In the last few days I have drawn attention to an intial article by Brian Gaynor in the NZ Herald on the Securities Commission and then a letter in response by Jane Diplock, Chairwoman of the Securities Commission.
Last Saturday, Mr Gaynor responded to Ms Diplock in another NZ Herald article.
He was less than impressed with the letter from Ms Diplock writing:-
Diplock wrote that the finance company failures were due to poor corporate governance, flawed business models, miscalculation of risk, falling property prices, some criminal activity and a light-handed regulatory regime that was overseen by trustees and unregulated financial advisers.
In other words, the commission isn’t taking any responsibility for the finance company debacle even though one of its main objectives is “to strengthen investor confidence and foster capital investment in New Zealand by promoting the efficiency, the integrity and cost-effective regulation of our securities markets”.
Towards the end of his article Gaynor notes:-
Unfortunately, the commission has consistently given the impression that it doesn’t want to act until a crash has occurred, until there is a mess to mop up. It continually argues, as Diplock did in her letter to the Herald, that it has limited powers. The glass is half empty, rather than half full, as far as the commission is concerned.
Yet the regulator has huge powers that it rarely uses.
One of its roles is to review securities laws and make recommendations for reform to the Ministry of Commerce. If the commission believes it is powerless to achieve its objective “to strengthen investor confidence and foster capital investment in New Zealand” then it should go to the Government and insist that it be given the tools to achieve this aim.
He gives examples of where he considers the Securities Commission has failed as well as saying he thinks Diplock did not really address the issues he raised in the first article, as exemplified by his final paragraph:-
I asked Diplock to take up this challenge but the tone of her Herald letter suggests she is still far more interested in making excuses for not taking affirmative action, particularly in relation to offer documents that are misleading, confusing or deceptive
It will be very interesting to see if Ms Diplock responds again. Personally, I am of the view that Mr Gaynor appears to have a point.