It is a great privilege to speak in support of the Securities Disclosure and Financial Advisers Amendment Bill. Before I go further I will acknowledge the huge amount of work that has gone into this bill by colleagues on the Commerce Committee from Labour, National, and the Māori Party. I say that because I have not been involved in a great deal of the detail. The Commerce Committee meets on a Thursday morning from 9.30 a.m. to 1 p.m. During the course of starting deliberations on this bill, I was seconded by my leader to the Emissions Trading Scheme Review Committee, which meets at the same time. So I have not been able to spend nearly as much time at the Commerce Committee as I would like, and I am very conscious that we have heard speeches in the House this afternoon from people who have been more intimately involved in hearing submissions and debating. Nevertheless, I do want to speak on this bill.
The bill is designed to respond to the current international financial crisis by removing the unnecessary impediments to capital raising, while, at the same time, disclosing all relevant financial information. This bill was initiated by the previous Labour Government, and it comes out of the recommendations of the Capital Market Development Taskforce. One of the things this bill gives rise to is a simplified disclosure prospectus.
There have been a number of speeches on this bill during the course of the day, setting out in detail the provisions of the bill. I do not want to go into the details, other than to say that our economy—our future prosperity—depends on investment, on saving, and on raising our living standards. If we are to raise living standards, we need to have investment, savings, and a very efficient economy. We also need risk taking. It is very important to have a strong financial sector that rewards risk taking but acknowledges the risks associated with that.
A strong economy depends on investment in infrastructure, and I was very pleased to read that the National Government had announced today that it intends to proceed with the Mt Roskill to Waterview option—an option that it costed at $1 billion to $1.4 billion. It is infrastructure that will lead to a more productive and more efficient economy with higher living standards. But it concerns me greatly that National still talks about the loss of some 400 homes; I have a scheme that would involve a surface route through that area, and it would involve the loss of fewer than 50 homes. I find it quite fascinating to hear Labour and National debating this issue in the media when there is a much simpler option. I call on Labour members to support my option. If they are truly concerned about the people of Mt Albert, they will support my option, which would provide an efficient connection from Mt Roskill through to Waterview.
One of the most important things we need to do to lift our economy is to raise confidence in our financial markets. We need to restore confidence. That is the No. 1 challenge our country faces if we are to get people to invest, and save money. Although a huge amount of money has been lost in finance companies over the last 2 to 3 years—in fact, some $5 billion to $6 billion is estimated to be tied up in moratoriums or losses—there is a need for a thriving financial sector. There is a need for successful and well-run finance companies, because they help fund the economy.
It was interesting to hear Kevin Hague acknowledge my call for an inquiry into finance company failures. I have been calling for this for the last 3 months. It has been frustrating, because wheels move very slowly in this place. The affairs and the discussions of the Commerce Committee are held in confidence, and as a member of that committee I am not able, as members will be well aware, to talk about some of the things we are discussing. However, I think it is safe to say—I think it is on record—that Lianne Dalziel has acknowledged that the select committee is considering an inquiry. I think I can say that, but I cannot go any further.
When I first raised the issue of an inquiry I was very concerned about what I thought was fraud or near fraud in a number of cases. I wanted to know how I could address that. I was repeatedly told that we have the Serious Fraud Office to deal with cases of fraud and that it is not the job of a politician. I was told by my leader, Rodney Hide, that if we are to have an inquiry, it has to have a parliamentary purpose. It has to look at lawmaking. I was not sure what would come out of that inquiry, but I was aware that some $5 million to $6 million had been lost, mainly by the elderly and, in large instances, by elderly people who had been misled.
I needed to try to help them. I did not know how I was going to help them, but I needed to try. In the last week it dawned on me how I can help them and how Parliament can help provide some support to those people who have lost so much money. It dawned on me that a number of finance companies have gone into moratoriums. A number of finance companies went to their shareholders, investors, and bondholders last year and said “Look, we have lost a lot of money, but we have a scheme of arrangement. We want you to support us, but we need you to agree to varied terms of repayment. You have an entitlement to appoint a receiver, but we do not want you to appoint a receiver; we want you to back us and the management that has previously lost so much money for you.” I think virtually every one of those moratoriums that were put to bondholders passed. It is a sad reflection on human psychology and behaviour that when faced with realising a loss and acknowledging that we have made a mistake and that our money is lost, we do not want to do it. In most cases those moratoriums were overwhelmingly supported.
I am very cynical about a number of the finance company managers. I say that, because I know some finance company managers. In fact, I know two people who have intimate knowledge of how one particular finance company was run, because they were associated with the borrowers. They were aware that when the directors of this particular finance company—I will not mention its name—took a moratorium proposal to its bondholders last year, the directors knew they could not meet the obligations they were making. In fact, that was part of their plan. Their plan was to go and get the bondholders to take what they would call a “haircut”—to acknowledge the write-off of some of their money, and then to go back to those same bondholders a year later and say to them “I am sorry. Times are tough. Things have worked out a lot poorer than we thought they would. We have another proposal for you and we want you to write off some more of your money.” That was part of their plan.
Over the last week it has occurred to me that the one thing this Parliament can do to help these people is to pass a law that would require any company that wishes to vary the terms of its moratorium to first of all go to the court—to an independent officer, a judge—and to say to the judge “This is what has happened. This is our plan.”, and for that judge to order an independent inquiry. I say that, because I have here the moratorium document for one Hanover Finance. This moratorium was supported by some 93 percent of the bondholders by value, as I understand it. I will read sections to members. The document states: “Under the plans … Hanover Finance is aiming to fully repay …” That is very generous, is it not? I am aware that there were, I believe, two expert opinions on this report, and neither of those expert opinions was as optimistic as the directors.
The report talks about the shareholders of Hanover Finance agreeing to provide financial support of up to $96 million. A bondholder when faced with realising the loss of his or money might take some comfort from thinking that the shareholders were going to put up to another $96 million. When one reads the cold, hard print, one realises that that calculation is based on property valuations, and directors’ property values at that. The reality is that the directors of Hanover Finance could get away without putting in a single cent to that company. The first $10 million has to get paid into a solicitors’ trust company, and then that money is drawn down only if the bondholders do not get the first 8c in the dollar—a measly 8c in the dollar. When companies such as Hanover come back seeking to vary the moratorium—and it may not be Hanover but it will certainly be other companies, because it has already started—I would like to see this Government passing a law that states that we will make those companies go to the court, we will not allow the spin, we will not allow the company directors to employ a public relations company, and we will not allow them to produce documents that state “up to $96 million”. It would be far better off stating that the shareholders have received dividends of $84 million in the last 2 years. That would be a far more meaningful statement. Thank you.