Law firms team up to flag flaws in NZ securities law review

BUSINESSDESK: New Zealand's top law firms went against type and banded together to give Parliament free advice to stamp out flaws in the proposed overhaul of the nation's decades-old Securities Act.

Ditching a provision to make advisers on offer documents culpable if things go wrong was at the top of the wish-list of the joint law firms' oral submission on the Financial Markets Conduct Bill.

Simpson Grierson partner Don Holborow told Parliament's commerce committee that adding advisers to the list of liable parties in an offer would erode the ability of the issuer to get free and frank advice, which would also become more expensive.

It also meant lawyers may have to quit advising a client if the risk exceeded its set level.

'”We're directly in the gun," Mr Holborow said. "We have to consider whether we should in fact take the door or take the risk."

The 560-page bill, which passed its first reading in March, aims to consolidate New Zealand securities law into one act with a goal of improving financial market conduct and restoring investor confidence.

Chapman Tripp partners Roger Wallis and Ross Pennington told the committee advisers shouldn't be liable to investors, as their relationship was with the issuer, which could sue if the advice wasn't robust.

That was at odds with a submission from the Trustees Corporations Association, which said auditors should be face liability from investors as their reports were often relied on when making an investment.

Among other concerns shared by the law firms was the onus on the defendant to prove their innocence if the value of a security deteriorates and the issuer is accused of breaching the law.

In the joint law firms' submission, Chapman Tripp's Pennington said "due diligence is the critical factor" to enable investors to make informed decisions about a security's relative risk and reward.