Call to ban jailed directors for life

Commerce Minister Simon Power expects initial proposals to be ready for consultation this year. Photo / Dean Purcell

The Securities Commission is pushing for a crackdown on company directors which could see some banned for life, and more sent to jail, as part of an overhaul of securities laws.

At present, errant directors can only be banned for up to five years.

But the commission's chairwoman, Jane Diplock, says she would like to see that extended to life.

She would also like to see anyone who has served time in jail excluded from being considered a "fit and proper" person to run a company.

The change would prevent at least one current director of a listed company from doing his job.

Cynotech chairman and chief executive Allan Hawkins was sentenced to six years' jail in 1993 on seven fraud and conspiracy charges on transactions totalling $520 million after one of the longest and most expensive trials in New Zealand history.

His convictions were not disclosed in Cynotech's recent prospectus seeking to raise $10 million from the public.

Diplock is also pushing for a raft of other regulatory changes in the wake of the finance company meltdown and global financial crisis, including further measures to prevent company directors and owners from hiding their assets from creditors.

Lawyers who have dealt with many of the victims of the finance company meltdown are also arguing for changes, such as altering the High Court rules to allow class actions.

Class actions, which often result in complainants receiving significant compensation, are common in the United States, and are also allowed in Britain and Australia.

Commerce Minister Simon Power has confirmed "some relatively big changes" could be on the way, with a review of the 31-year-old Securities Act expected to take place later this year.

But they might not be quite the changes the commission has in mind.

Asked whether he was considering a radical overhaul of the way New Zealand's regulatory agencies are structured, Power replied that it was a "really interesting question".

"All I'm saying at this point is I'll be very interested to see what sort of responses we get to the discussion document."

Power expects some initial proposals to be ready for public consultation by the end of the year.

However, he has also indicated he does not intend "squeezing the markets tighter" with more regulation.

"What I'm looking for ultimately is a market where an individual or a couple with $100,000 sits in the middle of that spectrum, and whichever way they decide to invest that $100,000, that we devise a regulatory environment which gives them the confidence to go either way," he told the Business Herald.