The Bell Gully Regulator Report lists recent changes, decisions and developments at the main New Zealand corporate, commercial and competition regulatory bodies and also lists relevant updates from the Australian Competition and Consumer Commission. This edition of the Regulator Report covers the period from 16 October 2008 to 13 November 2008. For further details on any matter in this report, just click on the hyperlinks in each item.

The Ministry of Economic Development (MED)

Commencement of various provisions of the Financial Advisers Act
The Financial Advisers Act Commencement Order 2008 was made on 20 October and brings certain machinery provisions of the Financial Advisers Act 2008 into force on 5 December, in advance of the commencement of the main provisions of the Act. These include most of the outline and interpretation provisions; the provisions relating to the establishment of the Commissioner for Financial Advisers and the committee that has the function of producing a code of professional conduct for financial advisers; certain regulation-making and fee-making powers; and certain amendments to the Securities Act 1978 in relation to the functions and membership of the Securities Commission (namely Part 1 and sections 7 to 13, 78 to 95, 152 to 155, and sections 163(1) to (6)).
Click here to access the Order

Financial Advisers Bill and Financial Service Providers (Registration and Dispute Resolution) Bill: Supplementary Order Papers Report
MED has released its report to the Minister of Commerce seeking the Minister's agreement to outstanding policy for inclusion in the Supplementary Order Papers for the Financial Advisers Bill and the Financial Service Providers Bill.
Click here to access the report

Nominations or expressions of interest for the role of Commissioner for Financial Advisers
The MED is seeking nominations or expressions of interest for the role of Commissioner for Financial Advisers. This position has been established under the Financial Advisers Act 2008. The Commissioner will sit on the Securities Commission but has separate statutory functions set out in the Financial Advisers Act. The deadline for submitting applications is 5pm on Monday 17 November 2008.
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Submissions invited on CER rules of origin review
The rules of origin (ROO) which govern trade under the Australia New Zealand Closer Economic Relations Trade Agreement (signed in 1983 and commonly known as CER) are under review by the MED and the Ministry of Foreign Affairs and Trade. ROO are the criteria used to define where a product was made and are used to determine whether a product qualifies for tariff-free entry when being traded between New Zealand and Australia. The current ROO were finalised in 2006 and entered into force on 1 January 2007. Submissions close on 17 December 2008.
Click here for more

The New Zealand Treasury

The wholesale funding guarantee facility
The Minister of Finance announced on 1 November that the Crown will offer a wholesale funding guarantee facility to financial institutions that have an investment grade credit rating and have substantial New Zealand borrowing and lending operations. The facility will operate on an opt-in basis, by institution and by instrument. New issues of senior unsecured negotiable or transferable debt securities will be eligible for inclusion. A guarantee fee will be charged, differentiated by the credit rating of the issuer and the term of the security being guaranteed. The Treasury has released details of the wholesale funding guarantee facility, including operational guidelines and policy guidelines.
Click here for further information

Retail deposit guarantee scheme
The Treasury and Reserve Bank announced on 22 October Amendments to the Crown Retail Deposit Guarantee Scheme and the Treasury has published related Questions and Answers and Policy Guidelines. Potentially eligible institutions can access application documents for banks and non-bank deposit takers and for collective investment schemes on the Treasury's website.
Click here for more

Click here for the most recent Bell Gully commentary on the Retail Deposit Guarantee Scheme and click here for earlier commentary.

Securities Commission

Risk assessment and management in financial market turmoil
Jane Diplock AO, Chairman of the Securities Commission, gave a presentation to the 4th National Conference on Risk Management in Wellington on 6 November entitled "Risk Assessment and Management in Financial Market Turmoil". In her speech, Diplock addresses four areas of risk which have played a part in the recent market meltdown: credit risk, liquidity risk, market risk and operational risk. On the international front, she refers to her role as Chairman of the International Organization of Securities Commissions (IOSCO) and the work that the organisation has done to better understand the issues and to come up with effective measures. She notes a recent IOSCO report published in May which found that many institutional investors and investment banking firms had inadequate risk modelling and internal controls in place to understand and address the risks they were assuming when using the new forms of asset-backed securities and CDOs, CDSs, sub-prime mortgage derivatives and other types of structured finance products. They also relied heavily, or even exclusively, on external credit ratings for their risk analysis and had inadequate balance sheet liquidity even when adequately capitalised. In the local market, Diplock provides examples of recent findings by the New Zealand Securities Commission. These include situations of companies which were poorly capitalised and faced liquidity risk in a downturn. Other instances involved companies with too few directors; an ineffective (or no) audit committee; no independent directors; and in some cases, where there were independent directors, they failed to stay adequately informed or took insufficient interest in the business.
Click here to read a full transcript of the speech

October 2008 issue of The Bulletin published
The Securities Commission has published the October 2008 issue of its quarterly newsletter The Bulletin. This issue includes commentary on:

• The new regime for financial advisers
• The Reserve Bank of New Zealand Amendment Act 2008
• Tranz Rail settlements
• IOSCO responses to market turmoil
• Recent Securities Act charges against Bridgecorp executive directors Rodney Petricevic and Robert Roest and against the directors of National Finance 2000 Limited, Trevor Ludlow, Anthony Banbrook and Carol Braithwaite
• The Securities Commission's recent exemptions to facilitate disclosure by issuers about the New Zealand deposit guarantee scheme
• A reminder that the Commission is reviewing how well issuers respond to significant reporting challenges in the current market as part of its surveillance programme

Click here to read this issue of The Bulletin

Securities Act Exemption Notices

The following Securities Act Exemption Notices have been published for this period:

Securities Act (Overseas Employee Share Purchase Schemes) Exemption Amendment Notice (No 3) 2008 (SR 2008/428)
This notice, which came into effect on 7 November, amends a condition of the Securities Act (Overseas Employee Share Purchase Schemes) Exemption Notice 2002 by allowing the same employee share purchase scheme (or parallel scheme) offered in the jurisdiction in which the overseas issuer is incorporated or listed to be either offered at the same time as the New Zealand offer, or at an earlier time. Under the terms of the previous condition, the offer in the overseas jurisdiction under a parallel scheme must have been made at the same time as the offer in New Zealand.

Securities Act (New Zealand Deposit Guarantee Scheme) Exemption Notice 2008
This notice exempts financial institutions that are a party to a deed of guarantee entered into with the Crown under the New Zealand deposit guarantee scheme from certain provisions of the Securities Act 1978 and the Securities Regulations 1983, in order to facilitate the operation of that deposit guarantee scheme. The exemptions are intended to facilitate simple disclosure to investors about any issuer's coverage under the scheme. The exemptions outline the types of statements which must be included in an advertisement and a registered prospectus so that there is standardised information about the scheme for investors. The conditions of the exemptions require issuers to advise investors about their coverage under the scheme, refer investors to an authoritative source of information about the scheme, and prevent descriptions of the scheme that are inconsistent with official descriptions.

Securities Act (Contact Energy Limited) Exemption Amendment Notice 2008 (SR 2008/419).
This notice extends the expiry date of the principal notice, the Securities Act (Contact Energy Limited) Exemption Notice 2003, from 31 October 2008 to 31 October 2013.

Financial Reporting Act Exemption Notices

Under section 35A of the Financial Reporting Act 1993, the Securities Commission has issued the following Financial Reporting Act Exemption notices:

Financial Reporting Act (Overseas Companies) Exemption Amendment Notice 2008 (SR 2008/420)
This notice, which came into force on 31 October 2008, extends exemptions from various provisions in the Financial Reporting Act 1993 to directors of certain issuers incorporated in Australia. This notice extends the exemptions outlined in the principal notice, which only granted exemptions to the directors of certain issuers incorporated in the United States of America and the United Kingdom. The effect of the exemptions is to provide relief to the directors of issuers incorporated in those jurisdictions that have offered or offer securities in New Zealand under the Securities Act (Overseas Companies) Exemption Notice 2002 or other overseas companies notices that correspond to that notice from the preparation, content, auditing, and filing requirements of the Financial Reporting Act. These exemptions are granted on the conditions that the issuer prepares and publicly files financial statements that they are required to prepare under the financial reporting requirements of their respective jurisdictions. In the case of Australian issuers to whom this notice applies, those financial reporting statements will comply with the International Financial Reporting Standards as adopted by Australia, and will be audited in accordance with the requirements set out in Australia's legislation.

Financial Reporting Act (General Electric Capital Corporation Group) Exemption Notice 2008 (SR 2008/418)
This notice, which came into force on 31 October 2008 and expires on 31 October 2013, exempts certain subsidiaries of General Electric Capital Corporation (GE Capital) from being issuers, under section 4(1)(ba) of the Financial Reporting Act 1993, of any offer of debt securities to the public by virtue of being recipients of money raised by GE Capital New Zealand Funding. The effect of the exemption is that each subsidiary of GE Capital to whom it applies will not be required to file individual audited financial statements. The exemption is subject to specified conditions.

Takeovers Panel

Takeovers Code Exemption Notices

The following Takeovers Code Exemption Notice has been published for this period:

Takeovers Code (Phitek Systems Limited) Exemption Notice 2008
This notice came into force on 22 October 2008 and expires on 5 February 2011. The Takeovers Panel has granted exemptions for:

• K One W One Limited, TMT Ventures Limited, and VIF/TMT Ventures Limited from rule 7(d) of the Takeovers Code to the extent that rule 7(d) requires the notice of meeting to be in accordance with rule 16(b) of the Code in respect of any increase in the percentage of voting rights held in Phitek Systems Limited (Phitek) under a proposed rights issue and the exercise of any resulting options; and
• Phitek from rule 16(b) of the Code in respect of the notice of meeting.

Electricity Commission

Consultation on the urgent amendment to part J of the Rules: the seasonal adjustment shapes issue
The Minister of Energy made an urgent adjustment to the Electricity Governance Rules 2003 on 18 September to insert a new rule, 11.4.9 in Part J of the Rules. The adjustment resolves an unanticipated issue with the seasonal adjustment shapes that arose following the rule changes which came into force on 1 May 2008. The Electricity Act 1992 requires that the Electricity Commission must consult on any rule amendment made urgently and is now doing so for this rule change. Submissions on the consultation paper close on 28 November 2008.
Click here for further details

Review of System Security Forecast
The Electricity Commission and Transpower are reviewing aspects of the System Security Forecast (SSF) with a view to amending the rules in Part C of the Electricity Governance Rules 2003 to reduce the SSF forecast horizon from ten years to a period of not less that three years. They are also considering including a set of SSF Guidelines that would provide further details on aspects of the SSF and the approach to its preparation. The Guidelines would sit outside the Rules. Submissions on the proposed Rule amendments and the Guidelines outlined in a consultation paper close on 12 December 2008.
Click here for further details

New Zealand Commerce Commission (NZCC)

Media releases

The NZCC has issued the following media releases:

Industry regulation and regulatory control

• Commerce Commission releases draft requirements paper on regulatory financial reporting by Telecom
  The NZCC has issued a draft paper on the regulatory reporting requirements for the accounting separation of Telecom. The draft paper outlines the financial information that Telecom must provide and the conditions it must follow when preparing this information.
  Click here for more

• Gas authorisation released
  The NZCC has released the Authorisation for the Control of Supply of Natural Gas Distribution Services by Vector Ltd and Powerco Ltd.
  Click here for more

• Electricity lines businesses: Commerce Commission releases information disclosure requirements
  The NZCC has issued revised information disclosure requirements for electricity distribution businesses.
  Click here for more

Mergers and acquisitions

• Commerce Commission declines to give Tegel Foods clearance to acquire Brinks
  The NZCC has declined to give clearance for Tegel Foods Limited to acquire the assets and undertaking of the poultry businesses of P H Van den Brink Limited, VDB Industries Limited, Brinks South Island Limited, Southland VDB Limited, and BAT Promotions Limited, collectively known as Brinks.
  Click here for more

• Salmon Smolt NZ cleared to acquire assets of Silverstream Hatchery from NIWA
  The NZCC has granted clearance to Salmon Smolt New Zealand Limited to acquire the assets of Silverstream Hatchery from the National Institute of Water and Atmospheric Research Limited (NIWA).
  Click here for more

• First Security parent company ISS cleared to acquire manned guarding business of Chubb
  The NZCC has cleared ISS Holdings NZ Limited (ISS) to acquire a portion of the manned (static and mobile) guarding business of Chubb New Zealand Limited (Chubb).
  Click here for more

Telecommunications

• ACCC draft decision to reject Telstra's ULLS undertaking
  The ACCC has issued a draft decision proposing to reject Telstra's undertaking application for a $30 ULLS monthly charge for metropolitan areas. The ULLS monthly charge relates to the rent which Telstra charges competitors to access the copper wire from the telephone exchange to a house or office. Such access allows the provision of competitively priced voice and broadband services to consumers and businesses.
  Click here for more

• Commerce Commission releases second report on broadband quality
  The second quarterly report on broadband quality has been released by the NZCC. Commissioned from broadband measurement consultancy Epitiro and ICT analysts IDC, the report examines the quality of broadband service provided by New Zealand's internet service providers.
  Click here for more

• Commerce Commission consults on telecommunications market monitoring reports
  The NZCC is seeking feedback on its quarterly and annual telecommunications market monitoring reports. These reports aim to give a broad indication of what progress has been made towards achieving competitive prices for telecommunications services.
  Click here for more

• Commerce Commission decides to investigate mobile termination
  The NZCC has announced it is commencing an investigation into whether mobile termination access services should be regulated.
  Click here for more

• Early registration opens for Next Generation Networks conference
  Registration for the Commerce Commission's Next Generation Networks conference is open. Early registration is recommended as attendance at the conference, which will be held at the Langham Hotel in Auckland on 26 and 27 February 2009, will be free and places are limited.
  Click here for more

Consumer issues

• Commerce Commission update on Wings and Wheels refund process
  The NZCC has announced an update to the process for people seeking refunds for tickets for the postponed airshow Wings and Wheels over Waikato.
  Click here for more

• Real estate company fined for misleading 'buyer enquiry over' ads
  A Wellington real estate company, Celestine Realty Limited, has been fined $7,500 in the Wellington District Court for breaches of the Fair Trading Act in relation to the use of the term 'buyer enquiry over'.
  Click here for more

Australian Competition and Consumer Commission (ACCC)

ACCC media releases

The ACCC has issued the following media releases:

Mergers and acquisitions

• ACCC stops proceedings against ABC Learning
  The ACCC has announced that it has discontinued proceedings against ABC Learning Centres for breach of court enforceable undertakings.
  Click here for more

• ACCC not to oppose Aurora Energy's acquisition of Tamar Valley power station project
  The ACCC concluded that the acquisition of the Tamar Valley Power Station project by Aurora Energy is unlikely to substantially lessen competition under section 50 of the Trade Practices Act 1974 in the markets in which they compete.
  Click here for more

Market behaviour

• ACCC launches its first cases in alleged air freight cartel
  The ACCC has instituted separate proceedings in the Federal Court, Sydney, against Qantas Airways Limited and British Airways PLC seeking penalties for alleged price fixing between 2002 and early 2006.
  Click here for more

• ACCC proposes to authorise Queensland lottery agents collective bargaining arrangements
  The ACCC has issued a draft determination proposing to authorise the continued collective negotiation by Lottery Agents Queensland Ltd of the terms and conditions of agency agreements between Queensland lottery agents and the Golden Casket Lottery Corporation.
  Click here for more

• ACCC allows price agreements with dairy farmers
  The ACCC has granted authorisation for the continuation of milk pricing and milk purchasing policies between Dairy Farmers Milk Co-operative Limited and Australian Cooperative Food Limited following the sale of ACF to National Foods.
  Click here for more

Telecommunications

• ACCC rejects Telstra's 'Optus HFC exemption' application
  The ACCC has issued a final decision to reject Telstra's application for exemption from its obligations to supply regulated fixed line services to Optus within Optus' HFC cable network footprint.
  Click here for more

• ACCC grants Telstra further wholesale voice exemptions
  The ACCC has decided to grant Telstra an exemption from its obligations to supply a "declared service" in parts of metropolitan Australia, subject to a number of conditions.
  Click here for more

Consumer issues

• Autobarn receives a sober warning
  The ACCC has accepted a court enforceable undertaking from Autobarn Pty Ltd after concerns about representations made on the packaging of a personal breathalyser.
  Click here for more

• eBay trader recalls bunk beds
  Pacific Impexp Services, trading on eBay as "bang_4ur_buck", has conducted a national voluntary recall of two of its bunk bed models after the ACCC raised concerns that the beds did not meet the mandatory product safety standard.
  Click here for more

• Bon Levi imprisoned for 10 months following ACCC action for contempt of court
  The Federal Court of Australia has sentenced Mr Bon Levi to 10 months' imprisonment, with six months suspended, after the ACCC successfully prosecuted him for five counts of contempt of court.
  Click here for more

• ACCC grants authorisation to allow capped fees at ACT CALMS clinics
  The ACCC has issued a determination granting authorisation to enable CALMS Ltd to continue to use a 'not to exceed' fee schedule (capped fee arrangement) for after hours primary medical care in the ACT.
  Click here for more

• ACCC proposes to grant authorisation to dentists for fee setting in shared practices
  The ACCC is proposing to grant authorisation to enable dentists and dental specialists in shared practices to agree on the fees they charge their patients.
  Click here for more

• Coordinated review of two-price bed advertising
  The ACCC and state and territory offices of fair trading have been reviewing in-store and catalogue advertising of a number of bed retailers across Australia looking at claims consumers can buy beds for less than the normal price.
  Click here for more