimed to simplify the expression and content of the law. The process was based on wide and open consultation with all affected interests, including the general public or organisations representing sections of the general public. The Commission acted independently.
Timeliness	The Commission met the timetables of all those to whom its communications were addressed. The Commission met agreed timetables when working on specific projects with other agencies.
Cost	The Commission applied an estimated 16 percent of its expenditure ($390,000) to this output (budget for the year 11 percent).

OUTPUT 5	INTERNATIONAL LIAISON - TO PROMOTE NEW ZEALAND AS A WELL REGULATED COUNTRY. TO KEEP ABREAST OF DEVELOPMENTS IN GLOBAL STANDARD SETTING AND CONTRIBUTE THE COMMISSION'S VIEWS TO THIS PROCESS
Outcome	To increase New Zealand's standing in the international community as a responsible and well regulated country. To ensure that domestic policy and practice are developed in the context of a sound understanding of best international policy and practice. To maintain good working relations with overseas regulators. To strengthen public and institutional confidence in New Zealand markets.
Activities/Quantity
	The Commission participated actively in the work of IOSCO through its membership of the Asia Pacific Regional Committee and the Implementation Committee on Objectives and Principles of Securities Regulation. It received and actioned miscellaneous inquiries from overseas regulators about New Zealand regulatory policy and practice.
Quality	The Commission considers that it presented itself as a constructive and cooperative member of the international community of regulators. Views expressed to IOSCO and others took into account the relevant New Zealand values and principles.
Timeliness	The Commission met the timetables of all those to whom its communications were addressed. The Commission met agreed timetables when working on specific projects with other agencies.
Cost	The Commission applied an estimated 12 percent of its expenditure ($291,000) to this output (budget for the year 10 percent).

OUTPUT 6	PUBLIC UNDERSTANDING - TO PROMOTE PUBLIC UNDERSTANDING OF THE LAW AND PRACTICE OF SECURITIES
Outcome	To increase the community's awareness and understanding of securities market practice, the policy of the law and the importance of the Commission's work. To strengthen public and institutional confidence in New Zealand markets.
Activities included
	To publish The Bulletin and other documents. To maintain and develop the web site. To publish exemption notes on the web site. To respond to public inquiries. To maintain contacts with the news media and otherwise provide information to the public. To produce speeches, articles and presentations. To contribute to the Commission's 2000 Annual Report.
Quantity	The Commission published 4 issues of The Bulletin (budget for the year 4 issues). The Commission published 66 exemption notes on the web site. The Commission satisfied 1525 miscellaneous inquiries from members of the public (budget for the year 1000 inquiries). The Commission issued 23 statements to the news media.
Quality	The Commission based its work on observed market practice and on what it considers to be sensible interpretations of securities law. We aimed to simplify the expression and content of the law, so far as possible. We consider that material in The Bulletin and on the web site was current, relevant and useful.
Timeliness	The Bulletin, the Annual Report and other public understanding projects were produced on time. General inquiries from the public were actioned within 5 working days of receipt except 2 which required detailed research and information to be gathered from other agencies.
Cost	The Commission applied an estimated 12 percent of its expenditure ($295,000) to this output (budget for the year 11 percent).

B.   GENERAL OBSERVATIONS

Governance	The Commission Members are appointed by the Governor-General on the recommendation of the Minister having regard to their qualifications, experience, skill and reputation for integrity in the public market for securities. New appointments are made only after extensive advertising in the newspapers and personal interview by representatives of the responsible Minister and the Commission. All aspects of our work are kept under continuing review by regular reporting to Commission Members, by the frequent meetings of the Commission, a total of 161 during the 2000 financial year (11 regular monthly meetings and 150 quorum meetings including telephone conferences with decisions confirmed by resolutions in writing), and by supervision of staff by the Chief Executive. Where matters of significant policy arise at quorum meetings they are referred to a full meeting for further consideration by all Commission Members. The Commission reports quarterly to the Minister of Commerce. The Commission has an Audit Committee. This is chaired by a chartered accountant. It met on 3 occasions during the year.
Work Priorities	We review our priorities at each monthly meeting of the Commission and our complete work programme quarterly. We assess all requests for new work promptly. Where we are unable to undertake work, because it is not within the Commission's terms of reference, because it is not within our established priorities or because we believe another agency might be able to provide more relevant or more effective service, we say so promptly. Particular priority is given to work on exemptions and authorisations. We need to ensure that the activities of market participants are not delayed or inhibited because we are not able to provide a prompt, relevant and effective service. Priority was given under enforcement to the review of offer documents, the activities of investment advisers and insider trading.