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 2 June to 28 June 2010.

Ministry of Economic Development (MED)

Securities law discussion document released
MED has released a 200 page discussion document on proposed reforms to New Zealand's securities laws. A complete overhaul of current legislation is proposed, with the introduction of a new Act to replace the Securities Act 1978 and the Securities Markets Act 1988, and amendments to a range of other legislation dealing with aspects of securities law.

The new Act will set out what offers of financial products are to be regulated, how they will be regulated, and how this regulation will be enforced. The discussion document seeks feedback on MED's proposals on a range of issues through a Q & A format (with over 200 questions). Submissions on the discussion document close on 20 August 2010.
Click here for Bell Gully's client update on the discussion document
Click here for a copy of the discussion document

The Financial Service Providers (Pre-Implementation Adjustments) Bill has been passed
The Financial Service Providers (Pre-Implementation Adjustments) Bill was passed as the Financial Advisers Amendment Act 2010 and the Financial Service Providers (Registration and Dispute Resolution) Amendment Act 2010 (divided by Supplementary Order PaperNo.147) on 23 June. The Acts include the recommended amendments to the Bill made by the Commerce Select Committee's report back on the Financial Service Providers (Pre-Implementation Adjustments) Bill on 14 June (by Supplementary Order Papers No. 113 and No. 146). (For commentary on the Committee's recommended amendments see Bell Gully's article Financial Services Law Reform – the final pieces in the puzzle?)

In its final form the Bill contained a number of provisions which reflect significant shifts in policy, particularly with regard to wholesale clients and the qualifying financial entity (QFE) model. For further details on those changes also see the Bell Gully article "Fundamental changes proposed to new financial advisers legislation – better late than never"

Now that the Bill has been passed, Commerce Minister Simon Power has indicated that regulations will be developed to address concerns raised about the ability for category 2 advisers to seek authorisation. An announcement on this issue is expected to be made in the next few weeks.

Insurance (Prudential Supervision) Bill
The Finance and Expenditure Select Committee has reported back on the Insurance (Prudential Supervision) Bill and has recommended several changes. The Bill establishes a licensing regime for insurers and introduces prudential regulations which place strong reliance on self-discipline under the supervision of the Reserve Bank. The Bill will replace existing outdated legislation and fill gaps where no prudential regulation currently exists. It will also remove inconsistent legislative application between different insurance sectors. The Select Committee's key amendments include:

• Broadening the types of overseas entities that may be captured by the Bill to include associations of persons that are not body corporates.
• Introducing a new power enabling the Reserve Bank to exclude a particular level of insurance business from the requirements of the legislation.
• Amending the definition of "contract of insurance" so that a contract is no longer a contract of insurance merely because the insurer has a discretion as to whether or not it will pay a sum of money or its equivalent on the happening of the uncertain event. This deletion is designed to exclude discretionary mutual organisations.
• To ease the transition for insurers, allowing insurers to have 12 months to update all of their policy documents (which are now required to identify the statutory fund or funds to which a life policy is referable) issued before commencement, so that insurers can capture every policy in their annual cycle.

The select committee's full report can be found here.

Consultation on consumer law overhaul
Following the announcement by the Minister of Consumer Affairs Heather Roy of the "One Law–One Door" project last year, the Ministry has now released the 'Consumer Law Reform' discussion document which seeks feedback on whether New Zealand's consumer laws can be simplified and consolidated. Specifically, the following seven consumer laws are being reviewed for their ongoing relevance; whether they are sufficiently up to date for consumer transactions of today; and for their overall effectiveness and enforceability:

• Fair Trading Act 1986;
• Consumer Guarantees Act 1993;
• Weights and Measures Act 1987;
• Auctioneers Act 1928;
• Door to Door Sales Act 1967;
• Layby Sales Act 1971;
• Unsolicited Goods and Services Act 1975

The review is also considering the Carriage of Goods Act 1979 with respect to its coverage of consumer transactions and the Sale of Goods Act 1908 with respect to its relationship to the Layby Sales Act and the Auctioneers Act.

As part of the review of each consumer law, consideration is being given to whether:

• the law could be incorporated into an enhanced Fair Trading Act or whether it should remain as standalone law;
• there are any gaps in the law taking into account best practice international consumer law; and
• harmonisation can be achieved with Australian consumer law.

Click here for further details

Electricity Industry Bill: Select Committee Report
The Finance and Expenditure Select Committee has recommended that the Electricity Industry Bill (including the Supplementary Order Paper) be passed without significant amendment. The new regime for the governance of the electricity industry contemplated by the Bill is intended to be put in place on 1 October 2010.

The principal provisions in the Bill dealing with changes to the governance regime are largely unchanged. The Electricity Commission is to be replaced with the Electricity Authority (an independent Crown entity under the Crown Entities Act 2004) which will have a more focused set of objectives and functions. A number of the functions currently carried out by the Electricity Commission are to become the responsibility of other parties – for example, energy conservation will be reallocated to the Energy Efficiency and Conservation Authority, emergencies and security of supply will be dealt with by the System Operator and the approval of Transpower's national grid upgrades will be handled by the Commerce Commission.

The transfer of the Tekapo A and B hydro stations from Meridian to Genesis is to proceed also. The changes in the Supplementary Order Paper clarify how certain resource consents and existing contractual arrangements are to be dealt with in the context of this transaction.

The significant changes arising from the Select Committee Report are:

• Ownership of generation assets by Line Companies
  There is a further relaxation of the rules dealing with the ownership of generation assets by lines companies. The Select Committee considered that the initial thresholds in the Bill were set too low and this might discourage lines companies from entering the electricity generation or retailing businesses. These thresholds are intended to prevent large scale vertical integration of generator-retailers and lines companies and to reduce the risk of anti-competitive practices.

  The threshold for ownership separation is set at up to 250 MW of generation connected to the national grid (up from 100 MW) and the threshold for corporate separation is set at up to 50 MW of generation connected to its own distribution network (up from 10MW) and up to 75GW/year for retail (up from 5GW/year). The Select Committee indicated that there is to be no restriction on the quantity of generation that a lines company might own provided that it is connected to other local distribution networks.

• Continuance of supply
  In the context of the continuance of supply obligations imposed on lines companies, the Bill allows line companies the option of providing electricity generation facilities to a consumer rather than maintaining a lines connection.

• Consumer Guarantees Act
  The Bill requires that use of system agreements between lines companies and retailers are to include indemnities in favour of the retailers for liabilities under the Consumer Guarantees Act 1993 for breaches of acceptable quality caused by faults on the distribution network over which the retailer has no control. The Select Committee considered that this amendment was necessary to ensure that retailers are not held responsible by consumers for matters they cannot control or influence.

Rules of Origin changes
New Zealand and Australia have concluded their review of the Rules of Origin under the Australia New Zealand Closer Economic Relations Trade Agreement (CER). The new rules are expected to come into force later this year and can be viewed at www.mfat.govt.nz.
Click here for further details

Major changes to NZ credit reporting regulation - Credit Reporting Privacy Code 2004 - Proposed amendment open for public submission
Privacy Commissioner, Marie Shroff, has publicly notified a proposed amendment to the Credit Reporting Privacy Code and invited anyone interested to make a submission by 13 August.
Click here for further details

Companies Office

Companies Office launches a new era in services
The Companies Office has successfully launched its new IT system – Enterprise. Features of the new site include new logon procedures, contemporary navigation, personalised dashboards, enhanced company information, and enriched searches.
Click here for further details

Securities Commission

Consultation: Proposed transitional exemption - the Securities Regulations 1983 to the Securities Regulations 2009
The Securities Commission requires additional time to consider certain existing class exemption notices (including the Securities Act (Employee Share Purchases Schemes-Listed Companies) Exemption Notice 2006 and the Securities Act (Employee Share Purchases Schemes-Unlisted Companies) Exemption Notice 2005) to determine the appropriateness of granting similar exemptions from the Securities Regulations 2009 to those that are currently available under the notices from the Securities Regulations 1983. In the meantime, to enable issuers to rely on those class exemption notices (for prospectuses registered before 31 December 2010) the Commission is considering a further transitional exemption notice which would exempt issuers from complying with various parts of the 2009 Regulations, provided that the relevant offer was made in accordance with the 1983 Regulations and the terms and conditions of the relevant existing class notice or notices. The Commission says it is also considering a reporting clause to allow it to monitor the extent of reliance on the transitional notice.

The proposed exemption notice is not covered by the Securities Act (Transition to Securities Regulations 2009) Exemption Notice 2009 which covers situations where the 2009 regulations have not introduced significantly different or additional requirements.
Click here for further details

Consultation: guidance on the application of the Securities Markets Act 1988 to commodities futures contracts
The Securities Commission has prepared a draft guidance note for review and comment in response to queries it has received from market participants regarding the application of the insider trading provisions of the Securities Markets Act 1988 in relation to the trading of commodities futures listed on an authorised futures exchange. The Commission is also considering whether provision should be made in regulations to further clarify the law. Submissions closed on 30 June 2010.
Click here for further details

Guide for Authorised Financial Advisers released
The Securities Commission has released the AFA Adviser Business Statement Guide to help financial advisers prepare for the new regulatory regime. The guide provides information to help advisers decide whether they need to be authorised as an Authorised Financial Adviser (AFA) and also outlines the content to be developed in an Adviser Business Statement for those advisers applying to become an AFA.

To become an AFA an adviser will have to register online and apply for authorisation in a single process at the Financial Service Providers Register. Applications for registration and authorisation open in July 2010 at http://www.fspr.govt.nz/

Financial advisers urged to get ready for regulation
The Commissioner for Financial Advisers, David Mayhew, is urging advisers to get ready for the new regulatory regime. The top priority for advisers seeking authorisation is to enrol to be assessed against the adviser competence standards. These are set out in the draft Code of Professional Conduct currently being finalised by the Code Committee. "I am confident that the proposed competence standards are unlikely to change materially and certainly will not be reduced. I'd encourage all would-be AFAs not to wait until the last minute before applying," Mr Mayhew stresses.

The AFA timetable has been modified to allow time for late applications and is available at www.seccom.govt.nz/afa

Advisers can book their competence assessment at http://www.afacompetence.org.nz/

Under the latest changes to the financial advisers' regime, the Code of Professional Conduct is also to be a benchmark for firms and corporate groups seeking to become Qualifying Financial Entities (QFEs). The Securities Commission has relaxed the QFE application timetable. Mr Mayhew encourages QFEs to submit their ABS by October, although they will be accepted up to a final deadline of 1 December 2010.

A QFE "Get Ready" Checklist has been issued and is available at www.seccom.govt.nz/qfe

Click here to read the full press release

CLASS EXEMPTION NOTICES

The Securities Commission has granted the following class exemption during this period:

Financial Reporting Act (Overseas Issuers) Exemption Amendment Notice 2010
This notice, which came into force on 18 June 2010, amends the Financial Reporting Act (Overseas Issuers) Exemption Notice 2009. The effect of the notice is to exempt:

• the directors of certain issuers incorporated in the Netherlands from various provisions of the Financial Reporting Act 1993 (the FRA) by enabling them to provide group financial statements that they are required to prepare under Dutch financial reporting requirements; and
• the directors of all issuers covered by the principal notice from section 15 of the FRA in its entirety.

Takeovers Panel

Discussion paper on technical issues of the Takeovers Code released
The Takeovers Panel has issued the second public discussion paper of its three stage consultation process on technical/low policy content matters with the Takeovers Code. The first consultation document was issued last year on its proposed amendments to the Code's provisions which govern partial takeover offers. The Panel expects to issue a third, and final, discussion paper in late 2010 or early 2011. Once the Panel has completed this review of the Code, it expects to make recommendations to the Minister which will incorporate all of its proposed amendments to the Code, by the end of 2010, or in early 2011.

This current discussion paper covers matters in Parts 1 to 5 of the Code which include:

• the inflexibility of rule 16(b) regarding notice of meeting requirements for allotments of voting securities (which is currently being addressed by the Panel through a class exemption);
• a definition issue arising in respect of the application of rules 7(c) and (d) to certain upstream acquisitions or allotments;
• whether the discretion given to offerors under rule 25(1) of the Code to invoke defeating conditions (which are in the power of the offeror or its associates) included in an offer is inappropriate;
• amendments to rule 15 and rule 16 of the Code to ensure that the identity of every person (including a person whose voting securities in a Code company are held by a custodian or nominee) whose voting control increases as a result of a proposed acquisition or allotment, as the case may be, is stated in the information accompanying the notice of meeting;
• the requirement for a further independent advisers report under rule 30; and
• amending rule 35 to allow an offeror, who already holds or controls voting rights in the target company, to "sell in" its voting securities into its own offer.

Submissions close on 30 July 2010.
Click here to access the discussion document

TAKEOVERS CODE EXEMPTION NOTICES

Takeovers Code (New Zealand Clearing Limited and New Zealand Depository Limited) Exemption Notice 2010
This notice applies to acts or omissions occurring on or after 15 June 2010 and expires on 15 June 2015 and is in relation to NZX Limited's new clearing house (NZ Clearing Limited) and the house's clearing and settlement system (CSS). The notice exempts:

• NZ Clearing and NZ Depository and their upstream controllers, New Zealand Clearing and Depository Corporation Limited and NZX Limited, from rule 6(1) of the Takeovers Code in respect of any increase in their respective voting control in a code company as a result of the exercise by NZ Clearing or NZ Depository of any power or the performance by NZ Clearing or NZ Depository of any function under the rules of the CSS, or otherwise as a consequence of any event or circumstance affecting NZ Clearing or NZ Depository in their respective capacities as operators under the rules of the CSS;
• exempts clearing participants and upstream parties of those clearing participants from rule 6(1) of the Code in respect of any increase in their voting control in code companies as a result of the holding or controlling of voting rights as part of the clearing and settlement of a transaction through the CSS; and
• any associates of the above exempted parties from rule 6(1) of the Code in respect of any increase in the associate's voting control.

New Zealand Exchange (NZX)

NZSX/ NZDX & NZAX Listing Rule Amendments
NZX Market Supervision has given notice of amendments to the NZSX/NZDX and NZAX Listing Rules (the Rules). The amendments include the following:

• Changes relating to NZX's new clearing and settlement system which will come into effect on the Go-Live Date (still to be advised by NZX). In brief these are:
• all references to the "FASTER System" have been replaced by the term "Settlement System";
• the definition of Ex Date has been amended to provide that it shall be the second Business Day before the Record Date for that entitlement, unless NZX determines otherwise;
• rights issues will require five Business Days notice prior to the Ex Date. Quotation of Rights will cease four Business Days before the closing date for acceptances and renunciations.
• Corporate Actions Announcements: Issuers will be required to provide information regarding the amount of foreign dividend payment credits per share and, in the case of PIE issuers, excluded income per share, when notifying the market of corporate actions.
• Share Purchase Plans: Rule 7.3.4(c) is amended to reflect changes made to the Securities Act (NZX-Share and Unit Purchase Plans) Exemption Notice 2005 by the Securities Act (NZX-Share and Unit Purchase Plans) Exemption Amendment Notice 2009 which increased the annual monetary threshold for share purchase plans made under the 2005 Exemption Notice from $5,000 to $15,000.
• General amendments: A number of minor amendments have been made to address minor typographical errors and omissions contained in the existing versions of the Rules.

The Rule changes are still subject to regulatory approval under the Securities Markets Act 1988.
Click here for a marked-up copy of the amendments to the Rules
Click here for further details

NZX adjusts annual listing and participant fees
NZX will introduce some changes to annual listing and participant fees on 1 July 2010. Annual Listing fees on the Debt Market will increase 6.5%. On other markets the increase is 17.75%. There will be no change to initial or secondary listing fees for all listed issuers, or to annual listing fees for companies with a market capitalisation of less than $15 million listed on the NZX Alternative Market.
Click here for further details

NZX Participant Rule Amendments
NZX Market Supervision has given notice of amendments to the NZX Participant Rules. The amendments relate to the introduction of NZX's new clearing and settlement system and will come into effect on the Go-Live Date (which is still to be advised by NZX). The amended Rules can be found at www.nzx.com/market-supervision/rules/. NZX has provided two marked copies of the Rules. One shows the differences between the NZX Participant Rules as they are currently in force and draft Rules dated 12 April 2010, and the other shows the changes made since the 12 April 2010 draft Rules. As the Rules are subject to regulatory approval, including for the purpose of the Securities Markets Act 1988, any changes required to obtain regulatory approval will be made available prior to the Go-Live Date.
Click here for further details

New Zealand Commerce Commission (NZCC)

Media releases

The NZCC has issued the following media releases:

Industry regulation and regulatory control

• Commerce Commission releases draft decisions on Input Methodologies for electricity distribution businesses
  The NZCC has released a paper setting out its draft decisions and reasons on the input methodologies to be applied to electricity distribution businesses.
  Click here for more

• Commerce Commission releases draft decisions on Input Methodologies for gas pipeline businesses
  The NZCC has released a paper setting out its draft decisions and reasons on the input methodologies to be applied to suppliers of gas pipeline services – i.e. gas pipeline businesses.
  Click here for more

• Commerce Commission releases draft decisions on Input Methodologies for Transpower
  The NZCC has released a paper setting out its draft decisions and reasons on the input methodologies to be applied to Transpower.
  Click here for more

• Commerce Commission releases draft decisions on individual price-quality path for Transpower
  The NZCC has released its draft decisions and reasons on the application of individual price-quality regulation to Transpower. It complements the paper referred to in the previous item, setting out NZCC's draft decisions and reasons on the input methodologies to be applied to Transpower.
  Click here for more

Mergers and acquisitions

• Divestment guidelines released
  "The divestment guidelines will assist businesses and their legal advisers in understanding the NZCC's approach when assessing divestment undertakings in relation to a clearance application" said NZCC General Manager, Enforcement, Kate Morrison.
  Click here for more

• AMP granted clearance to buy AXA's Australian and New Zealand businesses
  The NZCC has granted clearance for AMP Limited to acquire the Australian and New Zealand operations of AXA Asia Pacific Holdings Limited.
  Click here for more

• Scandinavian Tobacco applies for clearance to acquire Swedish Match
  The NZCC has received an application from Scandinavian Tobacco Group seeking clearance to merge their New Zealand cigar and pipe tobacco business with Swedish Match.
  Click here for more

• Preformed Line Products granted clearance to buy Electropar
  The NZCC has granted clearance for Preformed Line Products Company to acquire Electropar Limited.
  Click here for more

• Tomarata Sand granted clearance to acquire Coastal Resources
  The NZCC has granted clearance to Tomarata Sand Limited to acquire the assets and business of Coastal Resources Limited relating to sand mining operations at Tomarata in Northland.
  Click here for more

Telecommunications

• Commerce Commission recommends regulation of mobile termination access services
  In its reconsideration report, the NZCC has recommended under the Telecommunications Act that the Minister for Communications and Information Technology regulate mobile termination access services, and not accept undertakings from Telecom and Vodafone.
  Click here for more

• Commerce Commission commences competition review of UBA service
  The NZCC has commenced a review to determine whether Telecom New Zealand Ltd faces limited competition in the provision of the unbundled bitstream access (UBA) service. The supply of the UBA service became subject to a competition test from December 2009.
  Click here for more

Consumer issues

• 1300 broadband customers to get refunds following Commerce Commission investigation
  The NZCC has reached a settlement with Telecom New Zealand Ltd (Telecom) under which Telecom will notify and refund approximately 1300 customers who may have been misled by a broadband promotion it conducted in 2008. Telecom will also contribute to the cost of establishing an internet-based tool which will enable consumers to compare the cost of various telecommunications products.
  Click here for more

• Commerce Commission settles with ANZ and ING over investment funds
  The NZCC has reached a settlement with ING (NZ) Limited and ANZ National Bank Limited in relation to two investment funds. The settlement follows an investigation into alleged breaches of the Fair Trading Act.
  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 calls for comment on proposed acquisition of Rockdale Beef Pty Ltd by Swift Australia Pty Ltd
  The ACCC has issued a Statement of Issues on the proposed acquisition of Rockdale Beef Pty Ltd by Swift Australia Pty Ltd.
  Click here for more

Market behaviour

• The ACCC has issued its final decision authorising Santos QNT Pty Ltd and ten other oil producers to jointly market their oil produced in the Surat Basin and Denison Trough in Queensland.
  Click here for more

• ACCC authorises amendments to Gladstone Power Station electricity supply arrangements
  The ACCC has issued a determination that authorises amendments to agreements about electricity generated by the Gladstone Power Station and supplied to the Boyne Island Smelter and the National Electricity Market.
  Click here for more

• ACCC sees continuing benefit in bulk electronic transaction clearing rules
  The ACCC has reauthorised certain regulations governing the operation of the Bulk Electronic Clearing System which is managed by the Australian Payments Clearing Association.
  Click here for more

• ACCC proposes to allow Vision Group clinics to agree on fees
  The ACCC proposes to grant authorisation to Vision Group Holdings Limited to allow employees and ophthalmologists engaged as contractors at its clinics to discuss and agree on the fees to charge patients for ophthalmology services.
  Click here for more

• ACCC grants interim approval to continue Agsafe industry stewardship program
  The ACCC has granted interim authorisation to allow Agsafe Limited to continue to enforce its Accreditation and Training Program for the agvet chemicals industry.
  Click here for more

• ACCC grants interim authorisation to ATM direct fee free agreement
  The ACCC has granted interim authorisation to an agreement between Suncorp Metway and the Bendigo & Adelaide Bank not to charge each other's cardholders a fee for transactions at ATMs they own.
  Click here for more

Consumer issues

• A one-stop shop free education program for people buying a franchise
  A free online education program funded by the ACCC will help prospective franchisees make an informed decision when looking to buy a franchise. The program, administered by Griffith University's Asia-Pacific Centre for Franchising Excellence, consists of five modules and will commence in July this year.
  Click here for more

• ACCC institutes proceedings against Optus alleging use of the word "unlimited" in its advertising is misleading
  The ACCC has instituted legal proceedings in the Federal Court, Melbourne against Singtel Optus Pty Ltd for alleged contraventions of the Trade Practices Act 1974 in relation to the use of the word "unlimited". The ACCC alleges that certain television, radio and print advertisements run recently by Optus which advertise "unlimited" calls on its $70 pre-paid Turbo Max plan are misleading because the offer is subject to a number of limitations and restrictions.
  Click here for more

• ACCC institutes proceedings against greenpower retailer for breach of undertakings
  The ACCC has instituted proceedings in the Federal Court in Sydney against Global Green Plan Ltd for breach of an 87B undertaking. Whilst operating GreenSwitch, Global Green Plan accepted payments from customers on the proviso that the money would be used to purchase renewable energy certificates. However, not all of the certificates were purchased as had been promised.
  Click here for more

Selected Australian developments

Guidance for directors
The Australian Government's Corporations and Markets Advisory Committee (CAMAC) has released a report "Guidance for directors" in response to a request from the Minister for Financial Services, Superannuation and Corporate Law for advice on whether there is sufficient guidance provided to directors to ensure that they clearly understand their roles and responsibilities and whether their performance would be enhanced by the introduction of a code of conduct or best practice guidance by a regulator. CAMAC concluded that there was no need for a new code or a best practice guide, but it did conclude that it was appropriate for the ASX's Principles and Recommendations to be reviewed in light of international developments arising from the global financial crisis.

CAMAC's report is of particular relevance to listed companies, with a governance board.
Click here for further details

ASIC strengthens disclosure requirements for debentures and unsecured notes
ASIC has released updated requirements for unlisted debentures and unsecured notes to improve disclosure to retail investors.
Click here for more

Short and simple product disclosure statements
New regulations prescribing short and simple product disclosure documents for margin loans, superannuation and simple managed investment schemes commenced on 22 June 2010, with a two year transitional period. Minister Tanner said: "Cutting down product disclosure documents from over one hundred pages to eight pages and making it easier for businesses to use alternative methods such as the internet for disclosing large amounts of detailed product information will also reduce costs for industry."
Click here for further details