Offer terms should not constrain regulators
One of the main aims of
New Zealand’s securities regulatory
regime is to protect investors. The
Securities Commission and other
regulators have certain powers to act
in the interests of investors.
A recent offer included a term that an
investigation by a regulator might end
the issuer’s obligation to pay returns
on capital.
We queried the implications of this
for investors and for regulators. It
appeared to mean that any complaint
by an investor to a regulator, and any
investigation by a regulator, could cause
payment of returns to cease.
We queried whether such a provision
was appropriate in terms of the law or
public policy, and also whether these
consequences were sufficiently
clearly disclosed to investors. In this case,
the issuer immediately amended this
aspect of the offer.
In our view the terms of any securities
should not constrain regulators from
acting in the interests of investors.
Issuers and their advisers should be
aware that we will take appropriate
action on any offer that contains such
a term.
IOSCO* Meetings
Her Excellency the Governor-General, the Honourable
Dame Silvia Cartwright, will welcome securities regulators
from around the world to Wellington next month.
The visitors are members of IOSCO committees meeting
here on 7 & 8 February 2006 to progress IOSCO’s aims
to achieve consistent standards of securities regulation
worldwide and to increase the number of jurisdictions that
can cooperate to combat international fraud.
The Executive Committee, IOSCO’s governing body,
takes all decisions and undertakes all actions needed to
achieve IOSCO’s objectives. It promotes high standards
of regulation and effective cooperation. It works with
other international standard setters and financial
institutions to achieve common goals of financial stability
and development. Jane Diplock, Chairman of the New
Zealand Securities Commission, chairs the Executive
Committee.
The Technical Committee reviews regulatory issues related
to international securities and futures transactions and
coordinates practical responses to these concerns. These
issues relate to accounting and disclosure, secondary
markets, market intermediaries, enforcement and the
exchange of information, and investment management. M. Michel Prada, President/Chairman of the French
Autorite des marches financiers, chairs the Technical
Committee.
The Emerging Markets Committee Advisory Board
promotes the development and efficiency of emerging
securities and futures markets. It sets minimum standards,
prepares training programmes, and facilitates exchange of
information, technology and expertise. The Chairman of
the Capital Markets Board of Turkey, Mr Dogan Cansizlar,
chairs this Board.
* International Organization of Securities Commissions
(www.iosco.org)
IOSCO work on audit quality and auditor independence
Corporate fraud and accounting scandals overseas have
heightened focus on the regulation of auditors, audit quality and
auditor independence.
If investors and markets have doubts about the independence
of the auditor of a company’s financial statements, the value
they place on those financial statements may be seriously
compromised, and affect the integrity of the market.
The provision of non-audit services to an audit client is one factor
that can lead to perceived and actual conflicts of interest.
Jurisdictions have responded in various ways to improve audit
quality and independence. Some have strengthened laws and
regulations, adopted new laws or standards, or restricted or
banned the provision of certain non-audit services to audit clients. Some have set up auditor oversight authorities to strengthen audit
standards and enforcement.
Inconsistencies among jurisdictions in the regulation of
non-audit services can create problems for investors, preparers,
auditors and regulators. For example, an auditor may be able to
provide non-audit services to a client in one jurisdiction, but the
client may want to offer securities in another jurisdiction where
provision of non-audit services is not permitted.
To address these cross-border concerns and to improve audit
quality and auditor independence, IOSCO has set up a
committee, chaired by Jeffrey Lucy, Chairman of the Australian
Securities and Investments Commission.
As part of its work the committee is surveying IOSCO members
on the regulation of non-audit services offered by auditing firms.
The Commission is consulting with the New Zealand Institute of
Chartered Accountants and other relevant parties to provide New
Zealand’s input to the survey.
Results of the survey will show how non-audit services are
currently regulated around the world. This information will
help IOSCO members determine how best to deal with auditor
independence issues in both local and international contexts.
