We regard surveillance and enforcement as an important aspect of what we do. We should be pro-active. The public expect this of us. We would prefer to have done more surveillance and enforcement work. We did not have the funding for this. Additional funding will be available in the new year and we expect to be able to increase our effort.
Promotion of Securities The investment statement is the primary offering document for offers of securities to the general public. We demonstrated our commitment to the effectiveness of this new offering document by undertaking extensive review work, particularly in the continuous savings sectors of life insurance, superannuation and unit trusts. We reviewed 78 investment statements and 60 prospectuses. Twenty-seven investment statements and eight prospectuses were amended or expected to be amended following discussions between the offeror and the Commission. We believe we have played a valuable role in promoting high standards of compliance.
We prohibited advertising for securities in respect of two advertisements. We issued four public warnings.
We frequently investigate financial advertising as a result of which material is voluntarily amended or withdrawn. It is not often necessary to resort to formal powers of intervention.
We asked, or approved the requests of, the Registrar of Companies to inspect the documents of issuers or promoters of securities on 10 occasions. We have commented on all recommendations made by the Registrar in his follow-up reports.
Share Dealing The Commission completed a major inquiry in the course of the year. The findings were published in December 1998. The work related to trading in the shares of McCollam Printers Limited ahead of its takeover by Blue Star Group Limited, a New Zealand subsidiary of US Office Products Company in the United States. Central to the inquiry were the transactions of E. J. Watson which gave rise to questions about insider trading, substantial security holder disclosure and market practice more generally. Watson established a fund of $680,705 to be available for claims by any seller of McCollam shares.
We received requests for action under section 17 of the Securities Amendment Act 1988 relating to the possibility of insider trading by former directors of Brierley Investments Limited. After careful consideration the Commission decided not to approve the requests for action. If the Commission had approved this step the company would have been obliged to obtain a legal opinion on whether there was a cause of action against the directors.
We completed inquiries into dealing in the shares of four listed companies, in particular, dealings by insiders and substantial security holders. Three further inquiries were continuing at year end.
We did not initiate enforcement action in the Courts. We were not funded for this purpose. However, we continue to undertake inquiries under our general powers and we consider that these are useful in keeping market participants alert to their responsibilities under the law.
We continue to receive a large number of complaints from people who have received telephone calls from brokers from overseas whom they have never heard of. Some people invest. The experience of most of these people is that once money has been sent offshore it is very difficult to recover. Many of these brokers are not bona fide and investors put themselves at great risk when they deal with them. We warn the public about this type of activity from time to time. We think people are foolish to invest in response to cold calls.
Financial Statements The Registrar of Companies referred 14 sets of financial statements of issuers to us on the grounds that the auditors' reports were qualified. Generally these did not call for action on our part. However we maintained a dialogue with the Registrar on any follow-up action by him.
We made inquiries into aspects of the financial statements of 17 listed companies.
Prohibition of Directors We have recommended to the Minister for Enterprise and Commerce that the role of the Commission in prohibiting directors should be discontinued. The Government has accepted this recommendation.
Corporations (Investigation and Management) Act 1989 The Act provides, among other things, for the Government to be able to place companies in statutory management on the recommendation of the Securities Commission and for the Registrar of Companies to be able to declare companies at risk and, with our consent, to issue directions to the company. We received one request for action during the year and this was approved.
Requests from Overseas We completed two requests for the exercise of our statutory powers to obtain information in New Zealand on behalf of an overseas securities commission. One was on behalf of the United States Securities and Exchange Commission. It related to dealings in the shares of McCollam Printers Limited. The other was on behalf of the Australian Securities and Investments Commission and related to a suspected prime bank scheme.
In addition to formal requests to take evidence in New Zealand we also receive a large number of general requests from our counterparts overseas for information that is already available. We also make many requests ourselves for information from regulators outside New Zealand. We regard this international cooperation as extremely important given the increasing globalisation of markets.
