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 3 September 2008 to 23 September 2008. For further details on any matter in this report, just click on the hyperlinks in each item.

Ministry of Economic Development (MED)

At last - revised directors and officers disclosure regime
Amendments simplifying disclosure obligations under the Securities Markets (Disclosure of Relevant Interests by Directors and Officers) Regulations are set to come into force on 9 October 2008.
For Bell Gully commentary on the new disclosure regime click here
Click here to access a copy of the new regulations

Financial advisers and dispute resolutions bills back
On 8 September, the Financial Service Providers (Registration and Dispute Resolution) Bill and the Financial Advisers Bill were both reported back from the Finance and Expenditure Committee. The Commerce Minister Lianne Dalziel and Consumer Affairs Minister Judith Tizard have welcomed the select committee's reports on the two bills and support the recommendations made by the committee. It is expected the Bills will be passed under urgency before the House rises for the General Election.
Click here to read the Ministers' press release
Click here for a Bell Gully update on the latest developments in the Government's Review of Financial Products and Providers reform
Click here for Bell Gully commentary on the Financial Advisers Bill and the Committee's recommended amendments

Stronger protection for investors with law change
Finance companies, building societies, credit unions and other deposit takers will be required to obtain credit ratings and meet tougher prudential requirements as a result of the enactment of the Reserve Bank Amendment Bill (No 3), which extends the Reserve Bank's responsibilities to become the regulator of non-bank deposit takers.
Click here to read the press release
Click here for Bell Gully commentary on the Bill

Credit unions rules to be modernised
On 11 August, Cabinet made decisions on the governance requirements for mutual financial institutions. The proposed legislation will also complete the second stage of the Review of the Friendly Societies and Credit Unions Act 1982, which was put on hold to allow the Government's Review of Financial Products and Providers to consider mutuals in its proposals for comprehensive reforms of the financial sector. Governance rules for credit unions and building societies will be standardised to meet international benchmarks and align with those for companies, but will retain flexibility that recognises the special character of mutual financial institutions. Commerce Minister Lianne Dalziel announced the changes in her opening address to the 2008 New Zealand Association of Credit Unions Conference on 12 September.
Click here to access the Cabinet Paper
Click here to read the press release

Bill allows Commerce Commission to cooperate internationally
A Bill enabling greater cooperation between the Commerce Commission, its Australian counterpart, and other overseas regulators was introduced into Parliament on 9 September by Commerce Minister Lianne Dalziel. The Commerce Commission (International Co-operation, and Fees) Bill allows the Commission and its equivalent overseas agencies to share information and assist each other in investigations of unfair trading practices and anti-competitive behaviour.
Click here to read the Minister's press release
Click here to read Bell Gully commentary on the Bill

Renewable generation gets boost from law changes
Unnecessary barriers to electricity lines companies investing in renewable generation have been removed by a Bill amending the Electricity Industry Reform Act enacted on 5 September, says Energy Minister David Parker. The Bill is a major rewrite of the Electricity Industry Reform Act, which requires separation of monopoly electricity lines and competitive generation and retailing businesses.
Click here to read the press release
Click here for Bell Gully commentary on the Bill

Government passes law to protect minority shareholders
The Government has passed the Companies (Minority Buy-out Rights) Amendment Bill. Commerce Minister Lianne Dalziel says the Bill "is good news for minority shareholders who don't want to hold on to their shares when the goalposts are moved against their wishes. The law will make sure they get a fair price for their shares if they decide they no longer want them under the changed circumstances."
Click here to read the press release
For Bell Gully commentary on the Bill click here

Infrastructure investment gets boost from law changes
Commerce Minister Lianne Dalziel says infrastructure businesses will have more incentive to innovate and invest in their future growth under a Bill amending the Commerce Act, passed in Parliament on 5 September. The Bill is a major rewrite of the price control provisions of the Commerce Act 1986. Its overall aim is to provide protection for consumers against excessive prices and poor quality for basic infrastructural services where there is no real prospect of competition (such as airports, electricity lines companies and gas pipeline companies), while at the same time ensuring that suppliers have incentives to invest, innovate and improve efficiency.
Click here to read the press release
Click here for Bell Gully commentary on the Bill

Bill ensures trade safeguards meet WTO rules
Commerce Minister Lianne Dalziel has introduced the Trade (Safeguard Measures) Bill to ensure temporary protections for New Zealand industry applied to imported goods at the border are in line with international trade rules. "The Bill brings our temporary safeguard measures regime up to date and in line with international rules. While it extends the time for completing a safeguard investigation, it gives domestic industry prompt protection by allowing provisional measures to be imposed at an early stage but then refunded if the investigation finds measures are not required", said Dalziel.
Click here for the full press release

Commissioning rule to be repealed and parody satire review announced
Associate Commerce Minister, Judith Tizard has introduced to the House an amendment to the Copyright Act that would repeal the commissioning rule. Currently, the commissioning rule allocates copyright ownership by default to the commissioner for artistic works, sound recordings and for the taking of a photograph or the making of a film. The rule does not apply to dramatic works or literary works (except computer programmes). The recommendation to repeal the rule comes after two rounds of consultation in both 2006 and 2007. Tizard has also announced that a review on whether there should be a copyright exception for the purpose of parody and satire has begun. A discussion document on the issue of parody and satire is planned for public release in December 2008.
Click here for more

Ministry of Foreign Affairs and Trade

A free trade agreement with the United States?
The US Government’s announcement to enter negotiations to join the P4 group has been warmly welcomed here in New Zealand. If the negotiations are successful, this decision could provide New Zealand with a much sought after free trade agreement with the US.
For Bell Gully commentary on the potential for a free trade agreement click here

Companies Office

Further charges laid against Bridgecorp directors
The Registrar of Companies has laid further criminal charges on indictment against the executive directors of Bridgecorp Limited, Rodney Petricevic and Robert Roest under section 58 of the Securities Act 1978. The charges relate to statements made in Bridgecorp's prospectus that it had never missed an interest payment or repayment. These same statements are the subject of other Companies Act and Securities Act charges laid by the Companies Office in June 2008.
Click here for more

The Companies Office register that fits in your pocket
The Companies Office has announced the launch of a company search service for internet enabled mobile phones accessible from http://m.companies.govt.nz.
Click here for more

Ministry for the Environment

Historic climate change legislation passes
A cornerstone economic tool will now proceed to help New Zealand reduce greenhouse gas emissions and tackle climate change, Climate Change Minister David Parker says. The Climate Change Response (Emissions Trading) Amendment Bill, and the Electricity (Renewable Preference) Amendment Bill (both formerly known together as the Climate Change (Emissions Trading and Renewable Preference) Bill) were passed on 10 September. The legislation establishes the framework for the New Zealand Emissions Trading Scheme.
Click here for the full press release
Click here for Bell Gully commentary on the new legislation

Crown makes submission on Meridian Energy's North Island wind farm proposal
The Crown has made a submission on Meridian Energy's wind farm proposal in the Central North Island. Since changes were made to the Resource Management Act in 2005, the Crown has been able to make a submission on an application for a resource consent that the minister considers to be of national significance. This allows the government to have input into local decision-making processes, while leaving the decision and hearings to happen locally.
Click here for more

Securities Commission

Securities Commission and Corporate Governance
In a speech entitled "Securities Commission and Corporate Governance" presented to the KPMG Directors' Breakfast in Christchurch on 3 September 2008, Jane Diplock AO (Chairman of the New Zealand Securities Commission and the Executive Committee, IOSCO) highlights the importance of good corporate governance and notes that, in the Commission's view, most cases of corporate failure and breaches of securities law are at least partly attributable to a failure of governance at some point. In the work the Commission has been doing recently in relation to failed finance companies, the Commission has seen many examples of what it considers to be poor governance. The examples given in the speech include:

• the failure to ensure that disclosure and financial reporting were accurate, particularly as to related party lending and/or asset quality;

• instances of too few directors and times when there were no independent directors on the Boards. In some cases independent directors failed to ensure they were adequately informed or took insufficient interest in the business; and

• ineffective (or no) audit committee. The Commission has seen the poor handling of growth or expansion of the business and an evident failure to recognise or act on warning signs in a timely manner.

Diplock also makes the point that while directors are entitled to receive and rely on expert advice, in her view directors should not do so blindly: "Directors need to critically assess valuations and other external reports and exercise common sense and good judgement".

The speech also discusses some of the recent work and actions the Commission has taken in relation to breaches of the Securities Act by failed finance companies.
Click to read a full transcript of the speech

Securities Markets Global Perspectives
In her presentation to the CNMV 20th Anniversary (1988 - 2008) International Conference on Securities Markets Perspectives, Supervision and Regulation, Jane Diplock AO (Chairman, Executive Committee IOSCO & New Zealand Securities Commission) outlines her thoughts on future developments in global financial architecture, and in particular on how to manage the tension between rapidly growing global markets while regulatory infrastructures remain nationally based.

In her view there is a need to look to conceptual (or virtual) solutions for the regulatory outcomes suitable for global capital markets in the 21st Century, the beginnings of which, she believes, are already emerging from the network of mutual recognition agreements that are being implemented and mooted around the world (such as the trans-Tasman mutual recognition of securities offerings scheme introduced by the Australian and New Zealand Governments in June 2008). These arrangements recognise and ensure the differences necessary in domestic regulatory approaches. They allow domestic laws and regulations to reflect national imperatives while providing the capacity for cross-border cooperation and enforcement. It is also her view that these recognition arrangements provide frameworks that effectively enhance the liquidity and resilience of markets. Once there is sufficient momentum in some of the world's large capital markets opening up access to deeper and more liquid markets, Diplock believes that it is likely that the issuers, investors and other market participants in markets without such arrangements will bring pressure for similar arrangements to occur in their markets.
Click here for a full transcript of the speech

Commission to review issuers' responses to reporting challenges
The Securities Commission will review how well issuers respond to significant reporting challenges in the current market as part of its Financial Reporting Surveillance Programme. The Commission will begin this work by reviewing 30 June 2008 balance date financial reports as part of its Cycle 8 surveillance programme. The Commission says it expects issuers to pay particular attention to:

• Impairment of asset values - there should be more focus on understanding, measuring and documenting the triggers of impairment;

• Determining fair market values - challenges in valuation practices and disclosures exist with the tight credit and illiquid markets. There should be a focus on valuation methodologies and processes and the disclosure of key assumptions, risks and uncertainties;

• Going concern - appropriateness of the going concern assumption should be assessed and where relevant, disclosure of levels of uncertainty;

• Significant judgements - all significant judgements used in preparing the financial statements and sources of estimation uncertainty should be disclosed;

• Classification of debt - it is essential that the classification of the maturity of debt is accurate and loan covenants are well understood particularly in terms of triggers; and

• Goodwill disclosures - in the current market, particular regard should be given to the extensive disclosures relating to the recoverable amounts of each significant cash-generating unit containing goodwill or intangible assets with indefinite useful lives.

Further information on areas that the Securities Commission has an interest in is outlined in the Review of Financial Reporting by Issuers Cycle 7 available on www.seccom.govt.nz
Click here for more

Securities Act Exemption Notices

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

Securities Act (PA Consulting Group Limited) Exemption Notice 2008 (SR 2008/305)
This notice, which came into force on 12 September 2008 and expires on 30 September 2011, exempts (subject to conditions) PA Consulting Group Limited (PACG), certain of its wholly owned subsidiaries, and holders of previously allotted securities, in respect of securities offered by PACG under employee share purchase schemes. The exemptions are from the prospectus and investment statement requirements, participation deed and statutory supervisor requirements, and certain other requirements of the Securities Act 1978 and from the Securities Regulations 1983 (except regulation 8).

Securities Act (Overseas Employee Share Purchase Schemes) Exemption Amendment Notice (No 2) 2008 (SR 2008/306)
This notice, which came into force on 12 September 2008, amends the Securities Act (Overseas Employee Share Purchase Schemes) Exemption Notice 2002 to remove the name of PA Holdings Limited as a specified overseas issuer for the purposes of that notice.

Takeovers Panel

The Takeovers Panel has released its Annual Report for the year ended 30 June 2008.

The New Zealand Exchange (NZX)

Proposed Trading Halt Guidance Note
NZX has formulated a proposal to vary its practices and procedures in relation to the application of trading halts under NZSX/DX Listing Rule 5.4/NZAX Listing Rule 5.4. NZX is seeking comment on the policy proposals embodied in a draft guidance note. Submissions close on 8 October 2008.
Click here for further details

New Zealand Commerce Commission (NZCC)

Speeches

Number portability celebration
On 4 September, Dr Ross Patterson, Telecommunications Minister of the NZCC, gave a speech at a Telecommunications Carriers Forum. In his speech, Dr Patterson celebrated reaching the 100,000 mark in number portability in New Zealand and canvassed the history of the introduction of number portability into New Zealand. Dr Patterson described number portability as making a significant contribution to the competitiveness of our telecommunications markets.
Click here for more

The role of regulation in New Zealand and the Commission's work in the energy sector
On 15 September, Michael Clark, Director, Networks Branch of the NZCC, gave a speech to the 10th Annual Energy Summit. In his speech, he outlined the Commission's role in the Energy sector, including the regulatory approach and the current state of competition in the sector. Clark also discussed how the Commerce Amendment Bill is likely to affect the energy sector.
Click here for more

Media releases

The NZCC has issued the following media releases:

Industry Regulation and Regulatory Control

• Commerce Commission issues final determination on Maui Gas Pipeline Open Access
  The NZCC has issued the final determination in relation to an application under section 58 of the Commerce Act by two Todd companies in relation to access to the Maui gas pipeline. This is consistent with the Commission's preliminary view stated in its April draft determination.
  Click here for more

• Commerce Commission's preliminary view on Vector and Powerco's offers of undertakings
  The NZCC has formed a preliminary view to not accept offers of undertaking from Vector and Powerco in relation to the supply of their controlled natural gas distribution services.
  Click here for more

Mergers and Acquisitions

• Commission declines to grant clearance to Southern Cross and Aorangi Hospital to form a joint venture
  The NZCC has declined to grant clearance to Southern Cross Health Trust and Aorangi Hospital Limited to merge their respective private hospital operations in Palmerston North.
  Click here for more

Telecommunications

• Commerce Commission reports to Minister on Telecom's Telecommunications Service Obligations
  The NZCC has advised the Minister of Communications that Telecom has complied with all its Telecommunications Service Obligations (TSO) quality measures for the 2007/08 financial year.
  Click here for more

• Telecommunications Act: Commerce Commission releases final Telecom TSO cost calculation for 2005/06
  The NZCC has released its telecommunication service obligations (TSO) determination covering the 2005/06 year. The final TSO cost is $58.2 million for 2005/06. The determination specifies how the TSO cost is shared between Telecom and other operators whose networks are interconnected with Telecom's fixed network.
  Click here for more

• Telecom remedies Separation Undertakings Breach
  Telecommunications Commissioner Dr Ross Patterson has received information from Telecom satisfying him that the breach of Telecom's Separation Undertakings that occurred on 30 June 2008 has been remedied.
  Click here for more

Consumer issues

• Mobile Electronic Services fined for misleading consumers
  A Christchurch based electrical appliance repairer has pleaded guilty to breaching the Fair Trading Act.
  Click here for more

• Commerce Commission initiates disclosure of interests inquiry
  The NZCC has announced it will be conducting an inquiry into whether Donal Curtin, who was appointed Deputy Chair of the Commission in July, provided an appropriate level of disclosure to the Commission and the Minister of Commerce in relation to his involvement with finance and investment companies Vestar Ltd, Mint Asset Management Ltd and MFS Ltd.
  Click here for more

• Telecommunications Act: Commerce Commission releases final Telecom TSO cost calculation for 2004/05
  The Commerce Commission has released its telecommunication service obligations (TSO) determination covering the 2004/05 year.
  Click here for more

• Commerce Commission issues draft standard terms determination for sub-loop services
  The NZCC has released its draft standard terms determination on the price and non-price terms on which Telecom must make the regulated sub-loop services available to other telecommunications providers. These are the services required to allow companies to provide services to their customers from Telecom's roadside cabinets.
  Click here for more

• Ezibuy fined for 'pashmina' shawls that were poly/cotton
  A popular clothing and home goods company has pleaded guilty to breaching the Fair Trading Act and has been fined $8,500 in the Auckland District Court for marketing and selling shawls advertised as silk blend pashmina, when they were not.
  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 accepts undertaking in Tamar Valley generation assets acquisition
  The ACCC has accepted a court-enforceable undertaking from Aurora Energy and the Tasmanian government in relation to the acquisition of the Tamar Valley Power Station Project and other related assets by Aurora Energy.
  Click here for more

• ACCC accepts undertaking in Flinders Ports/DP World (SA) joint venture
  The ACCC will not intervene in the proposed joint venture between Flinders Ports Holdings Pty Ltd and DP World (SA) Pty Ltd, after accepting a court-enforceable undertaking from Flinders Ports.
  Click here for more

Market Behaviour

• ACCC proposes continuation of capped fees at ACT CALMS clinics
  The ACCC proposes to grant authorisation to 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 institutes proceedings: Alleged misuse of market power by Cement Australia
  The ACCC has filed proceedings against Cement Australia Pty Ltd, Pozzolanic Enterprises Pty Ltd and two related companies in the Federal Court, Brisbane for alleged breaches of the Trade Practices Act 1974.
  Click here for more

• ACCC accepts undertakings from Vision Group
  Vision Group, a provider of ophthalmic services, has responded to ACCC concerns that the conduct of its subsidiary, Icon Laser (Aust) Pty Ltd, was anti-competitive, providing the ACCC with court enforceable undertakings to resolve the matter.
  Click here for more

• ACCC grants authorisation to Myer
  The ACCC has granted authorisation to Myer to enable it to continue to invite concession businesses operating within Myer Stores to participate in its various promotions.
  Click here for more

Telecommunications

• ACCC proposes fair access terms for core telecommunications access services
  The ACCC has issued a draft determination specifying model non-price terms and conditions for core telecommunications access services.
  Click here for more

• ACCC institutes proceedings against Clarus Telecom Pty Ltd
  The ACCC has instituted proceedings against Clarus Telecom Pty Ltd in the Federal Court of Australia. The ACCC has alleged that Clarus Telecom, through its telemarketers, has misled consumers by making representations that their company and the services they provide are affiliated with or provided on behalf of Telstra Corporation. Telstra is, in fact, a competitor of Clarus Telecom.
  Click here for more

• ACCC proposes to grant Telstra PSTN OA exemptions
  The ACCC has issued a draft decision proposing to grant Telstra exemptions from its obligations to supply public switched telephone network originating access (PSTN OA) services in five CBD areas and parts of metropolitan Australia.
  Click here for more

Consumer issues

• Saab 'Grrrrrreen' claims declared misleading by Federal Court
  In proceedings taken by the ACCC, the Federal Court has declared that GM Holden Ltd made false and misleading claims in its "Grrrrrreen" campaign which promoted the environmentally friendly nature of its Saab range of vehicles.
  Click here for more

• V8 Supercars corrects carbon emissions claims
  The ACCC has accepted an undertaking from V8 Supercars Australia Pty Ltd, concerning claims it made about offsetting carbon emissions from its V8 car racing series.
  Click here for more

• 'Designer Brand Outlet' website suspended
  The ACCC has acted quickly to freeze the assets and suspend the operations of www.designerbrandoutlet.com following complaints from consumers worldwide.
  Click here for more

• Online trader recalls child restraint systems for cars after ACCC raises safety concerns
  Xport Investments Pty Ltd has issued a national voluntary recall of two models of child restraint systems for use in motor vehicles after the ACCC raised concerns that the systems may not comply with the prescribed consumer product safety standard.
  Click here for more

• ACCC accepts undertakings for incorrect labelling of Cotton On boots
  Cotton On Clothing Pty Ltd, which operates 164 retail stores throughout Australia, has acknowledged that a 'Lambskin' label on a Home Boots product sold through its stores may have misled consumers.
  Click here for more