NZX rules review sub-standard: Weldon admits

Thursday 12th February 2009

NZX chief executive Mark Weldon has apologised to the Securities Industry Association for a "sub-standard" draft rules and consultation paper issued for industry submissions in December which he concedes have "spilled over into broader sentiment".

"We wish to acknowledge that the draft rules and consultation paper provided in December were sub-standard," Weldon said in a letter to SIA chairman Scott St John on February 2.

The letter, and St John's original letter of January 30, were revealed on the Cactus Kate blog site this afternoon, and follows a series of attacks by the anonymous blogger on the NZX and its high profile CEO, who is to chair this month's government-ordered Jobs Summit.

"We wish to acknowledge that the draft rules and consultation paper provided in December were sub-standard," said Weldon. "We agree that this shifted responsibility for drafting, quality control and other work to participants and that this unacceptable.

Thanking St John for "the frankness of your response", Weldon said: "During December, in respect of the rules, roles were not defined clearly and NZX's internal process confused. As a result, deadlines were not met and the draft rules suffered.

"We acknowledge that, without a material change, the rules review is not likely to improve."

Weldon acknowledged that discontent over the submissions paper had had spilled over into broader sentiment, reflecting a barrage of criticism directed by Weldon's detractors, particularly over public comments that the chief executives of under-performing companies should be forced to move on.

In response to the SIA's concern, the NZX was appointing a long-serving, Australian-based member of the exchange's legal and regulatory team, Edwin Bunning, to oversee a new review process and timetable.

A specialist legal consultant would also be part of the new process, and would review the draft rules before a new set of internally-prepared draft rules prior to external distribution.

"I also intend to engage actively in the policy discussions and decisions," Weldon said.

The new draft rules would also exclude several areas where the SIA had objected to the need for change: provisions relating to the regulation of "advice", including "Know Your Client" and voice recording of client transactions, "as there is no current legislative impetus for revision".

In his letter of January 30, St John said the SIA Group had been left to guess why significant omissions and amendments were being proposed, and at times was unable to be certain that what appeared to be errors or omissions were intentional or not.

The document suffered from"drafting and reference errors, inconsistencies, duplicate provisions which differed within and between sets of rules, confusing and at times incomprehensible provisions, and substantial omissions," the SIA said.

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