Crown Law Proposes Loopholes For Securities Law Evaders
Minister Burton's last minute so called legal opinions are laughable says ACT MP Stephen Franks, an experienced
commercial lawyer. "He waved the first around Parliament last week to deny offences by the Deputy Prime Minister, Mr
"Lawyers who see the opinion will fall about laughing. Only one sentence (or at most two) of the seven sentence
'opinion' even look like a legal assessment.
"It reads: 'In our view there is no absolute certainty that the statement made constituted an advertisement in terms of
section 2A of the Securities Act'. The earlier advice never said there was. Who expects certainty from a legal opinion
anyway? The rest of the "opinion" is just descriptions of the facts, not the law.
"I wonder how much negotiation it took the Minister to get that letter from the firm. Any half perceptive reader of
legal opinions will translate it "Of course the earlier advice is correct [that Mr Anderton appears to have broken the
law] ' you might have some defences ' but don't bank on them.
"This could be charitably called an 'advocacy opinion' not a prediction of a decision of the courts. Some lawyers think
they are unethical.
"The Minister's claims about it were certainly unethical. They misled journalists into reporting it as clearance. A
business person using a document like that would be liable for being misleading or deceptive.
"A Minister who gets away with misrepresentation lowers the ethical standard for the whole community just as condoning
securities law breaches by Mr Anderton would undermine integrity in the market.
"The Crown Law opinion is a more substantial attempt to get Mr Anderton off. But it seems to have been done by someone
with little or no securities law experience. It completely misses a crucial section of the Securities Act. Worse, it
raises defences that will have the Securities Commission choking.
"Crown Law is offering the novel view that you can evade the legal ban on pre-prospectus publicity if the securities are
not in existence, or you have not finalised the issue details, or you postpone incorporating the issuer.
"If only! For years I have urged a reform of these pre-prospectus publicity offences, as have venture capitalists and
others who need to test the market. I can even have sympathy for Mr Anderton. What he has done many honest business
people have wanted to do, and should have been allowed to do.
"But freedom of honest commercial expression is not protected in our securities law. Some of Mr Swain's proposed changes
will make it worse.
"Millions of dollars have been spent in fruitless legal fees to ensure compliance with this law. Until it is changed the
Commission must ensure it is enforced without fear or favour. Ministerial status should mean the salutary effect of a
prosecution will be greater.
"Any penalty on conviction should be nominal, because his offence is one of naivety, but the prosecution should
proceed," Stephen Franks said.