The Bell Gully Regulator Report lists recent changes, decisions and developments at the main New Zealand and Australian corporate, commercial and competition regulatory bodies. This edition covers the period from 11 September to 1 October 2007. For further details on any matter in this report, just click on the hyperlink below each item.

New Zealand Exchange (NZX)

NZX not satisfied with company disclosure trends
NZX has issued a reminder to NZX listed companies about the potential impact of poor timing and lack of detail in disclosures by some companies on investor confidence. The statement was triggered by some recent complaints to NZX about the way some listed companies had disclosed information to the market.
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Ministry of Economic Development (MED)

Operational Separation of Telecom
The Government has released its separation determination for Telecom whereby Telecom will be split into network, wholesale, and retail business units as part of the Government's strategy to deliver a more effective telecommunications sector. The determination reflects the model of separation set out in its April discussion document, although some amendments have been made with a view to improving the efficacy of separation and to provide incentives to upgrade the network. The industry and the public will be given an opportunity to comment on the draft plan in October.
Click here to read more
Click here to access the Telecommunications (Operational Separation) Determination 2007

Securities Amendment Regulations 2007
The MED has released new provisions amending the Securities Regulations 1983 to provide additional clauses deemed to be included in trust deeds of finance companies from 21 September 2007. Under the new clauses, finance companies must:

• provide regular reports to the trustee about the issuer's financial position and to regularly certify compliance with the trust deed;
• keep the trustee informed of matters relevant to the trustee's duties;
• have the borrowing group's half-yearly financial statements audited or, if that requirement is waived by the trustee, have them reviewed;
• provide the trustee with copies of the borrowing group's annual and half-yearly financial statements;
• consult the trustee on the appointment of auditors and inform the trustee if an auditor resigns or declines appointment or reappointment; and
• include specific conditions in the terms of appointment of auditors, which will give auditors responsibilities vis-�-vis the trustee.

The new clauses will give the trustee power to:

• appoint an independent auditor to audit the financial statements of the borrowing group; and
• appoint an expert to assist the trustee to determine the true financial position of an issuer, and recover the fees and expenses from the issuer.

Click here to access the Securities Amendment Regulations 2007

Trustee Amendment Bill introduced
The introduction of the Trustee Amendment Bill has been fast tracked in response to recent finance company collapses. The Bill amends the Trustee Act 1956 in the light of recommendations made by the New Zealand Law Commission in its report "Some Problems in the Law of Trusts".
Click here to access the Bill

Securities (Local Authority Exemption) Amendment Bill
The Government has called for public submissions on the Securities (Local Authority Exemption) Amendment Bill. This Bill amends the Securities Act 1978 to provide local authorities with an exemption from the full disclosure requirements of that Act when issuing debt securities to the public. Submissions close on 2 November 2007.
Click here to access the Bill

Insolvency Law Review Update - 27 September 2007
The MED has released an update on the Insolvency Law Review outlining the decision made by Cabinet on 24 September 2007 that the Companies Amendment Act 2006 is to come into effect on 1 November 2007. The Amendment Act makes some amendments to the corporate insolvency provisions in the Companies Act 1993. Most significantly, it introduces the new business rehabilitation scheme along the lines of the Australian voluntary administration regime, providing an alternative to liquidation for companies in financial distress. The update also notes that the Insolvency Act 2006 is anticipated to come into effect on 3 December 2007.
Click here to access the update

Companies (Voluntary Administration) Regulations 2007
The Companies (Voluntary Administration) Regulations 2007 were passed by Order in Council on 24 September and they come into force on 1 November 2007. The regulations relate to the new section 239ACN(3) of the Companies Act 1993 which provides that a deed of company arrangement under the voluntary administration regime is treated as including any prescribed provisions, except those prescribed provisions that the deed expressly excludes. The prescribed provisions are set out in the regulations. The regulations also prescribe a form for the administrator's six-monthly accounts.
Click here to access the regulations

New website for NZ business information
The new website business.govt.nz replaces biz.org.nz and expands the information and services that the previous site provided. It is directed at small and medium sized enterprises, and other business people, seeking access to all government business information and services, as well as relevant information from non-government business sources.
Click here to access the site

Securities Commission

Government Bill eases local government ability to raise funds
A bill for a new Securities Act Exemption had its first reading in Parliament on 12 September which, if passed, will restore local authorities' ability to raise funds from the public for infrastructure projects rather than having to pay for them out of rates.
Click here to read the full article

Review of ICP Biotechnology Limited
The Securities Commission has completed its review of ICP Biotechnology Limited's continuous disclosure obligations and insider trading allegations against the company's former CEO and Managing Director, Dr Earl Stevens. The Commission has ruled that ICP Biotechnology Limited is not in breach of their continuous disclosure obligations and similarly that there is no evidence of insider trading by Dr Stevens.
Click here to read the full article

Government acts to improve finance company regulations
On 17 September, Cabinet amended the Securities Regulations 1983, providing additional clauses that are deemed to be included in trust deeds of finance companies. The new clauses apply to both existing and future trust deeds affecting finance companies in their role as issuers who offer debt securities to the public and either lend money or provide financial services.
Click here to read the full article

Securities Act Exemption Notices

The following Securities Act Exemption Notices have been published:

• Securities Act (NZX Issuers) Exemption Notice 2007/272
  This notice exempts, subject to conditions, any issuer that has entered into a listing agreement with New Zealand Exchange Limited for listing on a NZX market, and the holder of previously allotted specified securities in the NZX issuer, from certain provisions of the Securities Regulations 1983 in respect of securities in that NZX issuer. The notice applies to issuers that have entered into a listing agreement for listing on the NZSX, the NZAX, and the NZDX.

• Securities Act (Mt Pisa Developments) Exemption Notice 2007/276
  This notice exempts Irrigation & Maintenance Limited, Mt Pisa Custodians Limited (and any assignee or successor in title of that company), and any person acting on behalf of either or both of them, subject to conditions, from sections 37, 37A, 38A, and 54B(3) of the Securities Act 1978 from the Securities Regulations 1983 (except regulation 8) in respect of the offer of ordinary shares in Irrigation & Maintenance Limited.

• Securities Act (Extension of Term, Amendment, and Revocation of Certain Exemptions) Exemption Notice 2007/277
  This notice extends the terms of various class exemption notices for a term of 5 years. The notice also makes some minor amendments to a number of those exemption notices.

• Securities Act (Equity Warrant Issuers) Exemption Amendment Notice 2007/278
  This notice amends the Securities Act (Equity Warrant Issuers) Exemption Notice 2002 by:

• extending its term for 5 years; and

• omitting references to section 37A(2) of the Securities Act 1978; and

• updating references to the New Zealand Stock Exchange to refer to a securities market operated by New Zealand Exchange Limited.

• Securities Act (Building Societies) Exemption Amendment Notice 2007/279
  This notice amends the Securities Act (Building Societies) Exemption Notice 2002 (the principal notice) and revokes the Securities Act (Canterbury Building Society) Exemption Notice 2004 by:

• exempting, subject to conditions, a designated building society from sections 33(3) and 53 to 53F of the Securities Act 1978 and regulations 3(3) and 7A(1) of the Securities Regulations 1983 in respect of a registered prospectus that relates only to an offer of certain building society shares to members who already hold shares in the designated building society; and

• extending the expiry of the principal notice for 5 years; and

• amending the list of designated building societies named in the Schedule of the principal notice.

• Securities Act (Assure New Zealand Limited) Exemption Amendment Notice 2007/287
  This notice amends the Securities Act (Assure New Zealand Limited) Exemption Amendment Notice 2002 by extending its expiry for a further 5 years and modifying a condition of the exemption from section 37(3) of the Securities Act.

• Securities Act (Rights, Options, and Convertible Securities) Exemption Amendment Notice 2007/288
  This notice extends the principal notice, the Securities Act (Rights, Options, and Convertible Securities) Exemption Amendment Notice 2002, for a further five year term.

• Securities Act (Real Property Proportionate Ownership Schemes) Exemption Amendment Notice 2007/289
  This notice extends the principal notice, the Securities Act (Real Property Proportionate Ownership Schemes) Exemption Amendment Notice 2002, for a further five year term.

• Securities Act (Group Investment Index Funds) Exemption Amendment Notice 2007/301
  This notice extends the principal notice, the Securities Act (Group Investment Index Funds) Exemption Amendment Notice 2002, for a further five year term and amends the definition of "fund" to require group investment funds to which the principal notice applies to be specified in a schedule to the principal notice. It also revokes clause 10 of the principal notice.

• Securities Act (Marlin Global Limited) Exemption Notice 2007
  This notice exempts Marlin Global Limited from clause 10(1)(c) of Schedule 1 of the Securities Regulations 1983, which is the requirement that a registered prospectus must provide a prospective statement of cash flows.

To view a list of all of the Securities Act Exemption Notices currently in force click here

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 Notice:

• Financial Reporting Act (Overseas Companies) Exemption Notice 2007
  This notice came into force on 21 September 2007 and expires on 30 June 2012. It exempts the directors of certain issuers incorporated in the United States of America and the United Kingdom from various provisions of the Financial Reporting Act 1993 (the Act). 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 (the overseas companies securities notices) from the preparation, content, auditing, and filing requirements of the 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.
  Click here to access this notice

Takeovers Panel

Takeovers Panel Appointment Announced
Commerce Minister Lianne Dalziel announced on 11 September the re-appointment of Kevin O'Connor as a member of the Takeovers Panel from 17 September 2007 for a term of two years.
Click here to access the announcement

Annual Report 2007
The Takeovers Panel has released its 2007 Annual Report which includes an outline of some recent legislative changes to the Takeovers Act and Code in the Chairman's Review.
Click here to access the report

Ministry for the Environment

Emissions trading scheme announced
The Government released its proposed emissions trading scheme on 20 September. The scheme's aim is to reduce greenhouse gas emissions, promote environmentally friendly behaviour and create business. The scheme will be phased in from 2008 with forestry being the first sector to join. The key features of the scheme proposed by the Government are:

• a cap and trade scheme which operates on an economy wide basis;
• imposing an obligation to account for emissions on a relatively small number of participants in each sector (overall the Government expects about 200 firms to be participants, plus foresters);
• the primary unit of trade will be the "New Zealand Unit". One New Zealand Unit must be surrendered for each tonne of emissions;
• the New Zealand emissions trading scheme will operate within Kyoto and each Unit will be fully comparable to a Kyoto-compliant unit in the international market;
• ownership of units will be recorded with a central registry. Participants will be expected to monitor their own emissions, but an administering agency with audit and inspection powers will verify compliance; and
• there will be different allocations for different sectors including free allocations of carbon credits to the farming and the forestry sectors.

Click here to view Climate Change Minister David Parker's press release on the scheme
Click here to read a Bell Gully article on the Emissions Trading Scheme

Tax side of emissions trading scheme under consideration
The tax consequences of the Government's proposed emissions trading scheme are the subject of an officials' issues paper for public consultation. The closing date for submissions relating to the forestry industry is 28 October, and for submissions on general tax issues, 30 November.
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Website for New Zealand's climate change solutions
The Ministry for the Environment has established a new website for climate change. It includes links to documents relating to the emissions trading scheme as well as speeches and announcements on this topic.
Click here to access this site

Projected balance of emissions units during the first commitment period of the Kyoto Protocol
The Government has published an update on New Zealand's projected quantity of emissions and removals of greenhouse gases during the first commitment period (2008-2012) of the Kyoto Protocol.
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Reserve Bank of New Zealand

Reserve Bank welcomes new deposit-take requirements
On 12 September it was announced the Reserve Bank will be the new prudential regulator of non-bank deposit-takers. Although Trustee corporations will continue to be the principal supervisor, the Reserve Bank's role will be to license, develop and enforce governance and apply credit rating requirements in order to provide more confidence in the deposit-taker sector. Legislation is expected to be introduced into Parliament later this year to implement some of the proposals with the remainder to follow later in 2008.
Click here to read the full article

September 2007 Reserve Bank Bulletin released
On 28 September, the Reserve Bank released the September 2007 issue of the Reserve Bank Bulletin.
Click here to access the bulletin

New Zealand Commerce Commission (NZCC)

The NZCC has issued the following media releases:

• Electricity Industry Reform Act: Commission grants exemption to Vector
  The NZCC has granted Vector Limited a limited exemption under the Electricity Industry Reform Act 1998 in relation to its proposed involvement in the development of the Te Rere Hau wind farm situated on the Tararua Ranges near Palmerston North. NZ Windfarms Limited and NPBB Pty Ltd have entered into a joint venture to develop the Te Rere Hau wind farm. Vector has agreed to subscribe for an interest in NZ Windfarms.
  Click here for more

Mergers and Acquisitions

• NZ Post and Salmat cleared to form joint venture
  NZCC has cleared New Zealand Post Limited and Salmat International Pty Limited (Salmat) to merge their respective unaddressed mail delivery operations. Salmat is listed on the Australian Stock Exchange, and is one of Australasia's major direct customer communications companies. Salmat provides unaddressed mail delivery services through its wholly-owned subsidiary Deltarg Distribution Systems Limited.
  Click here for more

• Whitcoulls' parent company applies for clearance to acquire Borders
  NZCC has received an application from A&R Whitcoulls Group Holdings Pty Limited seeking clearance to acquire 100% of the shares in Borders New Zealand Limited.
  Click here for more

• Southern Cross and QE Health cleared to form a joint venture
  NZCC has cleared Southern Cross Health Trust and QE Hospital Limited to merge their respective private hospital operations in Rotorua. Commission Chair Paula Rebstock said that the Commission was satisfied that the proposed acquisition would not have, or would not be likely to have, the effect of substantially lessening competition in any of the relevant markets.
  Click here for more

Market Behaviour

• Jewellery trader convicted and fined over misleading advertising
  On 11 September, Carrerabenz Diamond Industries Limited pleaded guilty to breaching the Fair Trading Act after it led its customers to believe they were making large savings based on the valuation prices of its jewellery. The valuation prices however were based on valuations made for insurance purposes in Australia and were not relevant to the market valuation of jewellery in New Zealand. The Auckland company was convicted of 21 breaches of the Act and fined $49,500 with costs of $520.
  Click here for more

• Companies warned over bacon and ham labelling
  The NZCC has issued formal warnings to two companies as a result of its investigations into country of origin labelling for Kiwi Bacon and Premier Bacon and ham products. The warnings were issued on the basis that the labelling was misleading and at risk of breaching the Fair Trading Act where imported pork was used in the bacon and ham products and the labelling had created the impression that they were made in New Zealand from New Zealand produced pork.
  Click here for more

Telecommunications

• Conferences next step in telecommunication regulatory process
  The NZCC held a series of conferences in September and will be holding more in October to seek clarification on aspects of the submissions made on recent draft determinations and investigations. The NZCC is currently working on a wide range of new issues in telecommunications regulation, including standard terms determinations and whether to accept an undertaking in lieu of further regulation. Dr Ross Patterson, Telecommunications Commissioner, notes that the conferences are a chance for the Commission to question the submitters and hear different perspectives that will inform final decisions.
  Click here for more

Australian Competition and Consumer Commission (ACCC)

The ACCC has issued the following media releases:

• ACCC sets record straight on franchising
  New online information outlining the ACCC's processes for investigating complaints about franchisors has been launched on their website.
  Click here to access the site

Mergers and Acquisitions

• ACCC seeks further comments in relation to sale of Southern Cross and related transactions
  The ACCC has considered three separate, but related, proposed transactions involving the sale of Southern Cross Broadcasting. The three transactions are:

  • The proposed acquisition of all of Southern Cross by the Macquarie Media Group;

  • The proposed acquisition of Southern Cross' metropolitan radio assets and other Southern Cross assets by Fairfax (the Macquarie Media Group intends to on-sell these assets to Fairfax after acquiring all of Southern Cross); and

  • The proposed acquisition of Fairfax's nine regional radio stations by the Macquarie Media Group.

The ACCC has released separate Statements of Issues for the proposed acquisitions to provide the parties and the public with some guidance on the preliminary issues the ACCC has identified and intends to investigate further.
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• ACCC not to oppose acquisition of Riverina Media Group by Rural Press (now part of Fairfax)
  The ACCC will not intervene in the acquisition of the Riverina Media Group by Rural Press Limited. Rural Press is now owned by Fairfax Media Limited. Inquiries with industry participants and advertisers indicated that if Rural Press/Fairfax attempted to raise prices above competitive levels in the relevant regional area, existing competitors including small to medium sized players would be well placed to win clients. The threat of new entry was also considered likely to act as a constraint on Rural Press/Fairfax. The ACCC note that it's risky for companies not to approach the ACCC before completing acquisitions that potentially raise competition concerns. The ACCC chairman, Graeme Samuels, states that the ACCC will not hesitate to seek court orders for divestiture if, during a post-acquisition review, it considers there was a breach of section 50 of the Act.
  Click here for more

• ACCC accepts undertaking in Blockbuster Australia Pty Ltd/Video Ezy Australasia Pty Ltd acquisition
  The ACCC will not intervene in the acquisition of Blockbuster Australia Pty Ltd by Video Ezy Australasia Pty Ltd, after accepting court enforceable undertakings from Video Ezy.
  Click here for more

• ACCC allows PPCA's collective licensing arrangements for rights in sound recordings
  The ACCC has re-authorised the Phonographic Performance Company of Australia Limited's collective licensing arrangements for the public performance or broadcast of sound recordings and music videos subject to a number of conditions.
  Click here for more

Market Behaviour

• Pandora Jewelry Pty Ltd stops resale price maintenance
  Pandora Jewelry Pty Ltd, a wholesaler of charms, bracelets and matching jewellery throughout Australia and New Zealand, has entered into an administrative settlement with the ACCC about Pandora's pricing policy.
  Click here for more

• Notices revoking Seal-A-Fridge third line forcing notifications
  The ACCC has issued notices revoking the third line forcing notifications lodged by the Seal-A-Fridge franchisors. Seal-A-Fridge franchisees operate a mobile refrigeration seal replacement service. Under the notified conduct, the franchisors are proposing to require franchisees to acquire the two goods used in the manufacture of refrigeration seals, PVC extrusion and flexible magnet products, from nominated approved suppliers. The ACCC considers there is little, if any, public benefit from the notified conduct. The ACCC notes a significant proportion of franchisees oppose the conduct. It is not clear that the price to franchisees will be lower as a result of the conduct, nor is it clear that there will be an increase in the quality of the end product to consumers. The ACCC does not have before it sufficient evidence to be satisfied that the proposed conduct would result in a substantial lessening of competition in a relevant market. Given this, the ACCC does not propose to take any further action in respect of notification.
  Click here for more

• ACCC alleges resale price maintenance by Hobie Cat Australasia Pty Ltd
  The ACCC has instituted proceedings in the Federal Court, Adelaide against Hobie Cat Australasia Pty Ltd alleging resale price maintenance. The ACCC alleges that the sailboat and kayak supplier contravened section 48 of the Trade Practices Act 1974 by including in its dealership agreements clauses which prohibit Hobie dealers from selling or advertising Hobie products below the recommended retail price, or at a price no less than 10 per cent below recommended retail price.
  Click here for more

• ACCC allows independent retailers of office products to collectively bargain with suppliers
  The ACCC has issued a determination authorising Office Choice Limited, Office National Limited and Office Products Depot Limited, together the Office Group, to collectively bargain the terms and conditions on which wholesale suppliers of stationery and office products will supply them and their franchisees. Office Choice and Office National are franchisors of chains of independently owned franchises selling retail office supplies across Australia. Office Products Depot runs a similar franchise business in New Zealand, sourcing some of their stock from Australian suppliers. The ACCC believes that the potential anti-competitive effect of the arrangement is limited by the voluntary nature of the arrangement, the comparative size of the bargaining group and competition for office products at the wholesale and retail levels.
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• ACCC issues Telstra accounting separation report for June quarter 2007
  The ACCC has issued its 16th imputation testing and non-price terms and conditions report under the enhanced accounting separation regime for Telstra. The report presents data for the quarter ending 30 June 2007. The report tests whether there is systematic discrimination in the price or non-price terms offered to Telstra retail and wholesale customers.
  Click here for more

Telecommunications

• ACCC institutes proceedings against Telstra for alleged misleading Next G advertising
  The ACCC has instituted proceedings in the Federal Court against Telstra Corporation Limited for alleged contraventions of sections 52 and 53 of the Trade Practices Act 1974 in relation to the promotion of its Next G network. The ACCC alleges that Telstra has engaged in misleading or deceptive conduct by representing that the Next G mobile network "covers the entire country" and has "coverage everywhere you need it".
  Click here for more

Access

• ACCC issues discussion paper on the digital radio access regime
  The ACCC has issued a discussion paper seeking stakeholders' views on the access regime that will apply to digital radio. Interested parties are requested to make submissions by 2 November 2007.
  Click here for more

• High Court overturns ACCC decision on access to the Moomba to Sydney Pipeline
  The High Court of Australia has upheld an appeal by East Australian Pipeline Limited against a decision of the Full Federal Court, which had affirmed the ACCC's rejection of the access arrangement for the Moomba to Sydney Pipeline.
  Click here for more