Evening Post. THURSDAY, AUGUST 9, 1934. PROMPT ACTION

Evening Post, Volume CXVIII, Issue 34, 9 August 1934, Page 12

Evening Post. THURSDAY, AUGUST 9, 1934. PROMPT ACTION

The remarkable business on which Parliament was engaged last night sends the mind back forty years to find a parallel. But though in its bearing upon high finance, in the rapidity of the procedure which put it through all its stages in both Houses in a single sitting, and in its happy immunity from party strife, Ihe Companies (Special Investigation) Act may recall the measure by which (lie Seddon Government saved the Bank of New Zealand in 1894, il breaks entirely new ground in its most striking feature. The Act is the outcome of consultations between five Governments, four of which have taken simultaneous or virtually simultaneous action, and the fifth is expected to follow suit next week. The lead came from this country because the subject-matter originated here and had been very cai-efully, though by no means completely, investigated . here. New Zealand has indeed good cause to be thankful to the Barton Commission for the skill and industry with which it has conducted its examination of the affairs of the Investment Executive Trust of New Zealand, Ltd., and its 14, associate companies, and also for the lucidity of its'ex^ position of a tangled and1 highly technical problem or set of problems. But Australia has also reason for gratitude, for two of the four chief investment trusts of the group are now in New SoutH Wales, and there are some in other States and in Canberra. These facts and the transfer of the financial and administrative . control of the investment trusts of New Zealand to Sydney, which; the Commission reported to be in progress, and Mr. Coates declared to have been complicated^ indicate how clear in the interest of all parties: was the united action. The need for a common and simultaneous effort in the investigation of a. type of investment trust which the Commission describes as "a source of potential danger instead of an instrument of financial progress," is specially emphasised in one of the findings. No effective audit of tlw> companies controlled by .Mr. J. W. 8. Me Arthur and his associates is possible, said the Commission, unless it is a comprehensive and contemporaneous audit of all these Companies made at :i common date. ;■ ' v ■ It was in order to establish this essential condition of an effective inquiry that Mr. Barlon, S.M., the chairman of the Commission, and Mr. A. D. Park, the Secretary to the Treasury, paid the visit lo Australia, about which there had been a good deal of speculation. They are to be congratulated,' and so are the Government and the country, upon the success of their mission. The only unreasonable point in the speech of Mr. Savage, the Leader of the Opposition, was his complaint that a report which was dated June 9 did not come before the House till August 8. The preparation of the necessary legislation, the negotiations for bringing five.Governments into line, and the search for a date that would suit them all supplied the Minister of Finance with a conclusive answer. The- appointment of a Royal Commission, which so often is a mere pretext for delay, has in this case prepared the way for prompt and effective action. It is hardly necessary to say that the effect of the new. Act is not to make a crime of anything that was ■lawful at the time when it was done. The retrospective wresting of the criminal law for the punishment of an intended victim is a procedure of which the monopoly hitherto enjoyed by the Nazi Government is not infringed. The object of the Companies (Special Investigation) Act is not punishment but' inquiry and protection. The Commissioners found that they were not authorised by their present order of reference to inquire into the nature and effect of the transactions mentioned in their report "except -to establish general principles." They also considered that the matters properly within the scope of their authority "tend as to moral gravity and urgency to be overshadowed by the issues" which these transactions raised. "Those issues, in our opinion," they added, "call for immediate inquiry, and action in the interests of the debenture-holders in particular, and of the community in general." The appointment of some inspector or body of inspectors armed with the necessary power to probe the whole matter to the bottom was accordingly recommended. It is in pursuance of this recommendation that the Government has taken action, and as the interests of Australian debenture-holders, are similarly affected the Australian cooperation necessary to ensure its success is fortunately forthcoming. The effective inspection and audit which the Chinese puzzle of these interdependent and intertanglcd companies would otherwise have prevented is now possible. Another point of great interest

and importance in the report of the Commissioners may be expected lo be covered by the Bill which the Minister of Finance expects to introduce during the present session. They describe investment trusts as "a characteristically British development" which has had a long and honourable history in the land of its origin, but has sometimes undergone serious changes for the worse when carried overseas. The deterioration to which the Commissioners refer has its parallel in the application of the word "trust," which in Britain represents the highest ideal of private obligation to those great business combinations in America which exist to exploit the public.

When transplanted to other countries, says tho report, tho investment trust idea had frequently been modified in such a way as to violate the principles which wcro laid down as axiomatic in Great Britain, and to make- the investment trust a sourco of grave potontial clangor instead of an instrument of financial progress. This applied especially to certain of the trusts which had been established in New Zealand and Australia. Had all such, investment trusts followed closely the British model, there would have beon no need for I;he interim report.

Referring to this point Mr. Coates said that in Britain "routine and tradition had shown how to deal with such matters, whereas in New Zealand investment trust companies were quite novel, and were different in their character." Parliament will doubtless be unanimous in making the British model compulsory.