Securities Market Watchdogs Yapping at Visitors
Friday 14 Mar 2003 Stephen Franks Press Releases -- Commerce
Having multiple watchdogs comment on the Vertex prospectus is likely to reduce market confidence and renew calls for a
bigger dog, ACT Associate Commerce Spokesman Stephen Franks said today.
"Meanwhile, fewer honest people will want to be around the market in case they get bitten - although the watchdogs have
generally yapped without biting anyone," Mr Franks said.
"I have no quarrel with the Securities Commission's conclusions. But I do question the waste of resources in reviewing
3,500 documents, and keeping a club full of lawyers and accountants busy, when the Market Surveillance Panel was already
looking at related issues.
"The issues should be simple - if no Vertex people were dishonest, planned to mislead, or knew they were misleading, it
should be the end of formal regulatory involvement. That's what the Securities Commission, and apparently the Market
Surveillance Panel, concluded.
"Regulators must draw a clear distinction between dishonesty or deliberate deception, and poor judgment. They must make
it clear why foolishness and carelessness are not matters for the criminal law, otherwise directors and shareholders
will see even more of their time and resources being used in regulatory crying over spilt milk. When there is no blood
to show investors at the end, they feel the watchdogs are toothless.
"The Government's new "co-regulation" scheme will guarantee we get more of this kind of doubling up. Political pressure
to show bite marks will increase.
The wrong lessons will be drawn - pay even more to accountants, lawyers and other consultants to get back covering
certifications. They may add nothing to shareholder value, or even to certainty in forecasts, and only mean directors
are safer from liability.
"The Vertex saga warns what happens when competing watchdogs scrap over the same bone. Without giving any clear
indication of what it was dissatisfied with, the NZSE Board undermined confidence in its own Panel. A few days later it
issued a jargon riddled statement about revamping its `regulatory construct'".
"The NZSE and the Securities Commission new Memorandum of Understanding has thousands of words about co-operating. All
it really means is the Securities Commission can micro-manage what the Exchange is doing. The net effect is that the
Commission has regulatory oversight of the NZSE watchdog, but plainly intends to bark as well.
"Both organisations seem set on frightening visitors more than burglars. They are discussing changes to the kennel and
the length of the chain, when the decision needed is whether to breed a bit more Alsatian into the Labrador already
there.
"Plans for law changes, strategic groups, consultation and regulatory investigation are excuses for not finding the
egregious cases and hitting them hard. Both bodies have powers they rarely, if ever, use. They would restore confidence
in integrity by ensuring they use their powers against fraud and dishonesty, and hard, instead of against the
carelessness, or over-optimism investors expect anyway," Mr Franks said.
For more information visit ACT online at http://www.act.org.nz or contact the ACT Parliamentary Office at
act@parliament.govt.nz.