Minister fast-tracks probe of corporate trustees; welcomes finance company inquiry

Commerce Minister Simon Power has ordered a faster review of the role of corporate trustees as part of a Ministry of Economic Development review of the Securities Act. This included the potential for the Securities Commission to supervise trustees more heavily, he said. Power also said in a statement he would welcome a select committee inquiry into the failures of finance companies in New Zealand. Power's comments follow a damning report from Registrar of the Companies Office, Neville Harris, on the roles of finance company directors, auditors and trustees in the failures of finance companies in New Zealand over the past few years. They also follow ACT MP John Boscawen's calls for a parliamentary inquiry into finance company collapses. "The Ministry of Economic Development has recently commenced work on a comprehensive review of the Securities Act, and the role of corporate trustees will form a significant part of that review," Power said. "I have asked for advice on the timing of the review, in particular opportunities to advance elements of the review more quickly," he said. "One option I am considering is fast-tracking the development of a trustee supervisory model." The model would see the Securities Commission playing a stronger role in the supervision of trustees. "I also welcome a select committee inquiry into the failure of the finance companies, however, the terms of reference will need to be carefully considered," Power said.

"I am particularly keen to ensure any inquiry does not cut across civil and criminal proceedings being undertaken by regulatory authorities against a number of finance companies. Many hard-working New Zealanders have lost money in failed finance companies, and given the scale of loss involved, there is a strong public interest in seeing that those who have broken the law are held to account," he said. The Trustee Corporations Association (TCA) welcomed Power's comments, saying: "We are certainly keen to work with the Minister on identifying the most effective way of strengthening rules governing investor protection." "This needs to be a multi-faceted approach covering all aspects of the legislation and all those involved in the finance industry," TCA Chairman Clynton Hardy said. "There is no doubt that lessons have been learned by all those involved in the finance industry which is why the TCA has been working for some time on solutions that can give investors additional safeguards," Hardy said. "We have worked with officials on the deposit guarantee scheme and the new prudential supervision regime for non-bank deposit takers, which are designed to deal with some of the issues raised by the failures," he said. "We are working on a number of other initiatives, including the registration and supervision of all trustees and are keen to share these with the Minister. We welcome his support for strengthening the supervisory regime." "We acknowledge that thousands of investors have suffered in the wake of finance company failures and we are determined to play our part in rebuilding the industry so investors can have greater confidence that their interests will be looked after." The TCA has four full members "“ Guardian Trust, Trustees Executors, Public Trust, and Perpetual Trust, with Covenant Trust as an associate. Perpetual and Covenant were singled out in the Harris report as being inadequtely experienced or staffed to properly manage the high amount of finance companies they acted as trustees for.