Trustees under Govt spotlight

The Government is seeking to fast-track legislation that would strengthen regulation of corporate trustees, including those criticised by the Companies Office last week for their "slow" and "timid" oversight of failing finance companies.

Commerce Minister Simon Power yesterday said the issues raised by the Companies Office would be addressed as part of a "significant" and "comprehensive" review of the Securities Act.

"I have asked for advice on the timing of the review, in particular, opportunities to advance elements of the review more quickly," Power said.

"One option I am considering is fast-tracking the development of a trustee supervisory mode."

That model, which came out of the Review of Financial Products and Providers, would give the Securities Commission a stronger role in the supervision of trustees.

In a report to Parliament's commerce committee, the Registrar of Companies heavily criticised two trustee companies, Covenant and Perpetual, which between them were the frontline regulator for 25 of the 30 or so finance companies that failed between early 2006 and the present.

Covenant's Graham Miller yesterday said he believed the proposed regime would be more of a change for other trustee companies than his own.

"I'm currently supervised by the Securities Commission.

"The proposed regime is that the statutory trustee companies would lose their 'as of right' ability to act as a trustee and would also be supervised by the Securities Commission.

"I think it's entirely appropriate that we're accountable to the Securities Commission."

Perpetual, along with Guardian Trust, Trustees Executors and Public Trust, are statutory trustees whose powers to act on behalf of investors are enshrined in law.

Amendments to the Reserve Bank Act last year made the central bank the prudential regulator for non-bank deposit takers including finance companies. Under the legislation, the Reserve Bank has the ability to fine trustees up to $200,000 for breaching their regulatory requirements.

The chairman of the Trustee Corporations Association, Clynton Hardy, said his organisation was pleased Power had ordered "a full review of securities legislation".

The review, begun late last year will also look the role and functions of the Securities Commission along with the penalties and enforcement regime it will administer as a result of last year's Financial Advisers Act.