The Regulator Report lists recent key changes, decisions and developments at the main New Zealand corporate, commercial, competition and energy regulatory bodies as well as selected Australian developments. This edition of the Regulator Report covers the period from 31 March to 20 April 2010.

General

Seminars to help businesses prepare for finance sector regime
Seminars to provide practical information for those affected by new regulation of the financial services sector regime will run in four New Zealand cities in May. The CCH series will be presented by Bell Gully partners Rachel Paris, Haydn Wong and David Craig, specialists across the financial services and investment products sector.

Entitled Financial Advisers Act – Are you prepared?, the seminars are designed to help organisations and individuals prepare for the full implementation of changes brought by the Financial Advisers Act 2008 and the Financial Service Providers (Registration and Dispute Resolution) Act 2008.

The speakers will identify who is affected and by which changes, and outline compliance obligations and other key issues for consideration. Among those directly impacted by changes are financial advisers, finance and insurance companies and banks.

The series will run as follows:

11 May: Auckland
12 May: Hamilton
18 May: Wellington
20 May: Christchurch

For further details click here to download the brochure or visit the CCH website.

The Treasury

PGG Wrightson Finance and South Canterbury Finance approved for extended Retail Deposit Guarantee Scheme
The Treasury has approved PGG Wrightson Finance Limited and South Canterbury Finance Limited for the extended Retail Deposit Guarantee Scheme. The extension scheme starts immediately after the current Retail Deposit Guarantee Scheme ends on 12 October 2010. Participation in the extension scheme is voluntary.
Click here for more

Ministry of Economic Development (MED)

Submissions on criminalising cartel conduct
Bell Gully has made a submission to MED on the proposal to criminalise cartel conduct in New Zealand. The firm's competition law specialists say more analysis is required into the costs and benefits of criminalisation, and that there is no evidence of cartel conduct in this country justifying a need to criminalise this behaviour.
Read Bell Gully's submission here
Click here to read submissions made by other interested parties
Also see the article Seizing the opportunity to fix price fixing for Bell Gully commentary on why the price fixing provisions in the Commerce Act and the related exemptions are crying out for reform.

Changes to Companies Act audit requirements for companies with overseas ownership
The Companies Amendment Act 2010, which came into effect on 20 April 2010, amends section 196 of the Companies Act 1993 to bring it into line with changes made to the Financial Reporting Act 1993 (FRA) in 2006. Under the changes made to the FRA certain companies with overseas ownership (for example, companies with more than 25% overseas shareholding that are not classified as "large" companies under that Act) are no longer required to file audited financial statements with the Registrar of Companies. However, prior to this latest Companies Amendment Act, under section 196 of the Companies Act these companies were still required to appoint an auditor and were prohibited from electing to not appoint an auditor via a unanimous resolution of the shareholders. In practice, this anomaly meant that a number of companies have been unable to take full advantage of the 2006 FRA amendments. The wording of the amended section 196 now allows all companies which are no longer required to file audited financial statements with the Registrar of Companies under section 19 of the FRA to elect to not appoint an auditor if, at or before each annual meeting, a unanimous resolution is passed by all the shareholders to that effect.

Views sought on taxation of foreign funds in PIEs
In its final report to Government in December 2009, the Capital Market Development Taskforce recommended pursuing opportunities to develop New Zealand as an exporter of high-value middle and back-office services for fund management companies. It has been suggested that one possible disincentive for foreign investment in New Zealand's financial services industry is the current way non-residents investing in foreign assets through a portfolio investment entity (PIE) are taxed. In an issues paper, "Allowing a zero percent tax rate for non-residents investing in a PIE" the government is seeking submissions on two possible options for exempting foreign-sourced income derived by a non-resident through a PIE. Submissions close on 4 June 2010.
Click here to read the media statement

New International Fund Services Development Group
A private sector group has been set up to advise the Government on the steps required to create an international fund services industry in New Zealand. The International Fund Services Development Group is to be chaired by entrepreneur and professional director, Craig Stobo. Other members are Caniwi Capital Partners chair and chief executive Troy Bowker, Citigroup New Zealand chief executive Mark Fitzgerald, BNP Paribas New Zealand chief executive Hugh Stevens, and Tower Investments chief executive Sam Stubbs. The group's work includes examining what regulatory and other undertakings would be required, and also how these undertakings could be used to strengthen New Zealand's funds management industry and capital markets. The group is required to report by the end of May, and is supported by a secretariat from MED.
Click here to read the Minister of Economic Development's press release

Select Committee reports back on Patents Bill
The Commerce Select Committee has reported back on the Patents Bill, recommending that it be passed with amendments. The bill is intended to replace the Patents Act 1953 (which has long been considered as outdated) and update the regulatory regime that applies to patent attorneys. Some key recommendations made by the committee include:

• transferring the provisions concerning the regulation of patent attorneys to a separate bill (the Patent Attorneys Bill) to provide time for the development of a single trans-Tasman framework for regulating patent attorneys;

• amending the bill to include software among inventions that may not be patented; and

• maintaining a modified form of pre-grant opposition that would enable third parties to oppose a patent before it was granted.

Click here to read the committee's full report

Anti-Counterfeiting Trade Agreement Negotiations
MED has released a short report on the 8th round of negotiations on the proposed Anti-Counterfeiting Trade Agreement (ACTA) which was held in Wellington from 12-16 April 2010. Participants in the negotiations included Australia, Canada, the European Union, represented by the European Commission, the EU Presidency (Spain) and EU Member States, Japan, Korea, Mexico, Morocco, New Zealand, Singapore, Switzerland and the United States of America.

Good progress was made toward narrowing existing differences in the areas of civil enforcement, border measures, criminal enforcement and special measures for the digital environment. In addition the participants held constructive discussions regarding the scope of intellectual property rights covered in ACTA.

Participants also agreed that it was appropriate to release a draft text of the ACTA to the public.
Click here for the full report
Click here for the consolidated text of the Draft ACTA
Click here for a fact sheet on the ACTA negotiations

Companies Office

Seminars
During April and May 2010 the Companies Office is holding information seminars throughout New Zealand on the new Companies Office online services, and the new Financial Service Providers Register (FSPR).
Click here for further details

Securities Commission

Draft Code for Financial Advisers released
The Code Committee for Financial Advisers has released a draft Code of Professional Conduct for Authorised Financial Advisers (the Code) and has invited submissions – which must be received by 7 May. The draft Code will then be finalised, approved by the Commissioner for Financial Advisers, and sent for ministerial approval.

The draft Code prescribes minimum standards of conduct that must be met by all authorised financial advisers (AFAs). Specifically, the minimum standards cover ethical behaviour, client care, competence, knowledge and skills, and continuing professional training.

Notable features of the draft Code include:

• the introduction of a new concept of "wholesale client". Certain Code standards do not apply to the extent that financial advice is provided to wholesale clients;

• an obligation to determine the suitability for the client of the AFA's financial adviser services where "personalised financial advice" (another new concept) or a financial planning service is provided;

• potential relief from the minimum qualification standards in relation to "corporate advice provided in respect of capital raising and other investment banking-type functions"; and

• an obligation to complete at least 20 hours of continuing professional training each year.

Click here for further details

Reponses to authorised financial advisers' consultation papers released
The Code Committee for Financial Advisers has released the following publications on its website:

• Summary of responses to Code Committee's Consultation Paper on Proposed Minimum Standards of Competence, Knowledge and Skills for Authorised Financial Advisers
• Summary of responses to Code Committee's Consultation Paper on Proposed Minimum Standards of Ethical Behaviour and Client Care for Authorised Financial Advisers
• Summary of responses to Code Committee's Consultation on Proposed Minimum Standards of Continuing Professional Training for Authorised Financial Advisers

Criminal charges and civil proceedings under the Securities Act for Lombard Finance & Investment directors
The Securities Commission has laid criminal charges and has issued civil proceedings against Lombard Finance & Investments (Lombard) directors Sir Douglas Graham, Michael Reeves, William Jeffries and Lawrence Bryant. The Commission alleges that the directors made false statements in Lombard's registered prospectus dated 7 September 2007 (as amended by a memorandum of amendments dated 24 December 2007) and in investment statements dated 28 December 2007. The documents stated the company's financial position had not materially and adversely changed since the company's last balance date and that the prospectus was not misleading by failing to properly refer to adverse circumstances. The Commission alleges this was false and that the directors' statements misled investors. In addition, the Commission alleges that a DVD advertisement distributed during 2007 and 2008 contained similar untrue statements about the financial position of the company.

The Commission has applied for declarations of civil liability and civil pecuniary penalties of up to $500,000 against each of the current four directors. The criminal charges relate to the same allegations as the civil proceedings and carry a maximum penalty of five years imprisonment or fines of up to $300,000.
Click here for further details on the civil proceedings
Click here for further details on the criminal charges

Commission to sue Nuplex Industries Limited and directors
The Securities Commission has decided to file civil proceedings against Nuplex Industries Limited (Nuplex) and certain current and former directors. "The Commission alleges that from 22 December 2008 until 19 February 2009 Nuplex breached its continuous disclosure obligations under the NZX Listing Rules and the Securities Markets Act 1988 by failing to disclose to the market a breach of a banking covenant, and that both Nuplex and the directors are responsible for this failure," Commission Chairman Jane Diplock said. The Commission is seeking declarations of contravention, pecuniary penalties (maximum penalty of up to $1 million per defendant) and compensatory orders. This is the first continuous disclosure case brought by the Commission.
Click here to read the full press release
Click here to read earlier Bell Gully commentary on directors' liability for breach of an issuer's continuous disclosure obligations in the article: Expanded liability under the continuous disclosure regime

New Zealand Commerce Commission (NZCC)

Media releases

The NZCC has issued the following media releases:

Industry regulation and regulatory control

• Commerce Commission recommends type of regulation to apply to Transpower
  The NZCC has recommended to the Minister of Commerce that Transpower be subject to individual price-quality regulation following the expiry of its administrative settlement with the NZCC.
  Click here for more

Mergers and acquisitions

• Novartis AG applies for clearance
  The NZCC has received an application from Novartis AG seeking clearance to acquire the majority shareholding in Alcon, Inc.
  Click here for more

• Tomarata Sand applies for clearance to acquire Coastal Resources
  The NZCC has received an application from Tomarata Sand Limited seeking clearance to acquire the assets and business of Coastal Resources Limited.
  Click here for more

Market behaviour

• Commerce Commission closes investigation into music copyright holders
  A NZCC investigation has resulted in a voluntary change of rules in the music copyright industry. The change will allow for competition to occur, to the benefit of those who purchase licenses for copyrighted music.
  Click here for more

• Supreme Court overrules Commission's ability to pursue overseas residents
  The NZCC has received judgment from the Supreme Court in relation to the issue of jurisdiction relating to individuals resident overseas who are alleged to have breached the Commerce Act. The High Court in March 2007, and the Court of Appeal in March 2009, had each previously ruled that the Commission could pursue legal proceedings against defendants who were living overseas when the cartel was operating. "Today's ruling, which overturns those previous judgments, will be studied by the NZCC in order to consider the full implications of the judgment," said Commission Chair Dr Mark Berry.
  Click here for more

Telecommunications

• Summary and analysis report of Telecom's 2009 regulatory financial statements published
  The NZCC has published its summary and analysis of Telecom's first regulatory financial statements for the financial year ending 30 June 2009.
  Click here for more

• VDSL decision confirmed by Commerce Commission
  The NZCC has issued a decision related to Telecom's use of VDSL technologies in the provision of wholesale broadband services. The NZCC confirmed that if Telecom Wholesale were to employ VDSL technology to deliver the regulated bitstream service used to provide broadband, (i.e., the unbundled bitstream access service, UBA) then it must do so on the regulated terms and conditions, including price.
  Click here for more

• Commerce Commission invites Minister to consider Vodafone's new on-net pricing plan
  In response to a query from the Minister for Communications and Information Technology, the NZCC has invited the Minister to consider the launch of Vodafone's Talk Add-on product in his assessment of whether Telecom's and Vodafone's mobile termination access services undertakings should be accepted.
  Click here for more

Australian Competition and Consumer Commission (ACCC)

Selected ACCC media releases

The ACCC has issued the following media releases:

Mergers and acquisitions

• ACCC to oppose proposed acquisition of Goodman Fielder's edible fats and oils business by Cargill Australia
  The ACCC has announced that it intends to oppose the proposed acquisition of Goodman Fielder's edible fats and oils business by Cargill Australia. "The ACCC investigation found that the proposed acquisition of the Goodman Fielder assets by Cargill would lead to a significant concentration of refining assets in Australia and would remove one of only a small number of competing refiners that offer a wide range of fats and oils products." ACCC chairman Graeme Samuel said.
  Click here for more

• ACCC will not oppose proposed acquisition of Varian by Agilent after proposed sale of scientific instrument assets
  The ACCC has announced that it will not oppose the proposed acquisition of Varian Inc by Agilent Technologies Inc. The announcement comes after competition concerns were resolved by Agilent's undertaking to sell certain global scientific instrument assets.
  Click here for more

• ACCC to oppose NAB bid for AXA and to clear AMP bid
  The ACCC has decided to oppose National Australia Bank Limited's proposed acquisition of AXA Asia Pacific Holdings, and not to oppose AMP Limited's proposed acquisition. "At the heart of the ACCC's decisions are concerns about innovation, and as a consequence, future rigorous and effective competition between retail investment platforms." ACCC chairman Graeme Samuel said.
  Click here for more

Market behaviour

• ACCC authorises continued operation of Qantas/British Airways' Joint Services Agreement
  The ACCC has issued a determination granting authorisation of Qantas and British Airways' Joint Services Agreement for a further five years. The JSA allows the parties to coordinate commercial arrangements in providing air transport services, primarily between Australia and Europe.
  Click here for more

• Scuba equipment discounts clarified
  Retailers of scuba diving equipment have had their trading terms clarified after intervention by the ACCC. The ACCC was concerned that employees and sales agents of Scubapro Uwatec Australia Pty Limited, a manufacturer and wholesaler of scuba diving equipment, made statements to dealers telling them not to discount the products by more than 10 to 15 per cent below the recommended retail price.
  Click here for more

• ACCC seeks comment on proposed increases in postage prices
  The ACCC has released an issues paper seeking comment from interested parties on Australia Post's proposal to increase prices across a number of its monopoly letter services, including the basic postage rate.
  Click here for more

• ACCC institutes proceedings against Malaysian airline companies for alleged price fixing of air freight
  On 9 April 2010 the ACCC instituted proceedings in the Federal Court against Malaysian Airline System Berhad and its wholly-owned cargo subsidiary Malaysia Airlines Cargo. Malaysian Airline System Berhad is the thirteenth airline to be the subject of ACCC proceedings for alleged price fixing in the air cargo industry.
  Click here for more

• $8 million plus penalty imposed on cartel members
  The Federal Court in Melbourne has ordered four foreign based suppliers of marine hose to pay penalties exceeding $8.24 million for engaging in cartel conduct. In June 2009, the ACCC instituted court proceedings alleging that Dunlop Oil & Marine, Bridgestone Corporation, Trelleborg Industrie SAS and Parker ITR gave effect to an international cartel arrangement for the supply of marine hose, which included the Australian market from 2001 to 2006.
  Click here for more

• ACCC sees benefit in cheque clearing, bulk electronic transaction clearing rules
  The ACCC has reauthorised certain regulations governing the operation of the Australian Paper Clearing System. The ACCC has also issued a draft determination proposing to reauthorise certain regulations governing the operation of the Bulk Electronic Clearing System.
  Click here for more

• Music rights licence body to simplify rules under ACCC authorisation
  The Australasian Performing Right Association, which licenses thousands of businesses to play music, will simplify its rules for direct deals between composers and users under an authorisation granted by the ACCC.
  Click here for more

Australian Securities and Investments Commission (ASIC)

ASIC consults to improve disclosure by infrastructure entities
ASIC has released a consultation paper aimed at improving disclosure to retail investors by infrastructure entities, including listed and unlisted companies and registered managed investment schemes. ASIC is proposing a benchmark-based disclosure model for infrastructure entities, against which they must report. The proposed benchmarks focus on key issues including corporate structure and management, funding, assumptions in models and sensitivity analysis of those assumptions, valuation, distribution, withdrawal and diversification. Comments on the consultation paper are due by 30 June 2010, with ASIC proposing to release a regulatory guide in September 2010.
Click here to access the consultation paper

ASIC releases guidance on regulation of clearing and settlement facilities
ASIC has released regulatory guidance on its approach to the licensing and regulation of clearing and settlement facilities.
Click here for further details

Electricity Commission

2010 System Operator's Draft Policy Statement
The Electricity Commission is consulting on the System Operator's draft policy statement to the Commission for the period 1 September 2010 to 31 August 2011. The System Operator policy statement forms schedule C4 of the Electricity Governance Rules 2003 and plays a key role in the set of rules, contracts and other arrangements that collectively deliver common quality and orderly system operation. It sets out the policies and means considered appropriate for the System Operator to follow during the term of that policy statement. Submissions close on 12 May 2010.
Click here for further details

Gas Industry Company (GIC)

2011 Gas levy
On 26 March 2010, the GIC made recommendations to the Associate Minister of Energy, Pansy Wong, that levy regulations be made by the Governor-General, for the financial year from 1 July 2010 to 30 June 2011, under section 43ZZE of the Gas Act 1992. The purpose of the levy is to recover the estimated costs of the GIC exercising its functions as the industry body. The recommendations are as follows:

• the current annual retail levy of $6.40 per installation control point be retained;
• the current wholesale levy of 1.67 cents per gigajoule be increased to 1.84 cents per gigajoule; and
• these levies are to come into effect on 1 July 2010, replacing those levies established for the 2010 financial year.

The GIC also recommended that the new regulations clarify other related matters in relation to the levy.
Click here to read the recommendations

Pipeline balancing
In early April 2010, the GIC issued a supplemental to the October 2009 Statement of Proposal in relation to gas transmission pipeline balancing. The supplemental contains an update on developments since October 2009, a description of key changes made to the draft gas balancing rules and an implementation plan for those draft rules (which has been determined with industry input). In addition, the supplemental includes a quantitative cost/benefit analysis on the draft gas balancing rules, as previously requested by the Associate Minister of Energy.

Submissions on the supplemental are due by 5pm on Tuesday 27 April 2010.

Following a review of those submissions, the GIC intends to make a formal recommendation to the Associate Minister of Energy in relation to the draft gas balancing rules in May 2010.
Click here to view the supplemental

Retail contracts
As part of its agreed work programme with the Associate Minister of Energy, in relation to ensuring that contractual arrangements between gas consumers and retailers adequately protect the long-term interests of small consumers, the GIC agreed at its Board meeting on 22 March 2010 to submit a recommendation to the Associate Minister of Energy regarding retail contracts.

The recommendation was sent to the Associate Minister on 29 March 2010 and sought endorsement for an industry-led arrangement of benchmark retail terms. It noted that a commencement date of 1 June 2010 is desirable to enable some harmonisation with parallel activity by the Electricity Commission.

If the recommendation is accepted, the GIC will appoint an independent assessor to conduct a baseline review of retail contracts.
Click here to read the recommendation