NZ watchdog takes fraud battle to world

Jane Diplock

Securities Commission chairman Jane Diplock says her leading role in developing co-operation between market watchdogs around the world can only help the New Zealand sharemarket.

The International Organisation of Securities Commissions' 110 members have agreed to share information and work together in cross-border investigations.

All Iosco's members must now sign up to a memorandum of understanding by 2010 based on a strategic paper presented by Diplock at Iosco's annual meeting in Sri Lanka this month.

Diplock is also chairwoman of Iosco's executive committee. She maintains the Sri Lankan agreement is a coup for New Zealand and is "proud" the strategic direction adopted by Iosco members was drawn up in New Zealand.

"I think this improves our reputation as an investment destination because we are seen working within a world class regulatory framework."

Previously some regulators have been forbidden by local laws from sharing information with their foreign counterparts. Among these is the Swiss regulator. But Diplock says the Swiss have agreed to "carve out" from their banking secrecy laws, rules for the Swiss securities regulator to share information with counterparts in other countries.

Iosco will be lobbying finance ministers on the importance of making sure its vision of "seamless" global communication works.

Founded in the 1980s, Iosco is regarded as the standard setter for securities regulations by the World Bank and International Monetary Fund.

Diplock says Iosco is talking to uncooperative countries suggesting they should "lift their game". These tax havens have been used by the likes of Italian company Parmalat to hide transactions. Parmalat went bankrupt in 2003 with debts of more than 14 billion euros ($25.3 billion) that were camouflaged by a network of offshore subsidiaries.

If such countries do not come into line within a fairly short time frame, Diplock says Iosco will name, and effectively shame, them.

"Cross-border financial fraud knows no frontiers so we really have to try and make sure enforcement co-operation and exchange of information is seamless so any obstacles can be identified and removed," says Diplock.

New Zealand and the US are among 27 countries that have already signed up to Iosco's memorandum of understanding. This enabled the Securities Commission to get assistance from its US counterpart in its case against alleged insider traders in its Tranz Rail case, at present before the courts.