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New Zealand Securities Commission |
Last Updated: 7 November 2014
THE PROPOSED CONDUCT RULES
OF THE NEW ZEALAND STOCK EXCHANGE
PUBLIC CONSULTATION PAPER FOR THE PURPOSE OF PREPARING ADVICE TO THE MINISTER OF COMMERCE IN RESPECT OF THE APPROVAL PROCESS UNDER THE NEW ZEALAND STOCK EXCHANGE RESTRUCTURING ACT 2002
SECURITIES COMMISSION
17 June 2002
Securities Commission
12th Floor, Reserve Bank building
2 The Terrace
PO Box 1179
Wellington, New Zealand
www.sec-com.govt.nz
TABLE OF CONTENTS
PART ONE
Introduction ....................................................................................................................... 5
Purpose of this review ......................................................................................................... 5
Background – The New Zealand Stock Exchange ............................................................... 5
Public interest test ............................................................................................................... 8
Basis of analysis of Conduct Rules .................................................................................... 10
Specific Topics Canvassed in the Paper ............................................................................. 11
Securities Markets and Institutions Bill ............................................................................. 12
Invitation to comment ....................................................................................................... 12
Disclaimer ........................................................................................................................ 13
PART TWO
Conduct Rules – Issues for Discussions........................................................................... 14
Demutualisation ................................................................................................................ 14
Incentive to monitor and enforce the Conduct Rules .......................................................... 24
Responsibility for monitoring and enforcement of relevant legislation .............................. 28
Waivers and Rulings ......................................................................................................... 32
– Exercise of NZSE discretion ............................................................................... 32
– Related party transactions ................................................................................... 39
NZSE discretion to accept new entities for listing ............................................................. 42
Adequacy of sanctions ...................................................................................................... 45
Disclosure of information – Continuous Disclosure ........................................................... 48
Dissemination of information ............................................................................................ 55
Corporate governance of listed issuers .............................................................................. 58
Surveillance by broker network ......................................................................................... 61
Capital adequacy and fidelity guarantee fund ..................................................................... 63
PART THREE
Other Matters or Issues ................................................................................................... 69
PART FOUR
Discussion Questions........................................................................................................ 70
APPENDIX A (Letter of the Minister of Commerce to the Securities Commission) APPENDIX B (Comparison of Conduct Rules with international principles) APPENDIX C (Continuous Disclosure Regime)
APPENDIX D (Listing Rule 9.2 waiver history)
Glossary of Terms
“ASIC” – the Australian Securities and Investment
Commission
“ASX” – the Australian Stock Exchange
“FIBV” – the Federation Internationale des Bourses de Valuers, now known as the World
Federation of Exchanges
“HKSFC” – The Hong Kong Securities and Futures
Commission
“HKX” – The Hong Kong Stock Exchange
“ICMG” – the International Markets Group
“IOSCO” – the International Organisation of
Securities Commissions
“MAS” – the Monetary Authority of Singapore “MOU” – Memorandum of Understanding “NZSE” - the New Zealand Stock Exchange
“Panel” – the Market Surveillance Panel of the New Zealand Stock Exchange “Restructuring Act” – the New Zealand Stock Exchange Restructuring Act 2002 “SGX” – the Singapore Stock Exchange
“Sharebrokers Act” – the Sharebrokers Amendment Act
1981
“SMI Bill” – the Securities Markets and Institutions Bill
PART ONE
INTRODUCTION
PURPOSE OF THIS REVIEW
2. The Minister of Commerce has asked the Securities Commission to
provide advice to enable him to effectively discharge his
function of making his
recommendation to the Governor-General. To help it prepare that advice, the
Commission is seeking public
comment on the proposed Conduct Rules of the
NZSE.
BACKGROUND - THE NEW ZEALAND STOCK EXCHANGE
Constitution and funding
Functions
4. The Sharebrokers Act states that the NZSE’s functions are, in
summary:
to operate a national stock exchange;
to promote and specify the conditions for listing;
to regulate and promote uniformity in the conduct of its member sharebrokers,
and to promote the interests of its members and the
public in relation to
securities
trading.
NZSE Board and the Panel
Listing Rules
governance and director appointments;
criteria for listing;
documents such as prospectuses, investment statements and notices of
meeting;
issues and buybacks of securities;
related party and material transactions; and disclosure of information to the market.
Panel. Under this delegated authority the Panel has, in the past, imposed sanctions for breach, such as suspensions of trading and public censure of companies and their
directors and officers. The listing and delisting of companies has always
been the responsibility of the NZSE itself, not the Panel.
Business Rules
11. The Business Rules relate to the operations of the NZSE and its
members and act as a constitutional document for the NZSE
itself. In broad
terms, the Business Rules have in the past regulated matters such as:
admission of individuals and corporates to membership;
the composition of the NZSE Board;
general meetings of members;
members’ authority to act in relation to public offers of
securities;
dealings by members as principals;
discipline of members; disputes between members; defaulting members;
audits and inspections of members;
capital adequacy requirements; and
the establishment of a fidelity guarantee fund.
Demutualisation
there is a risk that the NZSE may have an
increased incentive to favour the interests of itself and its shareholders over
the interests
of the New Zealand sharemarket in general. An approval requirement
for stock exchange rules is consistent with established practice
in various
overseas jurisdictions. The requirement in the Restructuring Act for
Ministerial approval of the Conduct Rules is a result
of the demutualisation
process itself.
PUBLIC INTEREST TEST
17. As noted, the Conduct Rules comprise the Listing Rules and the Business
Rules of the
NZSE. These terms are defined in the Restructuring Act as
follows:
“business rules” means the rules made by the NZSE...that will govern the conduct of –
(a) the business on the stock exchange to be operated by the [NZSE];
and
(b) the sharebrokers who will be authorised to undertake activities on
the
[NZSE].
“listing rules” means the rules made by the NZSE... that will
relate to –
(a) the governance of the persons who are parties to listing agreements with
the [NZSE]; and
(b) the entry into, and revocation of, listing agreements with the
[NZSE].
1. market integrity, or public confidence in the effective functioning of
the sharemarket; and
2. the international perception of the New Zealand sharemarket.
(a) the proposed Business Rules; (b) the current Regulations;
(c) the current Code of Practice;
(d) the current Listing Rules, with some proposed amendments, notably to section 10 (continuous disclosure) and Appendix 3 (constitution of the Panel).
BASIS OF ANALYSIS OF CONDUCT RULES
3. The Commission is inviting comments on any other matter arising
from the Conduct Rules which, while not covered in this
paper, should be
considered by the Commission in its review and advice to the Minister.
International comparisons
by its wholly owned subsidiary, while the holding company itself retains the
regulatory functions). The purpose of this comparison is not to harmonise
the
Conduct Rules with those of other jurisdictions. Rather, it is to see how
similar issues are dealt with overseas, so as to analyse
whether dealing
differently with an issue could adversely affect confidence in, or international
perceptions of, the New Zealand
sharemarket.
SPECIFIC TOPICS CANVASSED IN THIS PAPER
26. Our review has raised the following topics for discussion in Part Two of
this paper:
(a) Demutualisation (the NZSE’s role in the context of a demutualised exchange). (b) NZSE incentives to enforce the Conduct Rules.
(c) Responsibility to monitor and enforce legislation. (d) Waivers and rulings.
(e) NZSE discretion to accept new entities for listing. (f) Adequacy of sanctions.
(g) Disclosure of information.
(h) Dissemination of information.
(h) Corporate governance of listed issuers. (i) Surveillance by member network.
(j) Capital adequacy and fidelity guarantee fund.
In Part III of this paper the Commission also invites comment on any other
relevant issue or topic.
SECURITIES MARKETS AND INSTITUTIONS BILL
INVITATION TO COMMENT
Comments on the paper should be sent to the
Commission by 12 July 2002. They can be emailed to liam.mason@sec-com.govt.nz or sent in hard
copy to:
Liam Mason
Securities Commission
Facsimile (04) 472-8076
PO Box 1179
Wellington
32. Comments or submissions received will be subject to the Official
Information Act
1982. It is the practice of the Commission to make submissions available on
request and, where appropriate, to refer to them in any
further paper. If you
would like us to withhold information included in any comments on this paper
would you please let us know.
Any request to withhold information will be
considered in accordance with the Official Information Act 1982.
Disclaimer
PART TWO
CONDUCT RULES – ISSUES FOR DISCUSSION
DEMUTUALISATION
“Commercial pressures or the governance structure may undermine the
commitment of resources and capability of the Exchange to
effectively fulfil its
regulatory and public interest responsibilities to an appropriate
standard.”
This pressure is considered to be even greater where the stock exchange
performs significant regulatory functions and might be listed
upon itself. The
IOSCO Technical Committee report highlights the following potential ways of
addressing these conflict of interest
concerns (each of which is described
briefly below).
(a) Corporate governance requirements, such as the requirement for
independent/non-shareholding directors on the Board, some objective
oversight
of management, as well as restrictions on shareholdings.
(b) Separation of commercial functions from regulatory functions. (c) Rigorous regulatory oversight.
(d) Enhanced transparency of decision-making.
Corporate governance/separation of commercial and regulatory
functions
government agency like the Securities Commission. The
directors of the ASX are appointed by its shareholders.
to provide a
commercial return and to protect and enhance the integrity of the New
Zealand sharemarket through the Conduct Rules.
In other words, should the Business Rules provide that
they are to be administered by an independent and experienced body in order
to
demonstrate that brokers, like listed companies, will be independently
monitored?
Discussion
Role and objectives of the Panel
to represent the interests of market participants;
to be, and be seen as, a body that is independent of any sector group in the
market, with authority and experience to engender respect
for the Listing Rules
and encourage voluntary compliance with them; and
to give the surveillance executives the authority of support by a prestigious
market representative body.
Effect of demutualisation on the Panel
Administration of the Business Rules
The Business Rules comprise the terms of a contract
between the NZSE and its broker members. High level general principles and
framework
provisions are set out in the Business Rules, while more detailed
provisions are expanded upon in the Regulations and Code of Practice.
43. The proposed Business Rules govern matters such as:
applications for accreditation;
ongoing requirements for brokers;
the power of the NZSE Board to admit, review and revoke
accreditation;
the ability to bring charges for breach by brokers;
disciplinary committee procedures;
disputes;
capital adequacy; and inspection of brokers.
44. It is contemplated that the NZSE Board and executive will remain
responsible for administering the Business Rules (although
the disciplinary
committee, which has some external representatives, will continue to have
certain responsibilities).
Supervision of exchange members
in other jurisdictions
Australia
Hong Kong
Singapore
53. For completeness, we note that the business rules of the SGX (the
"Rules and Bye- Laws") are currently under review by that
exchange, so are not
discussed further in this section.
Summary of ASX and HKX provisions
Comparison of
proposed NZSE provisions with ASX and HKX provisions
57. Unlike the ASX and the HKX, the NZSE does not provide an appeal from
decisions
of the Disciplinary Committee. However, there is a right of appeal to the
Disciplinary Committee from findings or penalties imposed
either by a Complaints
Committee (which is a committee appointed by the NZSE Board to deal with matters
not serious enough to require
the attention of the Disciplinary Committee) or by
the Managing Director (who can also be appointed by the Board to deal with these
less serious cases).
of the Disciplinary Committee may seem at odds with the
recognised need, discussed above, to increase the transparency of decision
making by demutualised exchanges.
Should there be an independent Business Rules panel?
independence. The same reasons would seem to apply in considering whether a separate and independent panel should monitor the Business Rules. Whether or not the lack of an independent Business Rules panel (in addition to the Disciplinary
Committee) would affect the Business Rules from a public interest perspective
should also be considered.
Regulatory Oversight of the NZSE as a listed
company
Supervision of NZSE compliance
64. The Special Division would comprise three independent Panel members who are to be selected by the Chairman of the Panel. “Independent” in this context means that each member of the Special Division must not be a director, employee or shareholder of
the NZSE or of any related company. The Special Division would deal with the NZSE’s listing application, consider any compliance issues, and take any enforcement action against the NZSE. It would have all the powers of the NZSE in doing so.
Discussion
68. In this regard we note that to date the Panel has comprised people
with status in the business community, and knowledge
and relevant expertise, as
contemplated by the Panel’s constitutional requirements (set out in
Appendix 3 of the Listing Rules).
69. We seek comment as to whether, under the proposed Business Rules, the
Special
Division will be perceived to be sufficiently independent to achieve its
objectives.
Monitoring the ASX, the HKX and the SGX
Possible New Zealand
alternatives
Transparency of decision-making
Discussion questions
75. We invite comments on the following questions.
The Panel
(a) Is the Panel sufficiently independent under its present
constitution?
(b) Is the definition of “independent” in the Listing Rules
sufficient to ensure adequate separation between the Panel
and the NZSE?
(c) Are the provisions for appointment of Panel members appropriate? (d) If not, in what respects do you think they are inappropriate?
(e) Should the Panel have its own separate powers under the Listing Rules
rather than acting as a delegate of the NZSE?
The Disciplinary Committee
(f) Is the Disciplinary Committee, as proposed, sufficiently independent
from the
NZSE Board?
(g) Should there be a separate body to monitor and enforce the Business
Rules?
Appointment of the Panel and Disciplinary Committee
(h) Should the Board of the NZSE appoint the Disciplinary Committee and
the
Panel?
(i) Should there be a requirement to involve any other person or
organisation in the appointment of the members of either body?
If so,
who?
(j) If the answer to (i) is yes, what should be the extent of that
involvement (ie, power to appoint, obligation to consult)?
(k) Are the proposed appointment arrangements likely to detract from public
confidence in the effective functioning of our market,
or from international
perceptions of the market?
The proposed Special Division
(l) Are the proposed Special Division appointment procedures under the
Conduct Rules sufficient to achieve appropriate independence
and integrity in
the body that monitors and enforces compliance with the Listing Rules by NZSE as
a listed company?
(m) Would international perception of the market, and the market’s integrity, suffer if compliance by a listed NZSE entity were monitored and enforced by
a body whose members are drawn from a body appointed by the NZSE? If so,
what other arrangement might be most appropriate?
(n) In terms of the public interest criteria against which the Conduct Rules are to be assessed, how much weight should each of the above issues be given?
INCENTIVE TO MONITOR AND ENFORCE THE CONDUCT RULES
Discussion
Is this conflict more perceived than real?
Panel required to disclose funding shortfall
Effect of the SMI Bill
Enforcement obligations in other
jurisdictions
Australia
Hong Kong
Singapore
Funding enforcement action
$715,000, $582,000 was funded by direct charges paid by listed issuers in respect of
Panel activity in which they were involved. Listing and trading fees also
assist the
NZSE to fund its monitoring and enforcement expenses.
Issuers’ bank bonds
$75,000 bank bond to the NZSE. This is essentially a
letter of credit that can be used at any time by the NZSE to fund an
investigation
into a potential breach of the Listing Rules. It is understood
that the NZSE treats bank bonds as a last resort and that the bonds
are rarely
drawn upon. The questions arise as to whether the requirement for a bond is
still appropriate, and if so whether a bond
of $75,000 is sufficient.
Private enforcement
The Business Rules
Rules, if the NZSE is able to adequately recover its costs of investigating complaints against brokers this should reduce enforcement costs for the NZSE, and also reduce disincentives on the NZSE conducting rigorous investigations. We note that where a broking firm successfully appeals to the Disciplinary Committee against a decision of the NZSE to suspend or revoke its designation, the Board of the NZSE must pay the
costs of the appeal. This exposure on the part of the NZSE may mean that it
is less willing to take on specific cases unless its
chance of success are high.
On the other hand brokers obtain some comfort that should not have to pay for an
unjustified action under
the Business Rules.
Discussion questions
94. In light of the above, we invite comments on the following:
(a) Do the Conduct Rules place sufficient obligations and incentives on the
NZSE
to monitor and enforce those Rules?
(b) If not, could this adversely affect public confidence in the proper
functioning of the market, or international perceptions of
the market?
(c) Should the Conduct Rules expressly give the NZSE primary responsibility
for monitoring compliance and for enforcing its Conduct
Rules?
(d) Should the NZSE state in its Rules that it has this
responsibility?
(e) Should the NZSE state that it will take actions for breaches of the
Conduct Rules for the benefit of shareholders, in priority
to encouraging
private actions by aggrieved shareholders?
(f) Is the requirement for an issuer to provide a bond to the NZSE still
appropriate? If so, is $75,000 the appropriate amount?
(g) In terms of the public interest criteria against which the Conduct Rules
are to be assessed, how much weight should these issues
be given?
RESPONSIBILITY FOR MONITORING AND ENFORCEMENT OF RELEVANT
LEGISLATION
1993, the Financial Reporting Act 1993, the Takeovers Code, the Securities Amendment Act 1988, and the Fair Trading Act 1986. If the Listing Rules state a requirement that listed issuers comply with certain key pieces of legislation this may
send a clear message to listed issuers of the importance accorded by the NZSE
to such compliance. It may also place some obligation
on the NZSE in terms of
monitoring and enforcing breaches of statutory obligations, as these would also
be breaches of the Listing
Rules. The Listing Rules already refer to statutory
compliance. For example, any prospectus or investment statement prepared in
connection with a listing application is required to comply with the Securities
Act 1978, and any annual report of a listed issuer
is required to contain any
confirmation “required by law”. The Listing Rules also expressly
require all listed issuers
to comply with their obligations under the Financial
Reporting Act 1993.
Discussion
questions of liability may arise, although these
might be addressed to an extent by agreement within the Rules
themselves.
Role and effectiveness of Panel
NZSE believes that changing the scope of
the Panel’s functions to include mandatory reporting on potential and
actual breaches
of the conduct rules and legislation related to the secondary
market could impact on the effectiveness of the Panel.
103. In particular, the NZSE has questioned whether:
(a) mandatory reporting of potential breaches could affect the flow of
information between an issuer and the Panel, and the willingness
of public
issuers to approach the Panel;
(b) whether extending the scope of the Panel’s reporting requirements to matters other than the Listing Rules (e.g. potential or actual breaches of legislation) might impact on the willingness of some market participants to take up voluntary positions on the Panel on the basis that they do not have expertise in this area (e.g. intermediaries, brokers, accountants, etc); and
(c) whether the creation of an obligation to report on potential or actual
breaches may impact on the willingness of market participants
to take up a role
as a Panel member.
The SMI Bill and the Corporations Act
Act to
ASIC. The Corporations Act regulates a very broad range of matters, including
company and securities law, insider trading,
takeovers, financial reporting, and
continuous disclosure matters.
Discussion questions
105. We invite comments on the following:
(a) What role (if any) should the NZSE have under the Conduct Rules in
monitoring or enforcing compliance with applicable legislation
by listed issuers
and brokers?
(b) Is such a role important in terms of New Zealand’s market
integrity and international perceptions of our market?
(c) If the answer to (a) was yes, which specific statutes should be referred
to in the Conduct Rules for this purpose?
(d) What impact, if any, do you think there would be on the
effective
functioning of the Panel if the Panel were required under the Listing Rules
to report to the Commission on likely or actual breaches
of the Conduct Rules,
and legislation relating to primary offers and secondary trading?
(e) If the SMI Bill is not passed into law, should the Conduct Rules contain an obligation on the NZSE to report relevant legislative and Conduct Rule
breaches to the Commission and require co-operation and information sharing
with the Commission, Takeovers Panel or other regulatory
bodies in relation to
any such suspected breaches?
(f) If so, what should be the extent of any such obligation on the NZSE
(e.g. actively monitoring compliance, reporting known or
suspected breaches,
acting on suspected breaches under its own powers)?
(g) In terms of the public interest criteria against which the Rules are to
be assessed, how much weight should these issues be given?
WAIVERS AND RULINGS
Exercise of NZSE discretion
Application of powers
108. Paragraph 11 of the Foreword to the Listing Rules notes that the rules
cast a wide net.
The purpose of this is to avoid the rules falling into disrepute due to
unintended avoidance. On the other hand the Foreword acknowledges
that there is
a need for commercial transactions not to be constrained where their form or
development does not undermine the objectives
of the NZSE. Accordingly the
Foreword invites companies to:
"...make use of these [waiver] powers in circumstances in which the Exchange
can be satisfied that the proposals for which dispensation
is sought are
innocuous."
Listing Rule 1.8.1 states, with regard to rulings (i.e. decisions on the interpretation of the Listing Rules), including waivers, that:
"the Exchange shall be guided by the policies set out or explained in the
Foreword to the Rules and in the footnotes and any other
practice notes or
Rulings promulgated to Issuers."
There is no requirement for the NZSE to publish its waivers or rulings or to set out the reasons why the exercise of its power meets the above criteria. Listing Rules 1.6.2
and 1.7.3 permit any waiver or ruling to be published, at the NZSE’s
discretion, and we are advised that in practice most are
published.
“Ideally, there should also be a brief statement of reasons by the Panel for the grant of the [waiver]. In this way, disgruntled investors would be able to assess the reasons
for the Panel’s decision. In the Committee’s view, any need for
urgency should not overwhelm the need for reasonable
process, given the
far-reaching effects of granting a waiver.”
This quotation illustrates a sentiment that, rightly or wrongly, is expressed
from time to time in the media and to the Securities
Commission that there needs
to be greater transparency in, and consistency of, decision-making by the NZSE
in order to provide certainty
as to what is and what is not permitted in terms
of the Listing Rules. Confidence in the decision-making processes of a body can
be enhanced where the rules under which decisions are made themselves provide
for a transparent and accessible procedure.
Discussion
Waiver powers in other
jurisdictions
Australia
112. The ASX has a broad waiver power under its listing rules, except to the
extent that the
ASX listing rules specify that a particular rule may not be waived. The listing rules
require the ASX to publish waivers periodically. In practice, the ASX
publishes a waiver register monthly which includes a brief
description of the
waiver and the names of the entities involved.
Hong Kong
Singapore
114. The SGX has recently undertaken a review of its Rules and has published
a new
listing manual which comes into effect on 1 July 2002. Under it, the SGX has a broad discretion to grant waivers, except to the extent that a rule is specified as not subject
to a waiver. Where a waiver is granted, it must be announced by the issuer
as soon as possible. Where the SGX rejects an application
it may, but is not
obliged to, disclose the reasons for its decision.
Need for flexibility
Need for transparency
of NZSE decisions on rulings and
waivers, together with an explanation of the reasons behind them, could promote
public confidence
and could improve international perceptions of the
decisions.
Listing Rule objectives
“The Exchange does not wish the necessarily broad scope of the Rules to
constrain the form or development of commercial transactions
which do not
undermine the objectives of the Exchange."
Comparison with overseas
exchanges
ASX
that certain standards of quality
must be met by the issuer;
that there is sufficient investor interest to warrant quotation;
that securities must be issued in circumstances and have rights attached
which are fair to new and existing security holders;
that timely disclosure is made of information which may influence investment
decisions or in which various parties have a legitimate
interest; and
that security holders must be consulted on matters of
significance.
SGX and HKX
Takeovers Panel
Should objectives be expressly stated?
rules) would
there be a clearer perception of the principles against which waiver decisions
are made?
Generic waivers
Rules not subject to
waiver
Comparison with other jurisdictions
Australia
Singapore
Reasons for entrenchment
good reasons for entrenchment. The policy behind
entrenchment of rules appears to be to send a signal to the market participants
on
certain matters. The question arises whether there are any further rules
that might be considered so important to the integrity
or perception of the
market that no waiver power should exist in respect of them.
Consultation option
Perceived disadvantages of consultation
(a) it considers that an essential element in attracting persons of experience and status to the Panel is the belief that they are undertaking a role in which they have prime responsibility. The NZSE believes that the requirement to consult
the Commission before granting waivers may impact on those
persons’
perceptions of the autonomy and value of the Panel’s role;
(b) it considers this obligation may create confusion for market
participants as to who is ultimately responsible for surveillance
of compliance
with the Listing Rules. The NZSE believes that if there is an obligation to
consult with the Commission before granting
waivers then public issuers who are
seeking waivers may think it necessary to approach both the Panel and the
Commission to ensure
both parties are aware of the reasons why they are seeking
the waiver;
(c) the NZSE considers that the Panel places a high priority on a speedy
resolution of applications and the NZSE questions whether
a waiver consultation
process may compromise this element of the Panel decision making
process.
Related party transactions – Listing Rule 9.2
134. The Panel’s annual report for 2001 indicated that, of all the
waivers that were granted,
52 per cent involved Listing Rule 9.2. Listing Rule 9.2 is a key provision
which regulates related party transactions. Essentially,
the rule states that a
material transaction between a listed company and a related party must be
independently appraised and put
to the vote of the non-associated shareholders
in general meeting. It is considered to be a fundamental rule because it assists
in
preventing public investors from being adversely affected by non arm’s
length transactions between a listed company and someone
with control or
influence over it.
1993.
Criteria for waiver from LR 9.2
Comparison with Australia
for which New Zealand has no
equivalent. Disregarding those waivers, the proportion of related party waivers
granted by the ASX is
increased to 37 per cent.
Zealand is unusual or inconsistent with international practice.
Discussion questions
140. We invite comment on the following:
(a) Is the process under the Listing Rules by which the NZSE can grant and
publish waivers a matter that may affect either public
confidence in the
effective functioning of the market or international perceptions of the
market?
(b) Should the Listing Rules require the NZSE to publish each waiver that is
granted, as and when it is granted?
(c) If the answer to (b) is yes, should the Listing Rules also require the
NZSE to publish its reasons for each waiver?
(d) Should any Listing Rules not be subject to waiver? If so, which rules,
and why?
(e) Should the NZSE be required to consult with an independent body (such as
the Commission) before granting waivers from any Listing
Rules, as is
contemplated in relation to waivers of the proposed new Listing Rule
10.1?
(f) If the answer to (e) is yes, on which Rules should the NZSE be required
to consult, and who should be consulted?
(g) Should the approval of an independent body be required in order to grant
any generic or class waivers?
(h) Alternatively to (g), should the Listing Rules require consultation with
any independent body before any generic or class waivers
are granted?
(i) Would a requirement for the Panel to consult with the Commission before
granting specific waivers impact on the effective functioning
of the
Panel?
(j) If the answer to (i) is yes, do you think the benefits of requiring
consultation exceed the potential for any detriment to the
effective functioning
of the Panel?
(k) Bearing in mind the NZSE’s intention to deliberately set a low threshold for related party transactions, is there any concern over the number of waivers that have been granted from Listing Rule 9.2?
(l) In terms of the public interest criteria against which the Conduct Rules
are to be assessed, how much weight should these issues
be given?
NZSE DISCRETION TO ACCEPT NEW ENTITIES FOR LISTING
Discussion
No review, reasons or appeal
Quality and transparency of decisions
Comparison with other jurisdictions
Australia and Singapore
Hong Kong
to the Listing Appeals Committee where an
application for listing has been rejected solely on the grounds that the issuer
or its business
is unsuitable for listing. This implies that reasons for the
refusal of an application are given to an unsuccessful applicant by
the Listing
Committee, although there is no rule to that effect.
Commercial sensitivity
148. It may be that often the reasons for a refusal to list are rightly kept
confidential.
Perhaps the fundamental question for discussion is whether the NZSE should be required to explain to the unsuccessful applicant why its application has failed. If the NZSE were obliged to explain to an unsuccessful applicant why it was declined, it would then be up to the entity involved to decide whether or not to publish the decision. Publication by the entity concerned would address any privacy, commercial
sensitivity, or defamation concerns that might arise from public disclosure
by the
NZSE.
Alternatives
for the NZSE to exercise that discretion
appropriately and should assist in promoting public confidence in the
NZSE’s decisions.
Discussion questions
152. We welcome comments on the following questions:
(a) Is transparency in the listing process important to a market’s
integrity and perceptions of that market?
(b) Should the NZSE be required to disclose its reasons for refusing a
listing?
(c) If the answer to (b) is yes, should the NZSE have to disclose its
reasons to the public, or only to the unsuccessful applicant?
(d) What further protections should there be for the applicant and the NZSE,
if any, to deal with issues of confidentiality and defamation?
How can these be
implemented within the scope of the Conduct Rules?
(e) Should the jurisdiction of the Panel, or perhaps some other regulatory body, be extended to hearing appeals from NZSE decisions on listing applications?
(f) In terms of the public interest criteria against which the Conduct Rules
are to be assessed, how much weight should this issue
be given?
ADEQUACY OF SANCTIONS
"During the year there has from, time to time, been criticism of the state of the share market in New Zealand. There is sometimes media criticism of a perceived lack of
‘teeth’ of bodies such as the Panel."
The Chairman goes on to note, however, that:
"While the outcome [of an investigation] may be a censure or critical comment
from the Panel (which the media delight in regarding
as a "slap on the wrist"),
it is evident from our discussions with listed issuers under investigation that
public exposure of their
shortcomings is viewed seriously by them."
Discussion
Available sanctions
154. The sanctions for breach of the NZSE's Listing Rules are set out in
Listing Rule 5.4.2.
The NZSE may, in its absolute discretion (although it must give
reasons):
cancel a listing;
cancel or suspend the quotation of any securities;
publish a censure or statement relating to the conduct of any issuer;
director or associated person; or
refer conduct to any statutory or governmental authority.
Comparison with other jurisdictions
Should there be a penalty or damages regime?
160. In respect of the company itself could a penalties or damages regime
entail either the power to impose penalties, or to sue
for damages under an
amendment to the present Rule 2.1.2?
Legal issues
2001 the Standing Committee found that although the NZSE derives its jurisdiction
from contract it is performing a regulatory function of a public nature, and
so the private law doctrine of penalties should not be
applied to render
unenforceable clear consequences of breach set out in the Listing Rules. If the
Standing Committee is correct
then the NZSE should be able to impose penalties
under its rules at present.
Penalties under the proposed Business Rules
Effect of the Restructuring Act
Discussion questions
167. We invite comment on the following questions:
(a) Do the sanctions that are currently available to the NZSE for breaches
of its
Conduct Rules provide an adequate deterrent?
(b) If not, what additional sanctions could or should be imposed under
the
Conduct Rules, and for which breaches?
(c) Does the NZSE have jurisdiction or power under the Conduct Rules to
impose financial penalties on, or seek damages from, issuers
or directors of
issuers?
(d) Would a penalties or damages regime for issuers, directors or officers
be appropriate in the context of ensuring that the Conduct
Rules create
confidence in the New Zealand sharemarket?
(e) If the answer to (d) is yes, what should those penalties entail? Under
what authority could they be imposed and enforced?
(f) Is this a matter to be addressed in the context of statute law reform or
in the
Conduct Rules?
(g) If this is a matter that should be addressed in the Conduct Rules, then
in terms of the public interest criteria against which
the Rules are to be
assessed, how much weight should this issue be given?
DISCLOSURE OF INFORMATION – CONTINUOUS DISCLOSURE
Current Listing Rule requirements
170. Paragraph 8 of the Foreword to the Listing Rules states:
“...trading on the market is most efficiently conducted and fostered
for all participants when issuers are required to disclose
to all participants
as much material information as can be disclosed without material damage to the
interests of the issuers.”
The last part of the above quotation highlights the tension that exists
between the need for the sharemarket to be fully informed
and the need for
listed companies not to be put in a position whereby their disclosure
obligations have the potential to put the
business at risk.
(a) it is received by someone who is not bound to keep it
confidential, or by someone who is likely to use it in deciding
whether or not
to deal in the issuer's securities; or
(b) it ceases to have greater value to the issuer for that information to remain confidential (it is not a good enough reason under the existing rule to withhold the disclosure of information under this limb if the release may adversely affect the market price of the issuer's securities).
“Relevant information” is a key element of the rule. The term
refers to information of a listed issuer about its business
which is not
reasonably available to an informed investor and which, if it were released to
the market, would or would be likely
to affect materially the market price of
the issuer's securities.
Proposed new Listing Rules
(a) a reasonable person would not expect disclosure; and
(b) the information is confidential; and
(c) one or more of the following applies:
(i) it would be a breach of law to disclose the information;
(ii) the information comprises an incomplete proposal or negotiation; (iii)
the information comprises matters of supposition or
is insufficiently
definite to warrant disclosure;
(iv) the information is generated for the internal management purposes of
the entity; or
(v) the information is a trade secret.
or officer.
obligations will apply even if the criteria in
Listing Rule 10.1.1(a), which permits withholding, are otherwise
satisfied.
175. In addition to the general obligation to disclose relevant information,
Listing Rule
10.1 will continue to require disclosure of specific information under
Listing Rule
10.1.2. This Rule requires prompt disclosure to the NZSE of any arrangement
in respect of which members of the public might reasonably
consider directors of
the issuer have a conflict of interest which may lead them to approve terms
which are materially more favourable
to the other parties than arm’s
length terms. In particular an issuer must always disclose:
(a) any arrangements by the issuer with any director or associated persons
of a director or with any shareholder who is not a member
of the public;
and
(b) the entry into any arrangement or agreement that will require
shareholder approval as a related party transaction under section
9 of the
Listing Rules.
177. Further specific matters must be disclosed under section 10 of the
Listing Rules.
These include:
(a) periodic reporting – six monthly and annual reports, preceded by
preliminary announcements;
(b) any proposed change in the general nature of the business of an
issuer;
(c) any action or disposal by a listed issuer of a holding of more than 5%
of the securities of another listed issuer;
(d) any acquisition or disposal of assets with a gross value exceeding 10%
of the issuers’ shareholder funds;
(e) any proposal to consolidate or sub-divide securities or to issue equity
securities (whether or not to be quoted);
(f) any proposal to amend conditions of quoted securities;
(g) non-confirmation by a meeting, or cancellation of any proposal already notified to the NZSE;
(h) any change in the directors or auditor of the issuer;
(i) any change in the contact details, registered office, or share registry,
of an issuer;
(j) any proposed name change of an issuer;
(k) the opening or closing of a branch register; and
(l) any credit rating of an issuer or any guaranteeing entity of an issuer
of debt securities.
10.1. There has also been comment on the specific
disclosures required under Rule
10, for example, whether the reasons for changes in directors or auditors
should also be expressly required to be disclosed as specific
matters. The NZSE
has informed the Commission that it is also intending to review the specific
disclosure requirements referred to
in Rule 10. Any comments on these matters
are also invited in submissions on this paper.
Effect of the SMI Bill
Discussion
New Rule changes emphasis
emphasis. The existing rule 10.1.1 says that every issuer must
treat relevant information as valuable property to be used for the
overall
benefit of the issuer, must safeguard relevant information and ensure it is not
wrongly divulged, and must release all relevant
information to the NZSE
immediately it ceases to have greater value to the issuer for the information to
remain confidential.
emphasis on the listed issuer to disclose
relevant information, except in certain clearly identified situations. In other
words,
there is a clear presumption under the proposed new rule that relevant
information will be disclosed and the onus is upon the listed
issuer to justify
why, in terms of the specific criteria, disclosure may be avoided.
Comparison with other jurisdictions
Australia
Singapore
184. The new regime is also broadly in line with the continuous disclosure
requirements of
SGX which also appear to mirror those of the ASX.
Hong Kong
materially affect market activity. Much of the practical effect of the rule appears to be dealt with by the HKX's Guide on Disclosure of Price-sensitive Information which
was published in January this year.
they stand as between the disclosure rules of the NZSE and
ASX, it should allow for some learning from experience in Australia in
applying
the rule to the variety of situations that invariably will continue to
arise.
is an important part of the ongoing
relationship with the NZSE in that it assists rather than impedes ongoing
compliance and co-operation.
Discussion questions
191. We welcome comments on the following questions:
(a) Will the adoption in the Conduct Rules of the proposed new continuous
disclosure regime contribute to and improve confidence
in, and international
perception of, the New Zealand share market?
(b) From a public interest perspective, are there any reasons why it is
inappropriate to adopt a continuous disclosure regime that
is broadly the same
as that of the ASX?
(c) Is the combination of general disclosure obligations and specific
disclosure requirements desirable?
(d) In the context of the New Zealand market, are there any other particular
matters that should be addressed in the continuous disclosure
rules or in the
specific matters required to be disclosed as referred to above?
(e) In terms of the public interest criteria against which the Conduct Rules
are to be assessed, how much weight should this issue
be given?
DISSEMINATION OF INFORMATION
Discussion
Subscriber services
a fee. This raises the issue of whether it is
appropriate for certain people in the market (albeit those who pay the NZSE for
the
privilege) to have more timely access to information about listed
issuers.
Effects of free access
NZSE states that this loss of revenue would
need to be made up from somewhere else, perhaps through higher trading charges.
Any discussion
about the NZSE’s processes and charges for the
dissemination of information needs to take account of these concerns.
ASX practice
Wider publication by issuers
provided to the Exchange, in order to provide the widest
possible dissemination of relevant information.
Discussion questions
200. We invite comment on the following questions:
(a) Should there be an obligation on the NZSE, under the Listing Rules, to
release to the market price-sensitive information provided
to it by listed
issuers?
(b) Is the lack of such an obligation likely to reduce public confidence in
the effective functioning of the market?
(c) Taking into account the NZSE’s statements about the effect on
its financial position that might flow from the immediate
free provision of
information, should there be a positive obligation on the NZSE to release price
sensitive information to the public/market
generally, immediately upon receiving
the information from the issuer?
(d) Should the NZSE publish whole announcements on its website? If so,
when?
(e) Has the NZSE struck the correct balance between commercial and public interest with its practice of releasing price-sensitive information immediately on receipt only to subscribers and twenty minutes later to non-paying market participants?
(f) Should it be left to the NZSE to balance how it derives its revenue
– through listing and trading fees and through charges
for the
dissemination of information?
(g) Should the Listing Rules require listed issuers to publish announcements
on their websites?
(h) Would the answers to the above questions be any different if there were
a statutory backing for the continuous disclosure rules?
(i) In terms of the public interest criteria against which the Conduct Rules
are to be assessed, how much weight should these issues
be given?
CORPORATE GOVERNANCE OF LISTED ISSUERS
“Good governance ensures that constituencies (stakeholders) with a
relevant interest in the company’s business are fully
taken account of ...
. In addition, good governance can make a significant contribution to the
prevention of malpractice and fraud,
although it cannot prevent them
absolutely.”
202. The expression “corporate governance” can mean different
things to different people.
The Listing Rules address key corporate governance matters such as:
related party transactions;
director remuneration and rotation;
shareholder approvals of transactions; and
provisions dealing with issues and buybacks of securities.
Discussion
International comparisons
UK
Australia
also contain some guidance as to the principles of corporate governance against which the report needs to be made. In this regard, the ASX’s Guidance Note provides an indicative list of corporate governance matters that should be considered by listed companies in making this disclosure. That list includes:
make-up of the Board in terms of executive and non-executive
directors;
policies relating to the appointment of non-executive directors;
procedures for directors to seek external professional advice at the
company’s expense;
procedures for establishing the remuneration of the chief executive and other
senior executives;
procedures for appointing auditors and any audit committee; and procedures
for identifying business risk.
the ASX’s rules states that:
“The role of the ASX in the area of corporate governance is primarily
to promote the disclosure of corporate governance practices
adopted by listed
entities and to assist in the development of these practices generally. ASX
policy is not to require that particular
practices be adopted or that entities
report against prescribed check-lists (‘tick-the-box’
approach).”
Singapore
Discussion questions
210. We invite comment on the following questions:
(a) In the context of ensuring that the Listing Rules promote international
confidence in the New Zealand market what role, if any,
should the NZSE have
under those Conduct Rules in enforcing good corporate governance
practice?
(b) Should the NZSE’s role be limited to requiring disclosure of the corporate governance practices and policies?
(c) Are the proposed Listing Rules adequate in relation to the disclosure of
corporate governance practices?
(d) If the answer to (c) is no, how should the Rules be altered?
For instance, should issuers be required to report compliance
with a set of
non-binding corporate governance principles written into the Listing
Rules?
(e) Should the Listing Rules provide that the NZSE can impose sanctions for
inadequate corporate governance systems and procedures?
(f) In terms of the public interest criteria against which the Conduct Rules
are to be assessed, how much weight should this issue
be given?
SURVEILLANCE BY BROKER NETWORK
Discussion
“Self-regulation within a particular peer group has long been the accepted and efficient form of establishment and enforcement of these codes of conduct.”
listed issuers it might be practical to extend the obligation
to include suspected Listing
Rule breaches.
Discussion questions
218. We invite comment on the following questions:
(a) Should NZSE sharebrokers be obliged to report suspected breaches of
the
Business Rules, Listing Rules, or securities markets legislation?
(b) Would a reporting obligation improve public confidence in the effective
functioning of our capital markets?
(c) Would there be any negative implications of a reporting
obligation?
(d) In terms of the public interest criteria against which the Conduct Rules are to be assessed, how much weight should this issue be given?
CAPITAL ADEQUACY AND FIDELITY GUARANTEE FUND
Capital adequacy
(a) No distinction between types of broker (corporate, partnership, sole
trader), and no distinction based on whether or not the
broker is a FASTER or
trading firm;
(b) Minimum liquid capital for all brokers (or firms) of $100,000 at all
times;
(c) Liquid capital of 5% of gross external liabilities to be additional to
the $100,000 minimum level of liquid capital;
(d) Higher liquid capital requirements for start-up firms of $250,000 at all
times for the first 12 months of operation;
(e) Corporate broking firms will no longer be required to maintain $1
million shareholder funds.
The NZSE believes that these changes will not negatively impact on the security or integrity of dealing with NZSE accredited firms in light of the “know your client” regulations, the FASTER insurance, and trust accounting for client assets.
Fidelity Guarantee Fund
Discussion
Overseas requirements
Australia
Hong Kong
225. The capital adequacy requirements in Hong Kong are set down in
regulation under the
Financial Resources Rules rather than in the business rules of the exchange
itself.
The Financial Resources Rules set out the various capital requirements, which
depend on the role that the relevant person undertakes.
For example, a
securities dealer must maintain liquid capital of at least HK$3,000,000. A
greater capital requirement can apply,
depending upon the circumstances. Where
the securities dealer is a corporation (and provides securities margin
financing), he or
she must maintain paid up share capital of at least
HK$10,000,000. These legal provisions are supplemented by the business rules
of the HKX.
all successful claimants in respect of all defaults of any one
member cannot exceed HK$2,000,000. Members who participate in the
fidelity
fund must deposit HK$50,000 with the "Compensation Committee" established by the
Board of the exchange.
made. Therefore, under the HKX’s business rules, each
member is required to deposit HK$50,000 with the HKX and may also be
required to
replenish the fund after a payment has been made. The maximum amount payable to
all successful claimants in respect of
any default of any one member cannot
exceed HK$8,000,000.
Singapore
exchange, its paid up capital is at least SG$15,000,000. The dealer's licence will lapse if aggregate indebtedness exceeds 1000% of its adjusted net capital or its adjusted net capital falls below SG$5,000,000 for four consecutive weeks. The Monetary Authority of Singapore (“MAS”) must be notified where a member company reaches certain trigger points approaching the prohibited levels. In addition, the member company must maintain a reserve fund of either 50% or 30% of net
profits depending on profit levels until MAS exempts a member company from
the requirement or allows distribution of dividends.
Comparisons
(a) NZSE = total turnover (2001), NZ$30.2 billion; 707,000 trades; $42,715.00 average trade;
(b) ASX = total turnover (2001) A$417.6 billion; 13 million trades, $32,123
average trade;
(c) HKX = total turnover (2001) HK$1852 billion; (d) SGX = total turnover (2001) SG$146 billion.
In these circumstances the
question of the size of the fund and the maximum claim limit of $20,000 seem
important, as does the $500,000
total that can be paid in respect of the default
of any one member.
$20,000 seems
less important now, as does the $500,000 total that can be paid in respect of
the default of any one broking firm.
Other factors
(a) full asset trust accounting for client assets held by broking
firms;
(b) delivery versus payment in the settlement system, which eliminates
principal risk;
(c) insurance over for invalid transfers through the FASTER system;
(d) reduced settlement times and better accounting for client obligations in broking firms;
(e) full risk based capital adequacy requirements for broking firms;
and
(f) “know your client” provisions in the
Regulations.
Discussion questions
236. In light of the above, the following questions arise for discussion:
(a) Are the NZSE’s proposed broker capital adequacy requirements
adequate? (b) Should the capital adequacy requirements be
higher or lower in
view of the
level and extent of trading on the NZSE and the other protections that are in
place?
(c) Does the fidelity guarantee fund as proposed contribute to investor and
public confidence in our markets?
(d) Should the size of the fidelity guarantee fund or the size of the
maximum claim be increased (bearing in mind that the NZSE has
noted doing so
will almost inevitably lead to an increase in trading charges)?
(e) Would international perception of, or public confidence in the New
Zealand sharemarket be adversely affected if the capital adequacy
requirements
and fidelity guarantee fund arrangements were to remain as currently
proposed?
(f) Should brokers be required to advise clients of the limitations on the
protections provided by the fidelity guarantee fund and
a summary of the
procedures for making a claim?
(g) In terms of the public interest criteria against which the Conduct Rules are to be assessed, how much weight should this issue be given?
PART THREE
OTHER MATTERS OR ISSUES
(a) What are the positive aspects of these Rules that are likely to add to
public confidence in and international perceptions of
our capital
markets?
(b) What are the negative aspects of these Rules that are likely to detract from public confidence in and international perceptions of our capital markets?
PART 4
DISCUSSION QUESTIONS
1. Demutualisation (the NZSE’s role in the context of a demutualised exchange)
The Panel
(a) Is the Panel sufficiently independent under its present
constitution?
(b) Is the definition of “independent” in the Listing Rules
sufficient to ensure adequate separation between the Panel
and the NZSE?
(c) Are the provisions for appointment of Panel members appropriate? (d) If not, in what respects do you think they are inappropriate?
(e) Should the Panel have its own separate powers under the Listing Rules
rather than acting as a delegate of the NZSE?
The Disciplinary Committee
(f) Is the Disciplinary Committee, as proposed, sufficiently independent from the
NZSE Board?
(g) Should there be a separate body to monitor and enforce the Business
Rules?
Appointment of the Panel and Disciplinary Committee
(h) Should the Board of the NZSE appoint the Disciplinary Committee and the
Panel?
(i) Should there be a requirement to involve any other person or
organisation in the appointment of the members of either body?
If so,
who?
(j) If the answer to (i) is yes, what should be the extent of that
involvement (i.e., power to appoint, obligation to consult)?
(k) Are the proposed appointment arrangements likely to detract from public
confidence in the effective functioning of our market,
or from international
perceptions of the market?
The Proposed Special Division
(l) Are the proposed Special Division appointment procedures under the
Conduct Rules sufficient to achieve appropriate independence
and integrity in
the body that monitors and enforces compliance with the Listing Rules by NZSE as
a listed company?
(m) Would international perception of the market, and the market’s integrity, suffer if compliance by a listed NZSE entity were monitored and enforced by
a body whose members are drawn from a body appointed by the NZSE? If so,
what other arrangement might be most appropriate?
(n) In terms of the public interest criteria against which the Conduct Rules
are to be assessed, how much weight should each of the
above issues be
given?
2. The incentives on the NZSE to enforce the Conduct Rules
(a) Do the Conduct Rules place sufficient obligations and incentives on the NZSE
to monitor and enforce those Rules?
(b) If not, could this adversely affect public confidence in the proper
functioning of the market, or international perceptions of
the market?
(c) Should the Conduct Rules expressly give the NZSE primary responsibility
for monitoring compliance and for enforcing its Conduct
Rules?
(d) Should the NZSE state in its Rules that it has this
responsibility?
(e) Should the NZSE state that it will take actions for breach of the
Conduct Rules for the benefit of shareholders, in priority
to encouraging
private actions by aggrieved shareholders?
(f) Is the requirement for an issuer to provide a bond to the NZSE still
appropriate? If so, is $75,000 the appropriate amount?
(g) In terms of the public interest criteria against which the Conduct Rules
are to be assessed, how much weight should these issues
be given?
3. Responsibility to monitor and enforce legislation
(a) What role (if any) should the NZSE have under the Conduct Rules in
monitoring or enforcing compliance with applicable legislation
by listed issuers
and brokers?
(b) Is such a role important in terms of New Zealand’s market
integrity and international perceptions of our market?
(c) If the answer to (a) was yes, which specific statutes should be referred to in the
Conduct Rules for this purpose?
(d) What impact, if any, do you think there would be on the
effective functioning of the Panel if the Panel were required
under the Listing
Rules to report to the Commission on likely or actual breaches of the Conduct
Rules, and legislation relating to
primary offers and secondary trading?
(e) If the SMI Bill is not passed into law, should the Conduct Rules contain an obligation on the NZSE to report relevant legislative and Conduct Rule breaches to the Commission and require co-operation and information sharing with the Commission, Takeovers Panel or other regulatory bodies in relation to any such suspected breaches?
(f) If so, what should be the extent of any such obligation on the NZSE
(e.g. actively monitoring compliance, reporting known or
suspected breaches,
acting on suspected breaches under its own powers)?
(g) In terms of the public interest criteria against which the Rules are to
be assessed, how much weight should these issues be given?
4. Waivers and Rulings
(a) Is the process under the Listing Rules by which the NZSE can grant and
publish waivers a matter that may affect either public
confidence in the
effective functioning of the market or international perceptions of the
market?
(b) Should the Listing Rules require the NZSE to publish each waiver that is
granted, as and when it is granted?
(c) If the answer to (b) is yes, should the Listing Rules also require the
NZSE to publish its reasons for each waiver?
(d) Should any Listing Rules not be subject to waiver? If so, which rules,
and why?
(e) Should the NZSE be required to consult with an independent body (such as
the Commission) before granting waivers from any Listing
Rules, as is
contemplated in relation to waivers of the proposed new Listing Rule
10.1?
(f) If the answer to (e) is yes, on which Rules should the NZSE be required
to consult, and who should be consulted?
(g) Should the approval of an independent body be required in order to grant
any generic or class waivers?
(h) Alternatively to (g), should the Listing Rules require consultation with
any independent body before any generic or class waivers
are granted?
(i) Would a requirement for the Panel to consult with the Commission before
granting specific waivers impact on the effective functioning
of the
Panel?
(j) If the answer to (i) is yes, do you think the benefits of requiring
consultation exceed the potential for any detriment to the
effective functioning
of the Panel?
(k) Bearing in mind the NZSE’s intention to deliberately set a low
threshold for related party transactions, is there any concern
over the number
of waivers that have been granted from Listing Rule 9.2?
(l) In terms of the public interest criteria against which the Conduct Rules are to be assessed, how much weight should these issues be given?
5. NZSE discretion to accept new entities for listing
(a) Is transparency in the listing process important to a market’s
integrity and perceptions of that market?
(b) Should the NZSE be required to disclose its reasons for refusing a
listing?
(c) If the answer to (b) is yes, should the NZSE have to disclose its
reasons to the public, or only to the unsuccessful applicant?
(d) What further protections should there be for the applicant and the NZSE,
if any, to deal with issues of confidentiality and defamation?
How can these be
implemented within the scope of the Conduct Rules?
(e) Should the jurisdiction of the Panel, or perhaps some other regulatory
body, be extended to hearing appeals from NZSE decisions
on listing
applications?
(f) In terms of the public interest criteria against which the Conduct Rules
are to be assessed, how much weight should this issue
be given?
6. Adequacy of sanctions
(a) Do the sanctions that are currently available to the NZSE for breaches of its
Conduct Rules provide an adequate deterrent?
(b) If not, what additional sanctions could or should be imposed under the
Conduct Rules, and for which breaches?
(c) Does the NZSE have jurisdiction or power under the Conduct Rules to
impose financial penalties on, or seek damages from, issuers
or directors of
issuers?
(d) Would a penalties or damages regime for issuers, directors or officers
be appropriate in the context of ensuring that the Conduct
Rules create
confidence in the New Zealand sharemarket?
(e) If the answer to (d) is yes, what should those penalties entail? Under
what authority could they be imposed and enforced?
(f) Is this a matter to be addressed in the context of statute law reform or in the
Conduct Rules?
(g) If this is a matter that should be addressed in the Conduct Rules, then
in terms of the public interest criteria against which
the Rules are to be
assessed, how much weight should this issue be given?
7. Disclosure of information
(a) Will the adoption in the Conduct Rules of the proposed new continuous disclosure regime contribute to and improve confidence in, and international perception of, the New Zealand share market?
(b) From a public interest perspective, are there any reasons why it is
inappropriate to adopt a continuous disclosure regime that
is broadly the same
as that of the ASX?
(c) Is the combination of general disclosure obligations and specific
disclosure requirements desirable?
(d) In the context of the New Zealand market, are there any other particular
matters that should be addressed in the continuous disclosure
rules or in the
specific matters required to be disclosed as referred to above?
(e) In terms of the public interest criteria against which the Conduct Rules
are to be assessed, how much weight should this issue
be given?
8. Dissemination of Information
(a) Should there be an obligation on the NZSE, under the Listing Rules, to
release to the market price-sensitive information provided
to it by listed
issuers?
(b) Is the lack of such an obligation likely to reduce public confidence in
the effective functioning of the market?
(c) Taking into account the NZSE’s statements about the effect on its financial position that might flow from the immediate free provision of information, should there be a positive obligation on the NZSE to release price-sensitive information to the public/market generally, immediately upon receiving the information from the issuer?
(d) Should the NZSE publish whole announcements on its website? If so, when? (e) Has the NZSE struck the correct balance between commercial and public
interest with its practice of releasing price-sensitive information immediately
on receipt only to subscribers and twenty minutes later to non-paying market
participants?
(f) Should it be left to the NZSE to balance how it derives its revenue
– through listing and trading fees and through charges
for the
dissemination of information?
(g) Should the Listing Rules require listed issuers to publish announcements
on their websites?
(h) Would the answers to the above questions be any different if there were
a statutory backing for the continuous disclosure rules?
(i) In terms of the public interest criteria against which the Conduct Rules
are to be assessed, how much weight should these issues
be given?
9. Corporate governance of listed issuers
(a) In the context of ensuring that the Listing Rules promote international confidence in the New Zealand market what role, if any, should the NZSE
have under those Conduct Rules in enforcing good corporate governance
practice?
(b) Should the NZSE’s role be limited to requiring disclosure of the
corporate governance practices and policies?
(c) Are the proposed Listing Rules adequate in relation to the disclosure of
corporate governance practices?
(d) If the answer to (c) is no, how should the Rules be altered?
For instance, should issuers be required to report compliance
with a set of
non-binding corporate governance principles written into the Listing
Rules?
(e) Should the Listing Rules provide that the NZSE can impose sanctions for
inadequate corporate governance systems and procedures?
(f) in terms of the public interest criteria against which the Conduct Rules
are to be assessed, how much weight should this issue
be given?
10. Surveillance by member network
(a) Should NZSE sharebrokers be obliged to report suspected breaches of the
Business Rules, Listing Rules, or securities markets legislation?
(b) Would a reporting obligation improve public confidence in the effective
functioning of our capital markets?
(c) Would there be any negative implications of a reporting
obligation?
(d) In terms of the public interest criteria against which the Conduct Rules
are to be assessed, how much weight should this issue
be given?
11. Capital adequacy and fidelity guarantee fund
(a) Are the NZSE’s proposed broker capital adequacy requirements adequate? (b) Should the capital adequacy requirements be higher or lower in view of the
level and extent of trading on the NZSE and the other protections that are in
place?
(c) Does the fidelity guarantee fund as proposed contribute to investor and
public confidence in our markets?
(d) Should the size of the fidelity guarantee fund or the size of the
maximum claim be increased (bearing in mind that the NZSE has
noted doing so
will almost inevitably lead to an increase in trading charges)?
(e) Would international perception of, or public confidence in the New Zealand sharemarket be adversely affected if the capital adequacy requirements and fidelity guarantee fund arrangements were to remain as currently proposed?
(f) Should brokers be required to advise clients of the limitations on the
protections provided by the fidelity guarantee fund and
a summary of the
procedures for making a claim?
(g) In terms of the public interest criteria against which the Conduct Rules
are to be assessed, how much weight should this issue
be given?
12. Review of the Rules
Given that the Minister has to approve or disapprove each set of Rules as a whole: (a) What are the positive aspects of these Rules that are likely to add to public
confidence in and international perceptions of our capital markets?
(b) What are the negative aspects of these Rules that are likely to detract from public confidence in and international perceptions of our capital markets?
APPENDIX A
COPY OF A LETTER FROM THE MINSTER OF COMMERCE TO THE SECURITIES
COMMISSION
Office of Hon Paul Swain, Minister of Commerce
15 November 2001
Jane Diplock
Chairperson
Securities Commission
P O Box 1179
WELLINGTON Dear Ms Diplock
You will be aware that changes proposed in the New Zealand Stock
Exchange Restructuring Bill include a new requirement
for the approval of
stock exchange conduct rules and the ability to disallow any changes
to those rules. This requirement
has been developed in the context
of perceived changes in the incentives on stock exchanges brought about
by operating
under a corporate structure. An approval requirement for
stock exchange rules is consistent with established practice in overseas
jurisdictions. Specifically, these legislative requirements result from the
demutualisation process and not out of any concern
about the content or the
operation of the current NZSE rules.
Should the changes be passed by Parliament, this will require me to
recommend approval of the rules to the Governor-General.
I will seek
advice from the Commission to enable me to effectively discharge this
function. I am aware of discussions
that have taken place between the
Commission, the NZSE and the Ministry of Economic Development in relation
to the process
and timeframes for demutualisation of the NZSE. I understand
that in order to achieve the NZSE’s timeframes, work on
approval of the
rules will need to be commenced now.
I will be required to recommend that the Governor-General, by Order in
Council, approve the NZSE’s rules unless I am satisfied
that it is not in
the public interest to do so. This is a high threshold and I expect that this
will be reflected in the process
and the level of detail at which the rules will
be scrutinised. However, it is important that the Commission’s review of
the
conduct rules for the purpose of providing the advice I am requesting is
robust, measured, transparent and can be seen to have integrity.
This will
enable me to effectively discharge my function of making a recommendation to the
Governor-General.
I consider that there are two key components to the public interest test. These are market intefrity, which I would describe as public confidence in the effective functioning of our capital markets, and international perceptions of New Zealand’s
capital markets. These public interest factors will only be relevant
insofar as they affect, or are affected by, the stock exchange
rules.
I expect that in assessing the rules for the purpose of this exercise, the
Commission will have regard to international and
domestic principles,
for example principles derived from IOSCO, FIBV and International
Capital Markets Group.
The Commission may also wish to consider other
relevant public interest components within the ambit of stock exchange rules
and
the Commission’s statutory functions. As stock exchange rules are subject
to the Commerce Act, I am not seeking advice
from the Commission on any Commerce
Act issues that may be associated with the rules.
I expect that, given the high threshold that must apply to justify my not
approving the rules, the Commission will prioritise a
number of key topics
for consideration. I anticipate that the Commission will work closely
with the NZSE throughout
this exercise and that the Commission may wish to
consult both publicly and with the NZSE. This may result in the NZSE making
changes to the proposed rules before the Commission’s final advice is
provided to me.
Yours sincerely
Hon Paul Swain
Minister of Commerce
APPENDIX B
INTERNATIONAL PRINCIPLES COMPARISON
Identified principles for the regulation of public securities exchanges
(As sourced from the IOSCO “Objectives and Principles of Securities Regulations (1998), the “FIBV Market Principles” (2000), the ICMG “Standards of Self-Regulation of the Securities Markets” 1992, the ASX listing rules and the Foreword to the NZSE’s listing rules.)
Source of principle (Also notes the ICMG “market”, a “regulatory” or “additional” standard)
NZSE Listing Rules/ Business Rules clause
Brief Summary of NZSE rule Alternate source
of
rule
Nature of issuer and disclosure requirements (Note: Principles 1-17 are the principles that relate to the relationship between the
NZSE and issuers of securities and are therefore relevant to the Listing
Rules.)
ICMG (A2)
M
FIBV (4) ASX NZSE (8)
LR 5.1.2,
5.1.3
LR
5.2.2,
5.2.3
LR 5.3
Listing: Information required; minimum value $5 million
Quotation:
Information required; spread requirement (500 to hold 25% of
securities)
Discretion of NZSE as to listing and quotation
ICMG (A2) M
FIBV (4) ASX
LR 5.1.2 Signing of Listing Agreement
ICMG (A1) R FIBV (4,11) IOSCO (E14)
ASX
NZSE (8)
LR 5.1.2
LR 5.2.2
LR 7.1, 7.2,
Listing: Information required (to NZSE) Quotation: Information required
(to NZSE) Offering documents and advertisements (prospectus
or profile)
Securities Act
1978 and
Regulations
1983
FIBV (4) LR 7.1, 7.2,
7.8
Offering documents and advertisements
(investment statement)
Securities Act
1978 and
Regulations
1983
5. Continuing and regular disclosure of price sensitive
information after listing. ICMG (A3) R
FIBV
(4,11)
IOSCO (E14) ASX
NZSE (8,9)
LR 7.12
LR 10
Announcement of issues and buybacks Disclosure of price sensitive information and half year and full year reports (see LR Appendix 1 re content of periodic reports)
(Minister has regulation making powers under the Securities Markets &
Institutions Bill)
|
Identified principles for the regulation of public securities
exchanges
|
|
Source of principle
|
NZSE Listing Rules/
|
Brief Summary of NZSE rule
|
Alternate source of rule
|
||
|
|
Business Rules clause
|
|
|||||
|
ICMG (A3) M
|
Reg 6(3)(d)
|
15 minute trading halt following release of price sensitive
information
|
|
||||
|
FIBV (2g,5)
|
LR 5.4.2,
5.4.3
|
NZSE has broad discretion to suspend and delist.
|
(Securities
Commission
has some powers under the Securities Markets & Institutions Bill)
|
||||
8. Delisting standards and procedures for the issuer and the
exchange.
|
ICMG (A2) M
|
LR 5.4.1,
5.4.2, 5.4.3
|
Suspension and cancellation (by issuer or
Exchange)
|
|
||||
|
FIBV (4)
|
LR 5.1.6
|
Overseas listed issuers deemed to comply while they comply with their
home
exchange rules
|
|
||||
Corporate governance requirements
|
||||||||
|
ICMG (A4) R
IOSCO (E15) NZSE (7.1)
|
LR 3, 7, 8, 9
|
Constitutions, trust deeds and directors (see LR Appendix 6 for
requirements of constitution). Director appointments and rotations,
remuneration, new issues and buybacks, changes to rights of security
holders, related party transactions.
|
Companies
Act 1993
|
||||
11. Securities to be issued in circumstances, and have rights and
obligations, which are fair to new and existing security holders.
Ownership and
voting interests of security holders to be protected.
|
IOSCO (E15)
ASX
NZSE (7.1,7.3,
7.4)
|
LR 3
LR 7.3
LR 7.5, 6
LR 8
LR 9
LR 11
|
Constitutions, trust deeds and directors
Issuers of new equity securities Issues, buybacks; financial assistance
Voting rights and rights of equity securities Related parties
and major
transactions Transfers and statements.
|
Companies
Act 1993
|
||||
12. Consultation with security holders on matters of significance.
|
IOSCO (E15)
ASX
|
As for 11
above, esp
LRs 7 & 9
|
|
Companies
Act 1993
|
|
Identified principles for the regulation of public securities
exchanges
|
|
Source of
principle
|
NZSE
Listing
Rules/
|
Brief Summary of NZSE rule
|
Alternate
source of rule
|
||
|
|
Business Rules clause
|
|
|||||
|
IOSCO (E16)
|
LR 10.6
|
Financial statements
|
Financial
Reporting Act
1993
|
||||
|
ICMG (E) A
IOSCO (E15) NZSE (7.5)
|
LR 4
LR 10.9
|
Takeovers provisions where not Code
companies
Issuers to provide NZSE with information on substantial security
holders
|
Takeovers
Code; Securities Amendment Act 1988
|
||||
Waivers
|
||||||||
15. Allow waivers where principles not undermined.
|
ASX
NZSE (11)
|
LR 1. 7.1
|
Power to waive. No requirement that waivers be granted only where
the
principles aren’t undermined.
|
|
||||
Issuer surveillance
|
||||||||
|
FIBV (2d,10)
|
LR 2.3
LR 2.4, 2.5
|
Issuer Surveillance
Constitution of Market Surveillance Panel
|
|
||||
17. The exchange is to monitor observance of the listing
requirements.
|
ICMG (B2) M
|
As for 16
|
Delegation of power to Market
Surveillance Panel. Primary responsibility
on issuer.
|
|
||||
Requirements for the organisation of the exchange (Note: Principles 18
– 37 are the principles that relate to the relationship between the
NZSE and its members and are therefore relevant mainly to the Business Rules and
the NZSE’s Regulations.)
|
||||||||
|
FIBV (2a)
|
|
|
Sharebrokers
Amendment Act 1981; Stock Exchange Restructuring Act; (Securities Markets
& Institutions Bill)
|
|
Identified principles for the regulation of public securities
exchanges
|
|
Source of
principle
|
NZSE
Listing
Rules/
|
Brief Summary of NZSE rule
|
Alternate
source of rule
|
||
|
|
Business Rules clause
|
|
|||||
|
FIBV (2b)
|
|
(Will be partly contained within the
constitution of the new NZSE company following demutualisation.)
|
Sharebrokers
Amendment Act 1981; Stock Exchange Restructuring Act; (Securities Markets
& Institutions Bill)
|
||||
Requirements for the admission of members
|
||||||||
|
ICMG (B1 a,b,c) R&M
FIBV (2c,3) IOSCO (G21)
|
BR 2.3
BR 3.14
BR 4.3
BR (B) 2.4
BR (B) 3,4
|
When Board to designate firm as member
Client advisors and investment advisors to be Approved
Representatives
Requirements for establishing new firm When Board to designate as Approved
Representative or Accredited Stockbroker Requirements for
designation as
Approved Representative/Accredited Stockbroker
|
Sharebrokers
Act 1908
|
||||
21. Members must meet solvency and capital adequacy standards.
|
ICMG (B1d) R
FIBV (2c,3) IOSCO (G22)
|
BR 2.3
BR 3.6
BR 4.3
BR 18
Reg 5
|
When Board to designate firm as a member
Shareholders funds $1 million
Requirements for establishing new firm
Capital adequacy requirements
Capital adequacy regulations
|
|
||||
|
FIBV (2c,5)
|
|
|
|
|
Identified principles for the regulation of public securities
exchanges
|
|
Source of
principle
|
NZSE
Listing
Rules/
|
Brief Summary of NZSE rule
|
Alternate
source of rule
|
||
|
|
Business Rules clause
|
|
|||||
Conduct of business, trading and clearance of settlement rules
|
||||||||
|
ICMG (C2)
R&M
FIBV (11,12,
13)
IOSCO (G23)
|
BR 1.1
BR 2.3
BR 3.1, 3.2,
3.3, 3.4, 3.6,
3.9
BR 3.14
BR 7
BR 20
BR 21
BR (B) 3,4
CC Reg 1
Reg 10
Reg 11
Reg 13
Reg 14
Reg 15
Reg 16
Reg 17
Reg 19
|
Definition of good stockbroking practice:
cross-ref to BRs, Regs, Code of Conduct When Board to designate firm as a
member
Firm and employees to observe good stockbroking practice; include good
stockbroking practice in constitution
Client advisors and investment advisors to be Approved
Representatives
Authority to act on offer to public Short sales to comply with good
stockbroking practice
Miscellaneous rules i.e. protection of buyer’s and seller’s
rights
Requirements for designation as Approved
Representatives/Accredited Stockbroker
Code of conduct
Disclosure of members’ interests,
members’ duty of care
Protection of benefits in entitlements issues and takeovers
Members to ensure entitled dividends paid Calls to be paid before delivery
of shares Rules governing transfers of securities Rules
governing trading of
options
Rules governing short sale of securities
All member firms to maintain a client funds trust account
Minimum information to be obtained before advice given
|
Securities
Amendment Act 1988; Privacy Act
1993
|
||||
|
ICMG (C2) M
|
BR 2.4
BR 5
BR (B) 2.4
BR (B) 6
|
Rules are contract between NZSE and
members
Powers of the Board
Rules are contract between NZSE and Approved Representatives/Accredited
Stockbrokers
Powers of the Board
|
|
|
Identified principles for the regulation of public securities
exchanges
|
|
Source of
principle
|
NZSE
Listing
Rules/
|
Brief Summary of NZSE rule
|
Alternate
source of rule
|
||
|
|
Business Rules clause
|
|
|||||
|
ICMG (C1) M
FIBV (5,13c) IOSCO (H27)
|
BR 6.1
BR 9
BR 11
Reg 6
Reg 12
|
No trading securities where application for
listing only (with exception) Contracts
Trading and transactions reporting; observe good stockbroking practice
Reporting of all sales and purchases to the Exchange
Claims
|
|
||||
26. Clearing and settlement facilities and rules must provide for the
efficient, safe and prompt settlement of transactions (to
at least the
internationally accepted standards of the G-30 and ISSA).
|
ICMG (B3) M
FIBV (6, 11) IOSCO (30)
|
BR 10
Reg 8
|
Observe good stockbroking practice
Settlement within 3 days, regulated by
Exchange
|
|
||||
|
ICMG (B3) M
FIBV (11) IOSCO (G24)
|
BR 19
|
Fidelity guarantee fund
|
Sharebrokers
Amendment
Act 1981
|
||||
|
ICMG (C2)
R&M
FIBV (5,13c)
|
BR 9.4
BR 16.1
|
Issue contract note on client transaction
Members accounts and records
|
|
||||
Arbitration and mediation
|
||||||||
|
ICMG (F)
R&M
FIBV (9)
|
BR 13
|
Disputes between members referred to
Board
|
|
|
Identified principles for the regulation of public securities
exchanges
|
|
Source of
principle
|
NZSE
Listing
Rules/
|
Brief Summary of NZSE rule
|
Alternate
source of rule
|
||
|
|
Business Rules clause
|
|
|||||
Self-monitoring, market surveillance and enforcement
|
||||||||
|
FIBV (2d,10)
ICMG (B1f)
R&M
|
BR 5.7
BR 17.1,
17.2
BR (B) 6.2
BR 3.7 -
3.11
BR 12.4
BR 14.5,
14.7
BR 16.2,
16.3, 16.4
BR 17.4
BR 8.1
Reg 2
Reg 3
Reg 4
|
Board may receive and consider
complaints
Appointment and powers of Inspector
Board may receive and consider complaints
Notice to NZSE re ownership/corporate governance changes, etc
Powers of Disciplinary Committee to require information
Members to report and facilitate enquiries re defaulting member
firms
Member to provide audit certificate and report on request; Board power to
inspect and take evidence; financial statements to be provided
on
completion
Supply of information to Inspector
Inspector may examine where member is underwriter
Member firms to maintain sufficient
accounting records
Audit of members’ books
Inspection of members’ records
|
|
||||
|
ICMG (B2) M
FIBV (13a)
|
|
(See the NZSE website)
|
-
|
||||
|
ICMG (B1d,2)
R&M
FIBV (2d,13c)
|
|
|
|
||||
|
ICMG (D1,2)
A
|
BR 3.12,
3.13
BR 17.3
|
Managing Principal responsible for firm’s compliance
Maintenance of records and internal systems
|
|
|
Identified principles for the regulation of public securities
exchanges
|
|
Source of
principle
|
NZSE
Listing
Rules/
|
Brief Summary of NZSE rule
|
Alternate
source of rule
|
||
|
|
Business Rules clause
|
|
|||||
|
ICMG (B2)
R&M
FIBV (10,13c)
|
As for 30,
31 & 32 above
|
|
|
||||
35. Investors should have access to public transaction data for
verification.
|
FIBV (13c,5)
|
BR 9.4
|
Issue contract note on client transaction
|
|
||||
|
ICMG (B1f)
R&M
FIBV (3) NZSE (3)
|
BR 5.6, 5.8
BR 12
BR 14
BR 15
BR(B)6.1,3
BR(B) 7
BR(B) 8
BR(B) 9
|
Board may bring charges and discipline through expulsion, suspension, fines
and
censure
Discipline through Discipline Committee or Complaints Committee; discipline
through expulsion, suspension, fines and censure Defaulting
member firms
Suspending and revoking designation as a member firm
Board may bring charges and discipline
Discipline
Suspension
Revocation and re-designation
|
Sharebrokers
Amendment
Act 1981
|
||||
|
ICMG (B1f)
R&M
FIBV (10)
|
LR 5.4.2
|
Exchange may refer the conduct or any issuer or director to any statutory
or governmental authority
|
(Security
Markets & Institutions Bill)
|
Key
ASX The Australian Stock Exchange or, in “source”
column, the principles on which the ASX Listing Rules are said, by the ASX in
its Introduction to the Listing
Rules, to be based.
BR
BR(B)
NZSE Draft Business Rules Part A
NZSE Draft Business Rules Part
B
CC The New Zealand Stock Exchange or, in “source” column, the principles on which the NZSE Listing rules are said, by the NZSE in its
Foreword to the Listing Rules, to be based.
FIBV Federation Internationale des Bourses de Valeurs (World Federation of Stock Exchanges ) [Note: The NZSE is a member] or, in the “source”
column, “FIBV Market Principles” from FIBV Annual Report
2000
ICMG International Capital Markets Group (a co-operative arrangement
among the International Bar Association Section on Business Law, FIBV
and the
International Federation of Accountants) or, in “source”
column, “Standards of Self-Regulation of the Securities Markets”,
Part III, ICMG paper, 1992
Note that an “M” for “market” beside the ICMG clause
number indicates that the ICMG consider the principle
is best self-regulated by
a stock exchange; an “R” for “regulatory” indicates that
the ICMG consider the
principle may be appropriately regulated by some other
body but not necessarily by the stock exchange; and “A” for
“additional”
indicates that the ICMG consider the principle enables
regulation to function more effectively but are above the core
standards.
IOSCO International Organisation of Securities Commissions [Note: The Securities Commission is a member] or, in “source” column “Objectives and
Principles of Securities Regulation”, IOSCO document, September
1998.
LR NZSE Listing Rules, with some proposed amendments, notably to
section 10 (continuous disclosure) and Appendix 3 (constitution of
Panel)
CC NZSE Members' Code of Conduct
Reg NZSE Members’ Regulations
APPENDIX C CONTINUOUS DISCLOSURE REGIME
"Relevant Information" means at any time information received,
generated, or held by, or otherwise concerning an Issuer, including information
about its
undertaking, activities, business environment, prospects, financial
position, or financial performance, that a reasonable person
would expect, if it
were generally available to the market, to affect materially the price or value
of the Quoted Securities of the
Issuer. For the purpose of this
definition:
(a) a reasonable person will be taken to expect information to materially
affect the price or value of the Quoted Securities of the
Issuer if the
information would, or would be likely to, influence persons who commonly invest
in Quoted Securities of the same kind
in deciding whether or not to subscribe
for, or buy or sell, the Securities; and
(b) information will be generally available to the market if: (i) it is information that:
(A) has been made known in a manner that would, or would be likely to, bring
it to the attention of persons who commonly invest in
Quoted Securities of the
kind whose price or value might be affected by the information; and
(B) since it was made so known, a reasonable period for it to be
disseminated among such persons has expired;
(ii) it is likely that persons who commonly invest in Quoted Securities of
the kind whose price or value might be affected by the
information know of the
existence of, and can readily obtain, the information (whether by observation,
use of expertise, or any other
means); or
(iii) it is information that consists of deductions, conclusions, or inferences made or drawn from either or both of the kinds of information referred to in subparagraphs (i) and (ii).
Listing Rule 10.1.1 Continuous disclosure of Relevant Information:
Without limiting any other Rule, every Issuer shall:
(a) release all Relevant Information to the Exchange immediately after the
Issuer becomes aware of the Relevant Information, provided
that this Rule shall
not apply while each of the following applies:
(i) a reasonable person would not expect the information to be disclosed; (ii) the information is confidential; and
(iii) one or more of the following applies:
(A) it would be a breach of law to disclose the information;
(B) the information comprises an incomplete proposal or negotiation; (C) the information comprises matters of supposition or is insufficiently
definite to warrant disclosure;
(D) the information is generated for the internal management purposes of the
entity; or
(E) the information is a trade secret.
In this Rule, an Issuer is aware of information if a Director or officer of
the Issuer or any of its Subsidiaries has, or ought reasonably
to have, come
into possession of the information in the course of the performance of his or
her duties as a Director or officer.
(b) safeguard all Relevant Information and take all reasonable
steps:
(i) to ensure that it is not divulged to persons not entitled to receive it
while the proviso to Rule 10.1.1(a) applies; and
(ii) to avoid knowingly letting any person acquire, or remain in, a position of privilege in relation to other holders of prospective holders of Quoted Securities of the Issuer by use of Relevant Information to deal in such Securities while the proviso to Rule 10.1.1(a) applies;
(c) release all Relevant Information to the Exchange no later than it is
received by any person who is likely to use it in deciding
whether or not to
deal with Quoted Securities of the issuer or to divulge it, directly or
indirectly, to any such person even if
the proviso to Rule 10.1.1(a) applies;
and
(d) release Relevant Information to the Exchange to the extent necessary to
prevent development or subsistence of a market for its
Quoted Securities which
is materially influenced by false or misleading information emanating
from:
(i) the Issuer or any Associated Person of the Issuer; or
(ii) other persons in circumstances in each case which would given such
information substantial credibility,
even if the proviso to Rule 10.1.1(a) applies.
1. The Exchange recognises that too much information and detail can obscure significance and be as misleading as too little.
Accordingly it is acceptable to provide summaries and to invite further reference to papers or documents which it would not be sensible to publish in full. Nevertheless Issuers must ensure that any summary is sufficiently complete so as not to be
misleading by omission.
2. In cases of doubt whether the Exchange should be advised, the
Surveillance Executive may be consulted on a confidential basis.
5. In deciding whether or not to release information, Issuers
should have regard to:
(a) Rule 1.1.5, the effect of which is to aggregate a group of entities
for disclosure purposes;
(b) section 178 of the Companies Act 1993, dealing with the rights of
shareholders to require the provision of information by a
company;
(c) Part 1 of the Securities Amendment Act 1988, dealing with insider trading;
(d) the Fair Trading Act 1986, and in particular the sections dealing
with the supply of information that is or is likely to be
misleading or
deceptive; and
(e) section 257 of the Crimes Act 1961, which relates to conspiracies
to affect the market price of securities.
(a) to protect the confidentiality of the information supplied;
and
(b) to ensure that the party conducting the due diligence will not
acquire, dispose of, or otherwise deal in Securities of the Issuer,
or advise,
encourage, or procure others to do so, until any Relevant Information supplied
to that party has been released to the
market or has ceased to be current or
remains within the Rule 10.1.1(a) proviso.
8. Apart from waivers granted under footnote 7 (due diligence), a waiver from an obligation under Rule 10.1.1 will only be given in exceptional circumstances and the Exchange will consult the Securities Commission on the application. The Exchange does not expect this will significantly extend the time taken to consider waiver applications.
APPENDIX D
LISTING RULE 9.2 WAIVER HISTORY
Year
|
Granted
|
LR 9.2.2(d) (0.5%) Remuneration
|
Not
Granted
|
Total
|
%
Not
Granted
|
%
Not Granted (excluding LR 9.2.2(d))
|
2001
|
33
|
9
|
5
|
38
|
13%
|
17%
|
2000
|
33
|
9
|
7
|
40
|
18%
|
23%
|
1999
|
35
|
7
|
8
|
43
|
19%
|
22%
|
1998
|
19
|
6
|
3
|
22
|
14%
|
19%
|
1997
|
31
|
-
|
6
|
37
|
16%
|
16%
|
1996
|
25
|
-
|
2
|
27
|
7%
|
7%
|
1995
|
12
|
-
|
2
|
14
|
14%
|
14%
|
1994
|
6
|
-
|
3
|
9
|
33%
|
33%
|
1993
|
5
|
-
|
6
|
11
|
55%
|
55%
|
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