Play nicely, reviewers tell NZ Securities Commission and NZX

Thursday 24th September 2009

Relations at a senior level between the Securities Commission and its equity markets co-regulator, NZX Ltd, have "not been particularly harmonious" and further efforts are required to create constructive working relationships, says a review of the commission's effectiveness.

However, the review by the former head of the Ministry of Foreign Affairs, Neil Walter, and a senior French securities regulator, Michel Prada, says there are "inherent tensions" caused by the respective roles of the commission and the exchange, and criticisms were consistent with tensions seen in other countries.

"From our discussions, it appears that at working level the relationship is becoming more constructive," says the review, which formally suggests that the two bodies "continue their efforts to develop a more constructive and positive working relationship".

The report acknowledges NZX's recent submission to the Capital Markets Development Taskforce proposing changes to the division of responsibility between regulators.

The review team encountered critics who believe the co-regulatory model is "inherently flawed, pointing to the potential conflict of interests in having a profit-seeking company which participates in the market also carrying out a supervisory role".

However, "no recent cases were drawn our attention where the NZX had failed in its regulatory duties and a number of people commented that the NZX was both well in tune with the market and good to deal with.

"We do note, however, that in other markets competition between exchanges has compromised regulatory effectiveness and that this situation can develop rapidly."

The review identifies the commission's lack of access to real-time trading data from NZX as a weakness that is being rectified.

Businesswire.co.nz

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