Stock Exchange says overhaul not reaction to recent criticism

By NZPA

Wednesday 12th March 2003

The New Zealand Stock Exchange is making changes to the way it regulates and punishes market players, but says that is not related to recent criticism.

The exchange is seeking to revamp the way it monitors market misconduct, after rumours of a falling out between itself and its independent market watchdog.

"The NZSE considers that its current construct, which involves seven different NZSE panels and committees, is flawed," the exchange said in a statement.

Exchange chief executive Mark Weldon told NZPA the exchange was examining the regulation framework which had grown over time in an ad hoc manner.

Mr Weldon said it was critical "the market has confidence in the NZSE's ability to enforce and punish non-compliance".

The cumbersome existing structure did not make sense for a demutualised company charged with regulating the market, and would change.

Mr Weldon said the recent criticism by the exchange of the Market Surveillance Panel following its ruling on Vertex last month had not spurred on changes.

The NZSE appeared to criticise the panel's decision not to punish listed plastics maker Vertex after finding the company had breached rules relating to its profit warning.

The review was completed three weeks ago.

"I've been in this position for nine months and it's something we've been looking at over that time... We felt quite strongly that it needed changing but we didn't want to be too hasty and do anything that would get the wrong answer," Mr Weldon said.

The current structure was often time-consuming and did not provide the exchange with sufficient control over the interpretation or enforcement of NZSE rules.

"We have internationally a very good set of rules and regulations, and where we fall down a bit internationally has been enforcement.

"I think that would be a fair summary of how the market feels and we would hope that would change quite quickly," Mr Weldon said.

The regulatory bodies had to be independent of the issue and people being examined, but not necessarily independent of the NZSE, he said.

Feedback from the NZSE's committees had been "overwhelmingly and unanimously very positive and supportive".

The proposed new structure would see two main changes.

It would bring compliance in-house, and introduce a single new enforcement body dealing with enforcement across both listed issuers and market intermediaries or brokers.

The new body will use a standing group of experts on a case-by-case basis, chosen for their independence. Each case would also involve some NZSE decision-making.

The exchange said it planned to release a detailed proposal in the next two weeks, followed by a period of public consultation and final approval from "the appropriate authorities".

Its seven compliance bodies are:

* the Market Surveillance Panel

* the panel's executive committee

* the NZSE board which drafts listing rules

* the listings sub-committee

* complaints committee

* disciplinary committee

* the Deloittes Audit committee which monitors brokers

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