Securities Commission-Diplock responds

Yesterday I drew attention to an article concerning the role and activity of the Securities Commission which had been written by Brian Gaynor.

Gaynor was not overly impressed by the recent performance of the Securities Commission and thought it had not been pro-active enough over issues such as finance companies.

Jane Diplock, Securities Commission head, responded in a letter to the NZ Herald published on 30 December 2008.

Given the statements made and the importance of appropriate governance and regulatory oversight. It may be time for the government to undertake a comprehensive view of governing legislation.

The text of the letter is over the break.

Jane Diplock’s letter to the Herald, 30/12/2008

Brian Gaynor and a correspondent suggested the Securities Commission failed to “oversee” the prospectuses of failed finance companies.

The commission’s role is not and never has been to approve prospectuses or investment statements.

The responsibility for the correctness of information contained in prospectuses lies with the promoters and directors themselves.

Where the Securities Commission finds that a prospectus may contain false or misleading statements, its role is to enforce the law against those responsible.

The grief and anger of investors who have lost money in the finance company failures is understandable and in many cases warranted. It should be directed at those responsible for these companies and those who recommended investors invest in them.

These failures were often brought about by poor corporate governance, poor business models, miscalculation of risk, a falling property market and in some cases criminal activity. These companies operated under a very light handed regulatory regime, overseen by trustees, and investors were advised by an unregulated industry of financial advisers.

Following recent legislative changes, reforms in both of these areas are under way. In relation to Bridgecorp and Nathans, the commission has issued civil and criminal proceedings against nine directors. In relation to the civil proceedings, the commission has sought a determination of civil liability which may provide an avenue for compensation for investors who relied on the relevant prospectuses.

Other finance company directors are under investigation. This is the appropriate role of the commission and the commission is actively and energetically pursuing these matters.

Jane Diplock, chairwoman,
NZ Securities Commission

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