NZSE's commission pen new regulatory agreement

By NZPA

Tuesday 18th March 2003

The New Zealand Stock Exchange today went in to bat for its new continuous disclosure regime, criticised by some market players as unwieldy.

"Companies are coming to grips with it and thinking more closely about information coming over their desks," Elaine Campbell, general counsel for the NZSE, said.

The regime, which took effect on December 1, requires listed companies to immediately inform the bourse when they become aware of any information that can reasonably be expected to have a material effect on the price or value of their securities.

Speaking at a briefing to discuss a new memorandum of understanding (MOU) between the exchange and regulatory watchdog, the Securities Commission, Ms Campbell said the continuous disclosure rules were changing the mindset of executives from viewing information as an asset for the company, to something that should be shared in order to put all investors on an equal footing.

The regime has copped some flak in recent weeks, particularly from plastics manufacturer Vertex, which contravened the new rules in issuing a profit warning soon after listing last year.

Investigations by the exchange's Market Surveillance Panel and the Securities Commission found Vertex misled investors -- failing to mention that two of its divisions fell short of prospectus forecasts prior to listing and failing to outline the risks involved.

The company's directors maintain it was better to take time to revise its forecast rather than rushing it.

Vertex said there was widespread confusion about the new regime and directors of New Zealand public companies needed detailed guidelines if they were to avoid unwittingly breaching the new rules.

Ms Campbell said the exchange had received only indirect feedback to the regime -- via the media -- and at this stage it was premature to pass judgement on its effectiveness.

The NZSE and the Securities Commission met in Wellington today to announce a new co-regulatory approach to securities regulation.

Securities Commission director of enforcement, Norman Miller, described the MOU as a "watershed" development, expanding the level of cooperation between the pair.

Under the MOU, dated February 27, the NZSE will act as frontline regulator -- monitoring trading and breaches of listing rules -- while the commission will be the statutory regulator responsible for reviewing practices on securities markets and enforcing breaches of the Securities and Markets Acts.

The agreement states that the NZSE must inform the commission within one business day of discovering or suspecting a significant breach of listing rules.

It is part of new, tougher, securities law which came into force in December. Under the Securities Market Amendment Act 2002, the commission has the power to take court action and seek civil penalties for insider trading and to monitor securities exchanges, continuous disclosure by issuers, and disclosure by directors.

"The goal of the MOU is to avoid duplication, but also to avoid gaps (in securities regulation)," the commission's general counsel, Liam Mason, said.

"What the MOU does is it recognises that the NZSE has certain powers under its conduct rules which are very efficient in certain situations.

"It also provides a means for handover or referral to the commission, where the commission's broader or statutory powers might be of assistance to supplement those rules."

Mr Mason said the agreement would boost confidence in the market.

One aspect of the MOU could cause friction, however. The MOU states that, in the interests of fairness, no public comment will be made at the time of referral so as not to damage the reputation of the company at stake.

Mr Mason denied this could upset the flow of information, with some investors receiving news through leaks or market rumours, while others would be kept in the dark.

"When there is an amount of rumour we will consider (commenting) on a case by case basis," he said.

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