Diligent censured, fined for numerous listing rules breaches

Friday 6th September 2013

Diligent Board Member Services, the governance app-maker hit by a slew of administrative mis-steps, has been publicly censured by the New Zealand Markets Disciplinary Tribunal for numerous breaches of stock exchange listing rules.

The regulator has approved a settlement agreement between Diligent and stock exchange operator NZX

whereby Diligent will pay $15,000 to the NZX Discipline Fund, tribunal costs and $3,840 towards the costs of NZX, the tribunal said in a statement.

New York-based, NZX-listed Diligent has changed its chief financial officer and appointed a new general counsel with public company and compliance experience after finding it had breached listing rules by failing to file required information, failing to seek authorisation for director payments and incorrectly issuing shares and options to employees.

While some breaches were minor, when taken together they indicate that Diligent's internal controls and processes were insufficient for a listed company, the tribunal said. Other breaches were more serious, particularly when taken together.

"Compliance with the rules is fundamentally important as the rules are designed to protect the integrity of the market and promote investor confidence in the market," the tribunal said.

In approving the settlement, the tribunal considered mitigating factors including that Diligent reported the majority of the breaches itself and took steps to address the breaches.

However, aggravating factors included that there were a number of breaches over a considerable period of time since the company listed on the main board of the stock exchange on Dec. 12, 2007, and that Diligent's internal controls and procedures were insufficient to ensure compliance with the rules, the tribunal said.

Separately, Diligent said it had received High Court approval to validate the issue of securities and options to some employees.

"The company's board and management are pleased to put these matters behind us," chairman David Liptak said in a statement. "We have taken the appropriate course of action to address each of the issues and accept the determination of the NZX. I have confidence that we have the resources and processes in place to effectively comply with our regulatory obligations going forward."

Shares in Diligent board member services gained 1.1 percent to $5.35 and have declined 3.3 percent so far this year.

The firm has gained a following for software used to distribute information to boards of directors efficiently.

BusinessDesk.co.nz

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