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 24 September 2008 to 15 October 2008. For further details on any matter in this report, just click on the hyperlinks in each item.

New Zealand Parliament

48th Parliament dissolved
The 48th Parliament was brought to an end on 3 October 2008. Section 20 of the Constitution Act 1986 provides that all parliamentary business before the House or its committees lapses on the dissolution or expiration of that Parliament, but may be reinstated in the next session of Parliament by a resolution of the House. This provision enables the new House to determine which business it will consider.
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Complaints over "New Zealand control of strategically important infrastructure" addressed
Parliament's Regulations Review Committee has presented its report on the complaints made by the New Zealand Business Roundtable and the Wellington Chamber of Commerce in March 2008 over the enactment of the Overseas Investment Amendment Regulations 2008. The regulations introduced an additional criteria for consent to an overseas investment in sensitive land, namely whether the overseas investment will, or is likely to, assist New Zealand to maintain New Zealand control of strategically important infrastructure on sensitive land. The complainants argued that the regulations were designed to affect the outcome of a bid by the Canadian Pension Plan Investment Board for a stake in Auckland International Airport Limited (AIAL) and argued that the regulations constituted an unusual and unexpected use of the regulation-making power under section 17(2)(g) of the Overseas Investment Act 2005.

The Committee upheld most aspects of the complaint but did not express a view on the merits of the AIAL decision, which was considered beyond the Committee's jurisdiction. The Committee recommends that the Government:

• review the Overseas Investment Amendment Regulations 2008 and consider whether the Overseas Investment Act 2005 should be amended to address strategically important infrastructure as a class of sensitive asset separate to sensitive land;
• introduce legislation amending the Overseas Investment Act 2005 either to omit section 17(2)(g), or to add to section 17(2)(g), a requirement to consult with relevant parties; and
• take steps to ensure that primary legislation does not allow regulations to be made adding factors or criteria listed in primary legislation, where such factors or criteria are to be taken into account in ministerial decision-making.

Click here to read the full report

The New Zealand Treasury

Government's financial statements for the year ended 30 June 2008
The Financial Statements of the Government of New Zealand for the year ended 30 June 2008 were released by the Treasury on 6 October. The Treasury has also prepared Summary Financial Statements.
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New secondary tax rate announced
Finance Minister Michael Cullen and Revenue Minister Peter Dunne announced that Cabinet has agreed to a new, bottom secondary tax rate of 12.5 per cent. The decision flows from the package of personal tax cuts announced in Budget 2008. The new rate comes into effect on 1 April 2010.
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Skip the rhetoric – show me the numbers
The recent turbulence in financial markets around the world has elevated the economy to the forefront of most voters' minds. For a Bell Gully overview of the tax packages currently being proposed by each political party click here.

Reserve Bank of New Zealand

Deposit guarantee scheme introduced
Finance Minister Michael Cullen announced on 12 October 2008 that, using his powers under the Public Finance Act, the Government has introduced an opt-in retail deposit guarantee scheme for a term of two years. The scheme covers deposits for New Zealand-registered banks and eligible non-bank deposit-takers (including banking societies, credit unions and finance companies). Reserve Bank Governor Dr Alan Bollard and Acting Secretary to The Treasury Dr Peter Bushnell announced on 15 October that "as the retail deposit guarantee scheme is being implemented, a number of policy issues are arising that are being addressed". Since the initial announcement, decisions have now been made to:

• tighten the requirements upon non-bank deposit takers;
• introduce a fee for finance companies that are rated below BB or are unrated on the indebtedness in excess of the indebtedness established on 12 October 2008;
• require all new entrants to the scheme to be BBB- rated, or better;
• cover non-resident depositors in New Zealand branches of overseas banks as at 12 October 2008;
• ensure that deposits with building societies and credit unions are covered; and
• include collective investment schemes (with certain conditions).

The following documents are now available:

• Operational details of New Zealand Deposit Guarantee Scheme;
• Questions and answers on New Zealand Deposit Guarantee Scheme;
• Registered Bank - Specimen-Crown Deed of Guarantee;
• Non-Bank Deposit Taker - Specimen - Crown Deed of Guarantee; and
• Information Required in Application for Crown Guarantee.

Click here to access the press releases
Click here for Bell Gully commentary on the Crown deposit guarantee scheme

Ministry of Economic Development (MED)

Reform of Securities Act 1978
MED has announced that its officials have begun scoping a broad project around the reform of the Securities Act 1978, which will include further consideration and seek decisions of the policy issues identified in the review. Some of the issues to be included in this project include:

• an examination of the definitions of a security and the relevant exemptions;
• an examination of the disclosure requirements on securities issuers;
• a review of the current roles and functions of the Securities Commission in light of, for example, the additional responsibilities from the Financial Advisers Act 2008;
• a review of the penalties and enforcement framework for the Securities Commission, given their new functions; and
• a review of the regulatory framework and supervision around fund managers and trustees.

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Update on financial sector reforms
The reviews which led to the recent financial sector reforms began with a review of the financial sector through the Review of Financial Products and Providers in 2005, and have resulted in the following legislation:

• The Reserve Bank of New Zealand Amendment Act 2008 which allows the Reserve Bank to impose minimum prudential standards upon non bank deposit takers, including finance companies, building societies and credit unions.

• The Financial Service Provider (Registration and Dispute Resolution) Act 2008 which requires financial service providers to register and join an approved dispute resolution scheme.

• The Financial Advisers Act 2008 which sets minimum standards for those giving financial advice and provides for financial advisers to be centrally regulated by the Securities Commission.

In addition to these legislative changes MED notes that officials are continuing to work on legislative drafting changes required for the insurance sector given the policy decisions made by ministers in late 2007.
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For a Bell Gully update on this new legislation click here

Financial Sector Consultants Panel
The MED is establishing a Financial Sector Consultants Panel to provide consultancy services to the Ministry on financial sector policy issues and is seeking proposals for membership on the Panel.
Click here for more details

Renewable Preference Regulations 2008 Discussion Paper
The Electricity Act 1992 was amended by the Electricity (Renewable Preference) Amendment Act 2008 (the Act). The Act implements a comprehensive restriction on the operation of new thermal plants (greater than 10MW that uses more than 20 per cent fossil fuels) for a period of 10 years to coincide with the establishment of the Emissions Trading Scheme, unless a specific exemption is obtained. The Act provides for regulations to prescribe processes and parameters for exemptions. The Renewable Preference Regulations Discussion Paper outlines the proposed design and substance for the regulations, including where applicable, the quantitative values. Submissions are due by Wednesday 5 November 2008.
Click here for further details and to access to the discussion paper

Funding the regulation of electricity, gas and airports under the revised Commerce Act
As part of the implementation of the new Part 4 of the Commerce Act 1986 (which puts in place a revised regulatory regime for electricity lines businesses, gas pipelines and major international airports), amendments are required to electricity and gas sector levy regulations to reflect the new regime. In addition, levy regulations are to be developed to levy regulated international airports for the costs of information disclosure. Options for levy design are being considered for development of revised regulations. MED has now released a discussion paper proposing options for levy design for the revised regulatory regime under Part 4 of the Commerce Act, and seeks the views of electricity lines businesses, gas pipeline businesses, major international airports and other interested stakeholders on their preferred options. Submissions are due by 14 November 2008. Revised levy regulations are to be in place by 30 June 2009.
For further information click here
Click here to access the discussion paper

Review of the Clearance and Authorisation Provisions within the Commerce Act 1986
MED has released a paper reporting back on the outcome of the review of the Clearance and Authorisation Provisions under the Commerce Act 1986. The paper also seeks:

• agreement to defer the drafting of the proposals requiring legislative change until a suitable legislative vehicle can be identified in 2009; and
• approval to make public the Cabinet papers in relation to the Commerce Commission (International Cooperation and Fees) Bill, introduced to Parliament on 9 September 2008.

Four legislative changes are recommended relating to the Commission's processes and third party appeal rights against Commission determinations:

• The statutory time frame for the Commission to make merger clearance determinations should be increased from 10 to 40 working days, broadly reflecting current practice.
• The requirement that parties halt conduct while the Commission is considering an application for authorisation of that conduct should be repealed, thus requiring the Commission to seek court orders if it considers the conduct is harmful to competition.
• Subject to the change noted below, the right of an applicant and third parties to call a Commission conference in the course of considering an application should be repealed (conferences will be called at the initiative of the Commission only). In addition, the Commission should be able to call a conference at any time during its proceedings and not just after the release of a draft determination.
• Standing of third parties to appeal against Commission determinations (currently linked to participation at a conference) should be amended as follows:
• for authorisation determinations, third parties will have standing if they can satisfy the court that they have a significant interest, for example, in the determination and they participated in the Commission's proceedings on that determination; and
• for clearance determinations, third parties should not have standing to appeal. These parties must instead rely upon judicial review.

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A New Zealand approach to clearing and settlement
The Settlement Systems, Futures, and Emissions Units Bill was read for a first time on 23 September 2008 and referred to select committee. The Bill provides for an opt-in designation process for settlement systems operating in New Zealand. The Bill also contains minor changes to the regulation of authorised futures exchanges and technical amendments relating to the legal treatment of emissions units. Parliament will seek comments on the Bill though the select committee process. Cabinet has also asked the Minister of Commerce to review broader issues around New Zealand's approach to the clearing and settlement of securities. The Minister has been asked to report back before the end of March 2009. The review will consider issues that fall outside the scope of the Settlement Systems, Futures and Emissions Units Bill.
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For Bell Gully commentary on the Bill click here

Ministry for the Environment

Regulations released for energy and industry in the emissions trading scheme
Draft regulations have been released covering obligations under the emissions trading scheme for participants in the stationary energy and industrial processes sectors. "Both sectors will have obligations under the emissions trading scheme from 1 January 2010, which will include collecting data and information to calculate businesses' greenhouse gas emissions. The regulations set out the methods and requirements for these activities, and contain the relevant default emission factors. They also cover the calculation methods for those who opt in to the emissions trading scheme to cover the coal or natural gas they use," says Dave Brash, General Manager of the government's Emissions Trading Group. An accompanying commentary outlines the major issues that officials considered when developing the regulations and why certain decisions were made. Submissions on the draft regulations close on 15 December 2008.
To access the regulations click here
To read the accompanying commentary click here

Securities Commission

Commission welcomes new financial adviser legislation
The Securities Commission has welcomed the passing of the Financial Advisers Bill by Parliament. "This will make financial advisers more accountable and boost investor confidence in the professionalism and integrity of financial advisers," Commission chairman Jane Diplock says. "It is an important piece of legislation in that it addresses a gap in regulation of financial services and aligns New Zealand with international best practice."
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Click here for the Commerce Minister's press release on the passing of the Bill
For a Bell Gully update on the new Act click here

Finance sector consumer complainants get redress
Consumers who have been unable to resolve a complaint with their financial adviser or service provider will have access to an independent and free dispute resolution service under the Financial Service Provider (Registration and Dispute Resolution) Act.
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For a Bell Gully update on the new Act click here

Responses to matters arising from the NZX Oversight Review 2007
In its NZX Oversight Review 2007 report released on 20 June 2008, the Securities Commission noted: "NZX, NZX Discipline and the Special Division have agreed to report to the Commission by 30 September 2008 in regard to matters arising from this review, and the Commission will publish such responses." NZX Special Division was not required to respond as there were no relevant matters arising from this review. See the responses from NZX and NZX Discipline.
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Securities Act and Securities Markets Act Exemption Notices

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

Securities Act (Global Investment Services Limited and Global Guardian Management Limited) Exemption Notice 2008
This notice, which came into force on 1 October 2008 and expires on 30 September 2013, exempts Global Investment Services Limited and Global Guardian Management Limited from:

• clause 7(5) of Schedule 3 of the Securities Regulations 1983; and
• clause 4(1)(a) of Schedule 7 of the Securities Regulations 1983.

The exemptions are in respect of units in one of the various unit trusts that are established under the laws of Australia and listed in the schedules of this notice.

Securities Act (Australian Registered Managed Investment Schemes) Exemption Notice 2008
This notice, which came into force on 26 September 2008 and expires on 30 September 2013, replaces the Securities Act (Australian Registered Managed Investment Schemes) Exemption Notice 2003 (the 2003 notice). This notice only carries over the exemptions relating to offers of securities in Australian registered managed investment schemes under distribution reinvestment plans. This notice also allows issuers who have previously relied on the 2003 notice to continue to rely on that notice until 30 September 2010. The Commission is of the view that the exemptions in the 2003 notice should remain only where those offers are not adequately covered by the Securities (Mutual Recognition of Securities Offerings—Australia) Regulations 2008 or there would be excessive compliance costs in relying on that regulatory regime. The Commission also notes that it recognises that Australian issuers that have previously offered securities in reliance on the 2003 notice require time to review requirements for reliance on the 2008 regulations and adjust their compliance procedures so that the introduction of the 2008 regulations does not inadvertently create unnecessary short-term compliance costs for these issuers. A transitional period is therefore provided for these issuers.

Securities Act (Southland Building Society) Exemption Notice 2008
This notice came into force on 8 October 2008 and expires on 30 September 2013. It exempts Southland Building Society (SBS) from sections 33(3), 37(1), 37A(1)(a), and 51 to 54B of the Securities Act 1978 (the Act) and regulation 14(2) of the Securities Regulations 1983, subject to specified conditions. Since SBS became a registered bank (on 7 October 2008), section 5(2C) of the Act applies to it, meaning that certain specified sections of the Act do not apply to SBS in respect of any redeemable shares it offers to the public to the extent that they consist of debt securities. The exemptions in this notice relate to the redeemable shares offered by SBS to the public to the extent that they consist of participatory securities, and are granted to SBS in order to ensure that SBS's compliance obligations in relation to the redeemable shares do not go beyond those of other registered banks.

Securities Act (Flight Centre (NZ) Limited) Exemption Notice 2008
This notice, which came into force on 10 October 2008 and expires on 30 September 2013, exempts, subject to conditions, Flight Centre (NZ) Limited and every person acting on its behalf from certain provisions of the Securities Act 1978 and the Securities Regulations 1983 in respect of the offer of notes under Flight Centre's employee note scheme.

The following Securities Markets Act Exemption Notice has been published for this period:

Securities Markets Act (Citigroup) Exemption Amendment Notice 2008
This notice, which came into force on 10 October 2008, changes the expiry date of the Securities Markets Act (Citigroup) Exemption Notice 2003 from 31 October 2008 to 31 October 2013. It also updates the references to sections of the Securities Markets Act that have changed because of amendments to that Act which came into force on 29 February 2008.

Takeovers Panel

Appointments to the Takeovers Panel
Commerce Minister Lianne Dalziel has announced two appointments to the board of the Takeovers Panel. Murdo Beattie and Andy Coupe have been appointed for terms of five years.
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Takeovers Code Exemption Notices

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

Takeovers Code (Zintel Group Limited) Exemption Notice 2008
This notice applies to acts or omissions occurring on or after 1 October 2008 and expires on 31 December 2008. The Takeovers Panel has granted an exemption from rule 6(1) of the Takeovers Code to Nicholas Peter Gordon and Richard Anthony Johnston in their capacities as trustees of the Gordon Family Trust in relation to a transaction arising from the division of matrimonial property.

Electricity Commission

Responsibility for Retailers' Wholesale Market Obligations: Discussion Paper
The Electricity Commission is proposing an amendment to Part A of the Electricity Governance Rules 2003 to resolve issues around how retailers interact with the wholesale market in respect of operations, trading and settlement. The issues have arisen because the Rules as amended from 1 May 2008 may make it more complex and costly for smaller retailers to participate in the wholesale market, and may unnecessarily restrict the ways in which the risk of retailer default can be managed. The Commission has issued a discussion paper setting out the details of the proposed amendment, the reasons for and the effects of the amendment, and the alternatives to the proposed amendment. Submissions on the paper close on 24 November 2008.
Click here to access the discussion paper

New Zealand Commerce Commission (NZCC)

Media releases

The NZCC has issued the following media releases:

Mergers and acquisitions

• Shell NZ cleared to acquire certain aviation fuel assets of Mobil Oil NZ
  The NZCC has cleared Shell New Zealand Limited to acquire Mobil Oil New Zealand Limited's Aerostop network assets.
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• Salmon Smolt NZ applies for clearance to acquire Silverstream Hatchery from NIWA
  The NZCC has received an application from Salmon Smolt New Zealand Limited seeking clearance to acquire the assets of Silverstream Hatchery from the National Institute of Water and Atmospheric Research Limited.
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• First Security parent company ISS applies for clearance to acquire part of Chubb
  The NZCC has received an application from ISS Holdings NZ Limited seeking clearance to acquire a portion of the manned (static and mobile) guarding business of Chubb New Zealand Limited.
  Click here for more

Market behaviour

• Dairy Industry Restructuring Act: Commission reaches draft determination on Kaimai and Grate Kiwi Cheese's dispute with Fonterra
  The NZCC has reached a preliminary view in a dispute between Fonterra Co-operative Group Limited and both Kaimai Cheese Company Limited (Kaimai) and Grate Kiwi Cheese Company Limited, meaning that, subject to the terms and conditions of regulated milk supply outlined in the Regulations, Fonterra will be obliged to supply Kaimai and Grate Kiwi Cheese with raw milk to their nominated delivery points.
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Telecommunications

• Commerce Commission reports to Minister on Sprint's compliance with Telecommunications Service Obligations
  The NZCC has reported to the Minister for Communications and Information Technology on Sprint International New Zealand Limited's performance in complying with the Telecommunications Service Obligations (TSO) Deed for Telecommunications Relay Services (TRS) for the period from 1 July 2007 to 30 June 2008.
  Click here for more

Consumer issues

• Consumers urged to approach cash back offers with caution
  The NZCC is urging consumers looking to purchase personal computers and printers to be cautious of cash back offers.
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• Commission concludes its investigation into 'light' and 'mild' cigarettes
  The NZCC has concluded its investigation into whether the use of the descriptors 'light' and 'mild' on cigarettes could be potentially misleading under the Fair Trading Act.
  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 proposes to allow food, garden waste management proposal
  The ACCC has issued a decision proposing to grant authorisation to the Inner Sydney Waste Management Group of Councils to jointly tender and contract for services to transfer, process and dispose of food and garden organic waste and to market and sell any end products in the relevant local government areas.
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• ACCC not to oppose BHP Billton's proposed acquisition of Rio Tinto
  The ACCC has concluded that the proposed acquisition of Rio Tinto Ltd and Rio Tinto plc. by BHP Billiton Ltd is unlikely to substantially lessen competition under section 50 of the Trade Practices Act 1974.
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• ACCC clears WPP bid for TNS subject to divestiture
  The ACCC will not intervene in the proposed acquisition of Taylor Nelson Sofres plc. by WPP Group plc., after accepting court-enforceable undertakings from WPP.
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Market behaviour

• ACCC proposes to grant authorisation to dairy price agreements
  The ACCC is proposing to authorise, for five years, milk pricing and milk purchasing policies between the Dairy Farmers Milk Cooperative and the Australian Cooperative Foods (ACF) to enable their continuation following the sale of ACF to National Foods.
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• ACCC issues draft water market rules and advice to Climate Change Minister
  The ACCC has issued its draft water market rules and draft advice to the Minister for Climate Change and Water on the water market rules for public consultation. The Minister has requested final advice from the ACCC by December 2008.
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• ACCC releases issues paper for water planning and management charge rules
  The ACCC has released its Issues Paper seeking submissions on the development of water charge rules for water planning and management.
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Telecommunications

• ACCC issues Telstra accounting separation report for June quarter 2008
  The ACCC has issued its twentieth report under the enhanced accounting separation regime for Telstra. These reports concern whether systematic discrimination could be occurring in the price or service quality offered to Telstra retail and wholesale customers. They are not intended to detect all forms of potentially anti-competitive conduct.
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• ACCC alleges hidden contracts, misleading conduct in telecommunications
  The ACCC has instituted proceedings in the Federal Court of Australia against 28 parties, including telecommunications companies and their related companies, finance companies and individuals, alleging exclusive dealing (third line forcing) and misleading and deceptive conduct.
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Access

• Telecommunications access dispute
  The ACCC has recently received notification of a telecommunications access dispute under Part XIC of the Trade Practices Act 1974. The dispute was notified by Primus Telecommunications Pty Ltd concerning the supply of the Unconditioned Local Loop Service by Telstra Corporation Limited.
  Click here for more

Consumer issues

• 'Text And Win' mobile subscription quiz TV ads misleading
  The ACCC has obtained orders by consent in the Federal Court in Sydney from TMG Asia Pacific Pty Ltd for false, misleading and deceptive conduct in advertising its premium rate mobile subscription quiz services.
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• Importer issues national recall of Indian cosmetics
  Continental Marketing Pty Ltd has issued a national voluntary recall of certain cosmetic products after the ACCC raised concerns that the products did not have the correct ingredient labelling.
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• Allphones gives undertaking to better inform franchisees
  Allphones Retail Pty Limited has undertaken to the Federal Court to stop negotiations with franchisees until it has fulfilled certain obligations. The undertakings follow the ACCC seeking urgent interlocutory orders against Allphones after the ACCC alleged misleading and deceptive conduct and alleged breaches of the Franchising Code of Conduct.
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