NZX enforcement processes transparency welcomed

by Sol Dolor26 Aug 2016
Chapman Tripp welcomes the transparency and guidance the NZX has provided on its enforcement processes, appreciating the focus on intentional, reckless or negligent breaches rather than honest mistakes.
The NZX Regulator (NZXR) recently clarified how it approaches investigations and enforcement for matters short of a referral to the NZ Markets Disciplinary Tribunal (NZMDT).
“Good corporate citizens should, if the NZX is true to these stated intentions, be able to expect that they will not have the book thrown at them on the first instance of an inadvertent breach,” said Josh Blackmore, Chapman Tripp partner.
He noted that the move continues a recent trend, led by the Financial Markets Authority (FMA), of New Zealand regulators providing more information on the goals and priorities of enforcement activity.
Blackmore noted that while the NZXR has not adapted the FMA terminology “willing compliers,” it has made clear that its focus, just like the FMA, are with intentional, reckless or negligent breaches as opposed to honest mistakes.
Both the FMA and the NZX will prioritise breaches which they consider are likely to pose the greatest risk to fair, efficient and transparent financial markets.
Blackmore said that continuous and periodic disclosure as well as “corporate governance” is a natural area of focus for NZX.
“Given the NZX’s current review of its own corporate governance guidelines for issuers (and our comments on the overcrowding of New Zealand guidance on corporate governance when compared with Australia) one obvious conclusion is to prioritise compliance with the NZX’s corporate governance rules,” he said.
The Chapman Tripp partner also noted that the NZX’s recent clarification makes it obvious that engagement with the market a focus, saying this is “right and proper”.
This focus “accords with our experience where NZXR staff are generally willing to go the extra mile to assist issuers with difficult situations,” he added.
Blackmore also welcomes the inclusion of some timelines that give issuers/participants a better sense as to how long any investigation should take, even though the NZXR stopped short of committing to the timelines.
“A referral by NZXR to NZMDT should occur within four months of commencement of an enquiry and anything short of that should be concluded in three months,” Blackmore said.
Blackmore also highlighted that some matters – like breaches of legislation, such as insider trading or a failure to make disclosure of a relevant interest – were clarified to not be within the ambit of the NZXR. These matters must be referred to FMA instead, he said.