Unlisted asks for support in the face of 'unsubstantiated' NZX opposition

Thursday 14th May 2015

Unlisted, the share trading platform applying for an exemption from the Financial Markets Authority, is looking for support from its participants saying it faces opposition from licensed rival, NZX.

Unlisted is seeking an exemption to run its market, via its owner Efficient Market Services (EMS), under the Financial Markets Conduct Act, which came into force in December. Unlisted currently requires minimal disclosure, keeping costs low for the 17 securities that trade on its platform.

In a note to its market participants, Unlisted said that from later this month through June, the Ministry of Business, Innovation and Employment will be approaching interested parties, such as the New Zealand Shareholders' Association, brokers and issuers, as well as the NZX and licensed crowd funding platforms to gauge the wider market's view on an exemption.

"We now seek support for our exemption application in the face of unsubstantiated accusations from our principal competition that the granting of an exemption risks undermining confidence in New Zealand's financial market (mirroring the 2004 efforts by those with vested interests seeking our registration and thereby curtailment of our services)," the note said.

Earlier this month NZX, which is New Zealand’s only registered stock market operator, said Unlisted operates without disclosure requirements and is not subject to insider trading or market manipulation restrictions. NZX itself gained an exemption for its NXT market last year, which is aimed at smaller companies, allowing less onerous disclosure obligations and reduced costs for issuers.

The Unlisted bourse operator is looking to retain its existing regulatory status, and has released its Draft Unlisted Market Rules to participants which detail an issuer's disclosure obligations and make clear that specific provisions of the new legislation, such as market manipulation, insider trading, ongoing disclosure and substantial product holdings, do not apply to Unlisted issuers.

After consultation with MBIE and FMA, Unlisted will not introduce an alternative insider trading regime, and "therefore limited remedies for both trading and market manipulation may be available to investors”. However it would "not tolerate misconduct that threatens the reputation, effectiveness or integrity of the Unlisted market."

To support its exemption application, Unlisted suggests a number of conditions including that it will not identify itself as a licensed financial products market, all trading will run through EMS approved brokers that are both authorised financial advisors and registered financial service providers who would acknowledge the market's exemption, and that EMS would consult with the commerce minister prior to making any changes to its market rules or policies.

It also proposes an annual report to the minister, outlining the exempt market's trading volume and activity and would engage with the FMA if it had any breaches concerning the act's fair dealing provisions.

Companies trading on Unlisted include Silver Fern Farms, New Zealand's biggest meat processor and marketer, Queenstown tourism company Skyline Enterprises, and biotechnology company PharmaZen. For some, the possibility of increased regulation has prompted them to review their commitment to the Unlisted market.

King Country Energy, the biggest electricity retailer in the Waitomo, King Country and Ruapehu districts, has told its shareholders it plans to move its listing to the NZX as it expects the Unlisted platform to become more heavily regulated.

BusinessDesk.co.nz

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