By Michael Coote
Friday 21st March 2003
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So speaks the Pythia, priestess of Apollo, of the presence of the Eumenides in her temple at the beginning of the third tragedy of The Oresteia by Aeschylus (Penguin Classics, 1983, Robert Fagles translation, p 233). These unwelcome houseguests had pursued the fugitive Orestes to avenge his crime of matricide.
Their name was a circumspect euphemism, meaning "well-wishers." Their true designation, which mortals feared to utter, was the Erinyes or the Furies.
The fate of local errant investment promoters, advisers and company directors may take on a similar cast to that of Orestes if enforcement powers are beefed up for authorities regulating investment markets. Given the aim of legal convergence for Australia and New Zealand, it is hard to imagine the NZ Securities Commission will become any less an avenging fury than the Australian Securities & Investments Commission (ASIC).
ASIC is a heavy-hitter in Australia. Legislated for in 1989, the Commonwealth entity was established in 1991 as the Australian Securities Commission. In 1998 it assumed new consumer protection responsibilities and its present name. In the saccharine guise of the Eumenides, ASIC states of itself:
"The Australian Securities and Investments Commission Act 2001 requires us to:
* uphold the law uniformly, effectively and quickly;
* promote confident and informed participation by investors and consumers in the financial system;
* make information about companies and other bodies available to the public; and
* improve the performance of the financial system and the entities within it."
In the unvarnished mode of the Erinyes, ASIC's website homepage indicates what all this upholding, promoting, making available and improving is about. The names of its flayed and impaled victims are listed with their crimes and punishments, including lengthy stints of imprisonment.
ASIC has 1221 full-time equivalent staff and a budget of $A143 million at its disposal to drag doomed corporate and investment miscreants kicking and screaming down into Hades and in return has gleaned $A372 million in revenues for the Commonwealth of Australia. Nice work if you can get it.
So shall we unleash the Furies in New Zealand? A couple of recent decisions by the Securities Commission suggest as much.
In its Vertex Group Holdings report the commission concludes: "In the commission's opinion, the statement relating to risk in the offer document was likely to mislead ... It is not for the commission to determine liability under [s56 of the Securities Act 1978] that is the role of the courts. The commission refers this report to the shareholders of Vertex who subscribed for shares in the IPO for them to consider the questions of civil liability. Whether any action should be taken is a matter for those shareholders to determine."
In the commission's inquiry into the 1 Parliament Street Car-Park Ltd Contributory Mortgage (May 2002) it was stated: "The commission will refer its report in this matter to the national enforcement unit of the Companies Office for it to consider whether to lay any criminal charges in respect of the breaches of the law identified in this report." Ten months later it remains to be seen if the national enforcement unit not a noted Fury has finished considering.
ASIC would not settle for this sort of wet bus ticket bludgeoning. If the Securities Commission is to have any teeth, it must possess more than its amply demonstrated will to go after putative offenders. It must have the requisite legal enforcement powers and responsibilities, an adequate budget particularly for funding prosecutions and sufficient personnel to get the job done. That is up to the government to sort out if it is sincere about protecting consumers and investors.
There are those who argue that present laws and civil shareholder remedies suffice. But that overlooks, as ASIC's legal architects clearly did not, that most investing mums and dads do not have the wherewithal to fund potentially expensive lawsuits for what are often relatively small sums of money if taken individually. Neither do they enjoy the American remedies of class action lawsuits and aggressive district attorneys to set matters right.
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