Regulators grant wavers to company listing rules

By Peter V O'Brien

Friday 20th August 2004

It was nice to see listed company New Zealand Exchange under the same stock exchange regulatory regime as other listed issuers.

The rules were applied last week in respect of waivers from listing rules that NZX sought after acquisition of the management role for the NZ Mid-Cap Index fund and a proposal to list and quote units in the NZX Australian Mid-Cap Index Fund of which it was the manager.

Applications for waivers are submitted to a body known as NZX Regulation or, when the listed NZX is involved, to NZX Regulation Special Division.

Decisions on the NZX applications were three of eight released last week. The apparent sudden bulge was immaterial, because one application was made in June and the others at various times. NZX Regulation sometimes delays publication of decisions pending conclusion of the applications' underlying proposed deals.

The regulator's decisions got little general publicity. They were expressed in a legalistic form and usually related to matters many investors would see as technical, rather than having a material effect on their interests.

All eight decisions granted the waivers sought, which was another reason for little publicity and/or investor interest. That did not mean NZX Regulation had become a rubber-stamper for influential companies.

It considered the application, the rule(s) from which waiver was sought, the background, effects of the waiver if granted, weighed up all matters and was objective in applying its discretion. The fact that all applications were granted was probably more a reflection of an unwillingness to ask for a waiver, knowing approval was unlikely, than an indication the regulator was a soft touch.

NZX Regulation had been busy in its role as a watchdog for NZX listing rules.

The eight decisions made sense when read in full against the background of the application, the logic of the reasons for the relevant rule and the need to remove any happy-go-lucky approach to stock exchange listing.

Changes to the regulatory system were made haphazardly over the years, usually as a result of pressure on exchange members who were hardly renowned for spontaneous reform.

Introduction of the current system seemed part of a prolonged process to modernise the exchange (including corporatisation) and persuade members to change its country cousins image on the international scene.

Decisions of NZX Regulation were one aspect of the re-imaging. They have been thorough, despite occasional wordiness and discussion of apparently esoteric issues.

Last week's decisions on waiver applications covered several situations.

Toll NZ Consolidated, a wholly-owned subsidiary of Tranz Rail parent Toll NZ, applied in June for a waiver from the requirement to obtain shareholder approval to allow Tranz Scenic 2001, a then wholly-owned subsidiary of Toll NZ, to receive funding from Toll Finance another part of the Toll group. The proposed deal, without spelling out the corporate relationships, would be done with a "related party" for the purpose of the listing rules.

NZX Regulation accepted information that the loan funding was negotiated on an arms length and commercial basis, independent confirmation of that fact, evidence that the terms of the Toll Finance loan were better than current bank facilities and confirmation the banking facilities were in default and needed urgent refinancing.

The regulator's statement of facts and its decision took four pages, although outsiders might think the issue was pedantic.

NZX Regulation said the "mischief" which the relevant listing rule aimed to address was not triggered by Toll NZ obtaining a loan from Toll Finance because the benefit of receiving the loan outweighed the benefit to Toll Finance from interest paid on it.

Another decision involved Speirs Groups, which applied for listing on the NZAX market. Speirs had a 25 years' relationship with motor vehicle dealer Anza Motor Company, under which the company leased commercial space to Anza, and financed its instalment credit vehicle sales.

Director Richard Speirs was a director of both companies and therefore Speirs and Anza were "related parties" under the listing rules.

NZX Regulation granted the waiver noting, among other things, it was consistent with recent waivers granted to Loan and Building Society and Oyster Bay Marlborough Vineyards.

The two decisions considered here were among the simpler of last week's eight. All sight showed NZX Regulation was thorough in its approach to rule waiver applications and was doing a good job on behalf of company shareholders and the wider investment community.

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