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2007 Annual Report

Public understanding

An understanding of the securities markets and the law relating to them is essential for market participants and their advisers. Well-informed investors are an essential ingredient for robust capital markets. An understanding of the securities markets, investment products, and the obligation of issuers to provide information about their products, will encourage people to become investors in securities. Because New Zealand has disclosure-based regulation it is important that people are aware of the information they are entitled to and understand that information before they make investment decisions.

Services
The Commission’s websites, publications, media releases and speeches provided information to help people understand the securities markets and how they are regulated. The website, www.seccom.govt, provided relevant, up-to-date material and some 2450 subscribers received email alerts to new information on the site. Visitor numbers averaged over 37,000 per month, an increase from 30,000 last year. The Commission produced a quarterly Bulletin, and issued 32 news releases which were widely reported. Reports were published giving the Commission’s views relating to financial reporting, NZX’s regulatory role, futures contracts, and an inquiry into certain statements relating to the release of Government’s Telecommunications Stocktake Paper. The Chairman, Members and staff spoke to groups and conferences in New Zealand and overseas on 26 occasions.

Education
An education campaign was launched to alert market participants to changes to securities law that come into force later in 2007. This involves advertising to raise awareness and guide people to a website, www.newsecuritieslaw.govt.nz, which broadly explains the new law. More than 230 people are registered to receive information from this site. Articles were published in magazines targeting market participants affected by the law changes, and presentations were made to relevant groups. A Guide to New Securities Law was prepared and will be published when regulations are settled. Market testing of the Guide with investment advisers and company directors indicated it was welcome and useful. Their comments helped improve the text. A database of people likely to be investment advisers under the new legislation (i.e. people who give advice on investments to the public as part of their job) was prepared. The Commission will notify them when the law is coming into force and send them the Guide to New Securities Law.

The Commission began a project to alert the public to the new requirements for investment advisers to disclose information about themselves and the products they advise on before they give investment advice. This includes a brochure How to choose an investment adviser to be available on the Commission’s websites, at public libraries, and from investment advisers and Citizens Advice Bureaux. The project includes revising parts of the Retirement Commission’s Sorted website and other material to include the new investment adviser disclosure requirements.

Enterprise New Zealand Trust provides financial education in many New Zealand schools. Previously the Commission had sponsored Enterprise New Zealand Trust to develop a Financial Studies Course (FSC) for senior secondary school students which covers investment, external influences on investment decisions, financial planning and student loans. This year the Commission sponsored teacher resource materials and teacher training in the FSC. As the Foundation Sponsor the Commission committed to continuing sponsorship to promote, deliver and support the course for two more years. A separate sponsorship was agreed to develop a student resource pack.

Effectiveness and organisational health

Capability and risk
The Commission has a risk management framework developed after a study by Deloitte in 2004. It identifies the key areas of our capability and risks to them. The main risks are recruitment, key personnel, staff retention, physical event/disaster, reputation, confidentiality of information and knowledge available. The Commission has developed responses to these.

Staff
The Commission has 44 staff (42 in 2005/2006) Five people work part time and two are on long term leave. Seven work full time for the Takeovers Panel and other staff work part time in support of the Panel. The risk that the Commission may not be able to recruit suitably qualified staff was countered by graduate recruitment, overseas recruitment, and targeting New Zealand recruitment campaigns effectively. The Commission recruited as required this year.

The risks associated with retaining staff are minimised by our commitment to being a good employer. The Commission won the small employer category (up to 50 staff ) of the Unlimited/JRA Best Places to Work in New Zealand Survey in 2006, after coming second in 2005. This survey is used to measure organisational health and our performance as an employer. We continued our values-based culture, maintained high professional standards, were responsive to staff feedback, and continued the human resource practices that have proven effective.

Physical event/disaster
The Commission’s offices are code compliant under section 95 of the Building Act 2004. Our earthquake and disaster plan includes emergency food, water and first aid supplies, staff trained in first aid, and document and IT recovery systems. Key staff have access to the Commission’s computer network enabling them to work from home.

Reputation and integrity
The Commission promotes high ethical standards in the securities markets. If it is to succeed in this, and thereby strengthen confidence in the integrity of New Zealand’s capital markets, it is essential that people have confidence in the integrity of the Commission itself.

The Commission must maintain a good reputation both for the quality of our work and the integrity of our approach. Much of our work is highly sensitive and confidentiality must be maintained. These risks were managed though the Values and the Code of Ethics we have adopted as an organisation.

Future capability
The Ministry of Economic Development’s review of financial products and providers is proposing reforms which would significantly increase the Commission’s responsibilities. A project to estimate the likely resource requirements of these new responsibilities was carried out to help prepare for these changes and to advise the government on the possible funding implications associated with any such reforms. This project quantified the likely funding needs for premises, infrastructure, technology and personnel.

Organisational health and capability building
The Commission worked with the following agencies on its organisational capability and health initiatives:

the State Services Commissioner, for its six Development Goals for the State Services; and
the Equal Employment Opportunities Unit (EEO Unit) of the Human Rights Commission for its Good Employer Guidance under the National Equal Opportunities Network.

The Commission’s good employer programme reflects its commitment to EEO under which staff are recruited and rewarded on the basis of merit. The statement "This organisation is an equal opportunities employer" was ranked first out of the 60 statements in the Unlimited/JRA Best Places to Work Survey 2006.

Financial objectives
The Commission’s main financial objective for the 2006-2007 year was to carry out our strategic plan on time and within budget and resources. It achieved this by delivering the outputs, as detailed in the Statement of Service Performance, within the funds appropriated by Parliament for this purpose.

The Commission applied its policies for expenditure, financial delegations, and acquisitions. The financial delegation policy requires all expenditure to be within set delegations, or subject to prior approval by the Commission. Detailed planning and management procedures based on the Auditor-General’s guidelines are followed for significant acquisitions including planning and managing litigation expenditure.

Working with others

The Commission has a wide range of stakeholders and the policy on stakeholders is published on the website.

We worked with the Minister of Commerce and the Ministry of Economic Development, in accordance with our statutory functions and powers, on policy, regulatory matters, law reform, and appropriations. We reported to the Minister under the Crown Entities Act.

We carried out our co-regulatory role with the NZX over the markets operated by that exchange as required by the Securities Markets Act 1988. NZX is currently the only registered exchange in New Zealand.

We are grateful for the good working relationship we have with Parliamentary Counsel Office. We worked with other government agencies including the Commerce Commission, Police, Registrar of Companies, Reserve Bank of New Zealand, Retirement Commission, Serious Fraud Office, State Services Commission and Takeovers Panel as appropriate and in accordance with our statutory functions and powers. We worked with overseas securities regulators and agencies in accordance with the IOSCO MMOU, bilateral MOUs and applicable law. We also worked with a variety of industry organisations and professional bodies.

Takeovers Panel

The Commission provides administrative and support services to the Takeovers Panel in accordance with the Securities Act. These services are provided under an MOU. For the 2006-2007 financial year the Commission and the Panel agreed on the level of services required and on the fees to be paid for them. The income received from the Panel and the costs of providing these services are recorded in the financial statements.

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