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2007 Annual Report

STATEMENT OF OBJECTIVES
for the year ended 30 June 2007

Performance of Securities Market Functions

"This appropriation covers the cost of purchasing the following functions by the Securities Commission:

(The Estimates of Appropriations for the Government of New Zealand for the year ending 30 June 2007, B.5 Vol.1 p149)

STATEMENT OF SERVICE PERFORMANCE
Performance standards and measures for the outputs of the Commission
for the year ended 30 June 2007

OUTPUT 1 Enforcement - inquiring into suspected breaches of securities law and intervening in the interests of investors in accordance with statutory powers.

Outcome Bad market practice is seen to be unacceptable and the law is complied with.
 
Activities

Take enforcement action in the following areas:

  • futures dealers,
  • insider trading,
  • market manipulation,
  • secondary market disclosures (substantial security holder disclosure, continuous disclosure, disclosure of trading by directors and officers),
  • offer documents,
  • financial intermediaries,
  • illegal offers,
  • contributory mortgages.

This is done by

  • prohibiting advertising,
  • removing offer documents from the market,
  • taking civil enforcement action in the Courts,
  • referring for prosecution,
  • acting on behalf of overseas commissions,
  • making other compulsory orders.
 
Performance standards
Performance measures
Enforcement
Actual
2007
Budget
2007
Quantity
Complete the enforcement actions that meet the Commission’s case selection criteria, relating to the above matters. We expect there will be 5 such actions. 5 5
Quantity
There is no successful challenge to the Commission’s decisions or actions under the rules of natural justice. 100% 100%
Enforcement actions comply with the Commission’s internal processes. Met Full compliance
Timeliness
Progress civil enforcement actions from investigation to the filing of proceedings. Nil On average, within 24 months
of commencing an investigation
Complete other enforcement actions. 4 months On average, within 6 months
of commencing an action
Cost
Expenditure allocated to enforcement work. 3% 7%

 

OUTPUT 2 Monitoring and market oversight – maintaining oversight of securities market activity and taking actions in accordance with statutory powers.

Outcome Integrity of, and confidence in, the securities markets are improved.
 
Activities

Maintain oversight of securities markets and take appropriate action in the following areas:

  • insider trading,
  • market manipulation,
  • NZX oversight,
  • secondary market disclosures (substantial security holder disclosure,
  • continuous disclosure and disclosure of trading by directors and officers),
  • offer documents,
  • financial intermediaries,
  • illegal offers,
  • contributory mortgages,
  • corporate governance,
  • futures dealers,
  • financial reporting,
  • regulatory co-ordination.

This is done by:

  • reviewing practices of market participants and issuers,
  • overseeing the operation of NZX,
  • assessing referrals from NZX,
  • monitoring market disclosures,
  • reviewing offer documents and advertisements for securities,
  • responding to public complaints,
  • using compulsory information-gathering powers (inspections, summons),
  • commenting publicly on market practice,
  • accepting enforceable undertakings,
  • reviewing financial reporting by issuers,
  • reviewing corporate governance reporting,
  • acting on behalf of overseas commissions.
 
Performance standards
Performance measures
Monitoring and market oversight
Actual
2007
Budget
2007
Quantity
Complete the monitoring and market oversight matters that meet the Commission’s case selection criteria, relating to matters listed above. We expect there to be 200 of these. 117 200
Complete NZX oversight review. 2 1 time in the year
Complete financial reporting surveillance programme. 2 2 cycles in the year
Complete the review of disclosure by finance companies. 1 1
Advise the Minister on proposed changes to NZX Conduct Rules. 3 3 times in the year
Consider and comment on continuous disclosure applications under the MOU with the NZX. 6 12 times
Participate in Securities Act allotment validation proceedings. 2 As required
Quality
There is no successful challenge to the Commission’s decisions or actions under the rules of natural justice. 100% 100%
Monitoring and market oversight inquiries comply with the Commission’s internal processes Full compliance Full compliance
Timeliness
Complete monitoring and market oversight matters. 2.4 months Within 3 months of commencing inquiries
Complete NZX oversight review. 5.6 months Within 6 months of commencing review
Complete financial reporting surveillance programme. 10.2 months On average, within 9 months of each cycle commencing
Complete the review of disclosure by finance companies. 11 months Within 12 months of review commencing
Advice is provided to the Minister on approvals of, or proposed changes to, the Conduct Rules of NZX Ltd within timeframes agreed with the NZX and allowing the Minister to exercise powers within the timeframes specified in the Securities Markets Act 1988. 100% 100%
Participate in Securities Act allotment validation proceedings. Met Meet Court timetables
Cost
Expenditure allocated to monitoring and market oversight work. 40% 35%

 

OUTPUT 3 Law reform – reviewing securities law and practice and making recommendations for reform.

Outcome The regulatory environment is relevant and effective.
 
Activities

Work, generally with the Ministry of Economic Development, on projects and reviews of:

  • the Securities Act 1978:
    - administration and efficiency,
    - surveillance, detection and enforcement powers,
    - exemption powers,
  • the Securities Regulations 1983,
  • the Securities Legislation Bill,
  • investment advisers,
  • insider trading and market manipulation,
  • substantial security holder disclosure,
  • financial intermediaries,
  • regulation of stock exchanges,
  • corporate governance,
  • the Financial Reporting Act 1993.

Work, generally with NZICA and ASRB, on reviews of:

  • international financial reporting standards,
  • exposure drafts of financial reporting and auditing standards,
  • the Financial Reporting Act 1993.
 
Performance standards
Performance measures
Law reform
Actual
2007
Budget
2007
Quantity
Make recommendations for securities law reform and improved market practice in accordance with obligations under the Securities Act 1978 and other relevant legislation. No recommendations were deemed necessary The Commission will make recommendations to comply with its obligations under the Securities Act 1978 and with other relevant legislation. The Commission’s contributions to law reform will arise in particular from its experience gained in the course of its enforcement work
Review exposure drafts of financial reporting and auditing standards, and Financial Reporting Act. 4 Review as required
Contribute to projects and reviews with the Ministry of Economic Development, other government departments and interested parties. Contributed to Ministry of Economic Development projects being:
  • Securities Legislation Bill
  • Review of Financial Products and Providers
  • Review of Financial Intermediaries
  • Business Law Reform Bill
  • Non-bank deposit takers
Contribution as required
Quality    
Recommendations are appropriate, given the prevailing securities law and practice. No recommendations were deemed necessary The Commission will base its work on thorough and accurate
research into, and analysis of, existing law and practice
All recommendations comply with the Commission’s
internal processes.		 Not applicable Full compliance
Timeliness    
Provide information and responses to the Ministry of Economic Development and others within agreed timeframes. 100% 100%
Cost    
Expenditure allocated to law and practice reform work. 6% 7%

 

 

OUTPUT 4 Exemptions and authorisations – considering and deciding on applications for exemptions from the provisions of the Securities Act 1978, Securities Markets Act 1988 and the Securities Regulations 1983; considering and deciding on applications for authorisation of market participants, including futures exchanges and dealers, trustees and statutory supervisors; reviewing existing authorisations.

Outcome Securities law regimes are tailored to the needs of the market.
 
Activities

Receive and consider applications for exemption from securities law.
Review existing exemptions.
Undertake special review projects relating to policy on exemptions.
Authorise futures dealers and exchanges.
Consider amendments to futures exchange rules.
Approve NZFOX participant rules.
Approve trustees and statutory supervisors.
Review existing authorisations.

 
Performance standards
Performance measures
Exemptions and authorisations
Actual
2007
Budget
2007
Quantity
Consider applications for exemptions, authorisations and approvals of market participants.

 Exemptions 63
Authorisations 6
Approvals 9
Designations 1		 Exemptions 75
Authorisations 15
Review existing exemption notices and authorisations. 4 As required
Quality    
The Regulations Review Committee does not disallow notices, and notices are not successfully challenged under the rules of natural justice.
 100% 100%
Proportion of notices issued which comply with the Commission’s internal processes.
 100% 100%
Timeliness    
Percentage of exemption applications and authorisations completed within 6 weeks of receiving all necessary information or within otherwise agreed target period
 100% 100%
Cost    
Expenditure allocated to exemptions and authorisations work. 9% 11%

 

OUTPUT 5 International liaison – promoting New Zealand as a well-regulated country; keeping abreast of developments in global standard setting and contributing the Commission’s views to this process.

Outcome New Zealand’s markets and regulatory environment are respected internationally, creating a climate for increased investment and good relationships with overseas regulators.
 
Activities

Take part in the work of IOSCO’s:

  • Executive Committee (Jane Diplock is Chairman of this committee),
  • Asia Pacific Regional Committee (the Commission is Vice-Chairman of this committee),
  • Taskforce on the Implementation of the IOSCO Objectives and Principles of Securities Regulation,
  • Communications Group.


Meet and confer with overseas regulators and institutional investors.
Contribute to implementation of the FSAP recommendations for New Zealand.
Respond to enquiries from overseas about New Zealand’s regulatory regime.
Participate in the international standard setting process by completing comparative surveys on securities law and regulation.
Fulfill the obligations of an Appendix A signatory under the IOSCO MMoU.
Contribute towards trans-Tasman initiatives.

 
Performance standards
Performance measures
International liaison
Actual
2007
Budget
2007
Quantity
Take part in the work of IOSCO’s Executive Committee, Asia Pacific Regional Committee and Taskforce on the Implementation of the IOSCO Objectives and Principles of Securities Regulation. Participated, as
required		 Participate, as
required
Meet regularly with overseas regulators and institutional
investors.		 Met and conferred,
as required		 Meet and confer,
as required
Contribute towards trans-Tasman initiatives. Contributed Contribute
Contribute towards implementation of the Financial Sector
Assessment Program (FSAP) recommendations for
New Zealand. 		Contributed Contribute
Quality    
The Commission will present itself as a constructive and cooperative member of the international community of regulators. Views expressed to IOSCO will take into account the relevant New Zealand values and principles. The Commission presented itself constructively and cooperatively at the international level. Views expressed to IOSCO were congruant with New Zealand’s values and principles. The Commission bases its presentations and views to the international community of regulators on sound research, consultation and analysis.
Timeliness    
Attendance at key meetings and responses to committees provided within agreed timeframes. 100% 100%
Contribute towards trans-Tasman initiatives, within agreed time. 100% 100%
Contribute towards implementation of the Financial Sector Assessment Programme (FSAP) recommendations for New Zealand, within agreed time frames. 100% 100%
Cost    
Expenditure allocated to international liaison work. 15% 14%

 

OUTPUT 6 Public understanding - promoting public understanding of the law and practice of securities

Outcome People understand the law and practice of securities.
 
Activities

Publish The Bulletin, annual report and other documents.
Respond to public inquiries.
Manage the website.
Maintain relationships with the news media.
Develop and implement a public education programme.

 
Performance standards
Performance measures
Public understanding
Actual
2007
Budget
2007
Quantity
Publish The Bulletin. 4 4 times a year
Deal with inquiries from the public. 1,338 1,400 a year
Manage the Commission’s website. Website was
available		 Website is
available
Maintain relationships with the news media. Approached & responded to news media Liaison as required
Continue the Commission’s public education programme.

Youth - teacher resources & teacher training projects completed

Youth - student resource project
implemented

New law – 2 projects implemented

 Develop and implement approved projects
Quality    
Readers respond that The Bulletin is interesting and relevant. No responses sought – next survey July 2007 80% of reader response to survey
Education programme meets target objectives. Objectives for completed youth projects met Objectives for each project are met
Inquiries are dealt with effectively. No complaints received Absence of material number of complaints
Information on the website is relevant and accurate. Website information approved by the Commission Accuracy and relevance of content
Relationships with the news media are constructive. Initiated contacts and responded constructively to inquiries Commission and media enjoy mutual respect
Timeliness    
The Bulletin is produced on time. July/Oct/Jan/Mar July/Oct/Jan/Mar
Education programme development is achieved to agreed timetable. Youth projects above achieved agreed milestones Achieve subprojects milestones
Inquiries are handled within 5 working days of receipt. 100% 95%
Information on the website is up-to-date. Information published within 2 working days of approval At all times
Meetings with, and responses to, news media meet agreed timetable. At all times At all times
Cost    
Expenditure allocated to public understanding and market presence work. 12% 11%

 

OUTPUT 7 Takeovers Panel – providing administrative and support services by agreement.

Outcome Services are provided to the Takeovers Panel in accordance with an annual agreement under the terms of a Memorandum of Understanding between the Panel and the Commission.
 
Activities

Provide services related to the Panel’s outputs including:

  • review of Takeovers Code,
  • approvals,
  • exemptions,
  • enforcement,
  • market practice,
  • public understanding,
  • international liaison,
  • administration.
 
Performance standards
Performance measures
Enforcement
Actual
2007
Budget
2007
Takeovers Panel
Quantity, Quality and Timeliness    
Services are provided as per the MOU between the Panel and the Commission. In accordance with the MOU In accordance with the MOU
Cost    
Expenditure allocated to providing administrative services to Takeovers Panel. 15% 15%
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