Sides line up over rule changes

Ranged against the proposal is the Securities Commission, and – to a lesser extent – the New Zealand Law Society.

In favour of the government’s proposal is a coalition of the Association of Superannuation Funds of New Zealand (ASFONZ), Business New Zealand, the Council of Trade Unions, the Investment Savings and Insurance Association, and the Retirement Commissioner.

The proposals, contained in the recently introduced Business Law Reform Bill, would cut out the requirement for employer based superannuation schemes to issue a prospectus.

Most of the information contained in these prospectuses is provided elsewhere, says ASFONZ chairman Mike Woodbury.

And requests for copies of prospectuses is almost nil, according to formal and informal surveys of ASFONZ members.

“The prospectus is only read by the signatories, the advisers, and a very junior official in the Companies Office. After that it becomes a dust collector.

“There’s the odd request from solicitors seeking them for due diligence purposes. One scheme had only had one request, and that was from a member who happened to be a member of the Securities Commission.”

The Commission’s advice on the proposed law change suggests that the costs of issuing prospectuses has been exaggerated.

After the initial set up, “the prospectus does not need to be an expensive glossy document. It need only be available on request, and can be incorporated in an annual report or published electronically, we are not aware of how many scheme trustees have taken these opportunities to save costs.”

That does not take into account the ongoing administration costs, says Woodbury.

“We’re still collecting the data but the direct costs are typically between $5,000-10,000 a year. The costs of trustee and employer time are additional to that. When you add the legal costs, it all adds up to a powerful disincentive for employers to get into this area.”

The Commission argues that the prospectus puts useful discipline on trustees and directors, as some employer schemes “can be particularly vulnerable to mismanagement.”

Rob Hosking is a Wellington-based freelance writer specialising in political, economic and IT related issues.

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