Iron lady gets a grip with velvet touch

Jane Diplock

Asked by the Herald photographer to look stern for a photo to go with this story, Securities Commission chairman Jane Diplock said she would rather be pictured smiling.

"We like to be the velvet glove over the iron fist," Diplock suggested.

That velvet glove is slipping off the commission's iron fist more under Diplock than it did before.

But, speaking in the commission's spacious offices on the Terrace in downtown Wellington (next door to the Commerce Commission), Diplock does not agree the watchdog is becoming more aggressive.

"I don't think I'd use the word aggressive. I don't think that's what it is, actually. I think 'effective' is a better word."

Diplock, an Australian, has been in the job since September 2001 and her term has coincided with a major overhaul and beefing-up of securities law by the Labour-led Government.

Starting with the introduction of the Takeovers Code in 2001, this four-stage reform project also includes the 2002 Securities Markets and Institutions Act, which enforced continuous disclosure on listed companies.

Then there is the Securities Legislation Bill - now before a parliamentary select committee - which will strengthen insider trading laws, and a review of the Securities Act.

The upshot is to bring New Zealand law more in line with Australia's.

Diplock maintains that New Zealand's previous regulatory framework did not work.

"So to put one in place that does work is not aggressive."

Last October, the commission brought a high-profile insider trading case against former Tranz Rail directors and executives including David Richwhite - the first time it has taken alleged insider traders to court.

The case is a direct result of the Securities Markets and Institutions Act, which gave the commission its own right to act against alleged insider traders. Before, only the company or shareholders could act.

Diplock declined to comment on the case.

However, it is part of what she sees as the commission's attempt to play a role helping to boost New Zealand's economic growth.

Diplock believes a "strong, effective" regulator encourages foreign investment and the chances of a "strong, robust" economy.

She suggests that New Zealand's securities markets have been left to the whim of market forces in the past, largely due to laissez faire economic thinking.

"[But] I think modern economic thinking does recognise there is a balance between market forces and market regulation. And to get that balance right is important in encouraging growth in the economy."

She reckons the worm has turned.

"I think we need a robust regulatory framework in New Zealand and I think we're getting there."

More teeth means increases in staff and money for the commission. At June 30, 2001, it had 21 staff and received a Government grant of $2.26 million that year. It now has 36 staff and got a $4.55 million grant in the year to last June 30. Other revenue, including $836,639 of administrative fees from the Takeovers Panel, took total revenue to $6.29 million. Expenses were $6.34 million, leaving a deficit of $47,872.

This financial year, the commission's Government funding rises by $1.05 million. The Government has budgeted an additional $1.35 million in 2005-06 and $1.93 million in each of 2006-07 and 2007-08. In three years, the commission may have 50 staff, Diplock suggests.

In comparison, the Australian Securities and Investments Commission (ASIC), where she worked before, has 1531 staff. It had A$196 million costs during 2003-04 and collected A$457 million in fees.

Greater co-operation with other countries' securities regulators is something Diplock keenly pursues.

For a start, there are her "strong personal relationships" with staff at her old workplace, meaning formal and informal meetings between the commission and its Australian counterpart have blossomed.

The commission recently used co-operation arrangements to force an Australian resident to give evidence in a New Zealand case at ASIC's Sydney headquarters.

International co-operation is something Diplock can also pursue through her role as chairman of the executive committee of the International Organisation of Securities Commissions. Its members include regulators from about 100 countries who each pay annual membership of 8300 ($14,900). It has a general secretariat in Madrid with 10 staff.

Diplock points out that the commission recently took evidence in an unnamed Asian country, thanks to co-operation with that country's securities regulator. Then there was a request for assistance to the United States Securities and Exchange Commission (SEC) in the Tranz Rail case.

The SEC subpoenaed two US-based defendants, Carl Ferenbach and investment company Berkshire Fund III, forcing them to produce documents.

"Because of the increased co-operation between securities commissions, what was probably considered impossible enforcement capabilities are now becoming a reality," Diplock says. "With the growth of the internet, this is absolutely critical. We can't remain isolated."

Last year, the commission signed bilateral memoranda of understanding with China, Indonesia and Malaysia, adding to ones already in place with ASIC and the Hong Kong and Taiwanese regulators.

In 2001, Diplock and her husband, Phillip Meyer, came to New Zealand with "no expectations" and fell "passionately in love" with the country. They have bought a house in Wellington and property in the Wairarapa.

"We're very, very positive about life in New Zealand and we're going to live in New Zealand for quite a while."

Meyer is a director on several New Zealand boards including Southern Cross Healthcare. These roles run beyond 2007 and Diplock's five-year contract at the commission runs to September 2006.

"We shall see what happens after that," she said.

In the meantime, this "transtasmanite" sees the New Zealand and Australian Governments' moves towards a single transtasman economic market as very important from a professional and personal viewpoint.

"We have business interests in Australia as well as New Zealand and I think we see very clearly that moving towards a single economic market is very sensible."

She suggests, however, New Zealand made the right decision 100 years ago when it decided not to become a state of Australia and should not reverse that decision. New Zealand ought to keep its proud heritage and identity.

"But that doesn't mean that it can't access that bigger market and have the advantages of being combined with that bigger market without losing any of those really positive Kiwi characteristics."

None of this necessarily means a merger between the commission and ASIC is desirable, however. Instead, Diplock suggests this country may end up with a virtual common securities regulator if moves to mutually recognise each other's laws and standards gather steam.

"I think we'll go a long way down the track to what, for the participant in the market, will look like one regulator. It won't really much matter to them who they're being regulated by if there are similar standards across the Tasman."

Jane Diplock

* Born in Australia but moved to New Zealand in 2001.
* She has degrees in arts and law and a diploma of education from Sydney University as well as a diploma of international law, international economics and international relations from the Australian National University.
* At the Australian Securities and Investments Commission (ASIC) she was national director of infrastructure and strategic planning and New South Wales regional commissioner.
* She has also held senior executive positions at Westpac.
* In 2003, she was appointed as an officer of the general division of the Order of Australia for service to business and commerce, public administration and the community.