by Rob Hosking
BT and Edinburgh are the only companies publicly known to have come a cropper under the rules: however it is understood they are the tip of a very large iceberg.
The Australian Investment and Financial Services Association (IFSA) has lobbied Australian Treasurer Peter Costello to bring pressure to bear on his New Zealand counterparts. He is understood to be considering an approach at ministerial level.
“It’s still early days but we hope something can be worked out,” IFSA deputy chief executive Jo-Anne Bloch told Good Returns.
Under the Securities Act, funds which are based offshore can be exempted from issuing a prospectus in New Zealand. That exemption is conditional on various papers and other information being lodged with the Companies Office.
Under the Act, failure to do that effectively voids the entire offering, and the company has to refund the money, plus 10% per year.
BT and Edinburgh both discovered their error and effectively dobbed themselves in to the Securities Commission. That voluntary action though has not thus far earned them any more lenient treatment.
There is a strong feeling within both the Australian and New Zealand industries that the rules are too stringent – “draconian” is the word most often used – and that the two companies are not getting their due for having fronted up about their errors.
“The rule is pretty strong to start off with, but the penalty is out of all proportion to the wrong done,” says Bloch.
“It’s not a question of us condoning this – our members expect to abide by the spirit of the law. But we have very strong concerns about how this law is being applied.”
The New Zealand counterpart takes a very similar view.
“We accept there should be a penalty, there’s no question about that,” Investment Savings and Insurance Association chief executive Vance Arkinstall says.
“It’s the draconian nature of the penalty we are concerned with. It seems out of all proportion with the crime.”
Commerce Minister Lianne Dalziel has been involved in the matter with officials but is not commenting at this stage.
Rob Hosking is a Wellington-based freelance writer specialising in political, economic and IT related issues.
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