Labour strengthens control over NZSE

By Rob Hosking

Friday 30th November 2001

The government is poised to increase its oversight of the New Zealand Stock Exchange - and any other exchanges that may set up in this country.

New clauses widening the government's powers are likely to be added to the New Zealand Stock Exchange Restructuring Bill, if ministers follow advice from the MPs on the finance and expenditure committee.

The committee wants a 10% control limit on ownership of a demutualised stock exchange, as a way of preventing a takeover by what it terms "dominant interests."

The NZSE itself argued for a 10% limit in its submission on the bill but left open whether this should be imposed by the government or by the exchange itself. Others, notably Macquarie Equities, have argued Stock Exchange investors are big boys and the requirement for some sort of ownership cap, or "Kiwi Share," is not as pressing as it might be for a demutualised insurance company or a privatised state-owned enterprise. It is for the exchange itself, rather than the government, to set any rules, it has argued.

"[Stock Exchange members] are sophisticated investors and do not need the protection that a shareholding cap provides to "mum and dad" shareholders in other market issues," the company said in its submissions on the bill.

A limit could also discourage beneficial capital invest-ment in New Zealand from overseas, Macquarie has argued - a particularly pertinent factor in light of the recent Australian and Singaporean exchange moves.

Moreover, the MPs' proposed extension of regu-lation-making powers would not only apply to the NZSE, but also to any other stock exchange that might set up. The government's control cap and listing rule powers would apply to all stock exchanges.

The reason given for this is that "investor confidence in New Zealand's capital markets is of key importance."

The proposed change to the bill includes a provision that anyone holding or controlling voting share above the limit would have to take steps within 90 days to divest themselves of enough shares to put them below the limit, and they would not be allowed to use any voting rights that are over the 10%.

The other recommended change is approval of the NZSE's listing rules. Under the present law the government has approval powers over the exchange's business rules, which cover the conduct of business on the exchange.

However the exchange's listing rules are not subject to the government's purview - something the committee has recommended be changed.

Comments from our readers

No comments yet