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Transparency rules

By Nikki Mandow

Saturday 1st March 2003

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I was reading an interesting article the other day about brokers' supposedly unconstitutional early trading of New Zealand Stock Exchange shares. Suddenly, a paragraph brought me up short. "Stockbrokers were forbidden to comment by the NZSE and threatened with disciplinary action (including fines up to $250,000) if they did," said the New Zealand Herald.

What? My hackles rose. What right does stock exchange boss Mark Weldon have to scold its members like naughty schoolchildren and forbid them to talk with the press about their minor misdemeanours? And even if he did have the right, is it appropriate to be using it at a time when the exchange should be portraying itself as an important advocate of increased transparency and disclosure?

I asked the stock exchange if it really threatened brokers. Of course not, said a spokeswoman (Weldon was too busy to talk to me). The letter sent to brokers simply reminded them of the stock exchange rules about members refraining from action that might bring the exchange into disrepute. And then mentioned that commenting on the share dealing issue could be construed as bringing the exchange into disrepute. That's all. Definitely not a threat.

This heavy-handedness isn't an isolated incident. When Unlimited did a story on Mark Weldon back in October, we were surprised afterwards to get a phone call from an irate NZSE marketing person expressing "disappointment" we had run a story without telling them (why exactly did they think a journalist was interviewing Weldon?) and that we had composed an illustration from a standard headshot (what did they expect when they refused a photo shoot?).

Then there was the Great PR Debacle, where the New Zealand Stock Exchange pissed off a large contingent of the country's public relations agencies by asking about 30 of them to pitch for the account and then appointing an internal person. (Read more in Fiona Rotherham's ultimate PR guide, where you'll find other great tips like why you should never let your PR company buy you lunch. But I digress ...)

You probably remember Weldon's recent and astonishingly abrasive comments about Wellington's "business hole" and the need for local government to get its act together to stop the outflow of corporations. That might all be true, but since when is it the NZSE's role to annoy its neighbours? He should be wooing New Zealand businesspeople, not castigating them.

The charitable conclusion is it's a case of a young team being media/public relations unsavvy. Mark Weldon and his mostly new crew are undoubtedly competent, bright and enthusiastic. But Weldon is a thirtysomething from a large organisation thrown suddenly into a media spotlight. Perhaps the simple cure is a dose of the sort of media training that made Princess Diana the media darling she still is, even posthumously.

I hope so, because the other explanation is that not much has changed at the stock exchange. And it really needs to. In an era of failing investor confidence (a survey of investor optimism conducted by UBS and Gallup shows the mood among US investors last year had sunk by nearly half since the giddy days of 1999 and early 2000), the stock exchange is in a prime position to be pushing hard for crucial investor issues to be on the front burner. Issues like the independence of auditors, the separation of investment banking and research in broking houses, insider trading, and having only independent directors on company audit committees.

In the US, much of this has already happened. A new regime, released in late January, includes barring auditors from certain non-audit work, tightening rules on Enron-style off-balance sheet structures, barring executives from selling stock when other employees can't, and forcing mutual funds to disclose how they use their proxy votes. There are also moves towards lifting the Chinese walls between research houses' research and investment banking arms and enforcing real independent research.

From the surface, at least, Weldon isn't pushing that hard. He should be. He has a great opportunity to be seen as the protector of investors, the promoter of transparency and maybe even the friend of freedom of information. Instead, financial industry lobby group INFINZ is openly congratulating Weldon on pulling back from imposing "quickfire US rules and regulations" that would, INFINZ says, damage the financial institutions and individuals it represents. Shame.

And in a recent media column, Weldon talked a good deal about the exchange's performance but barely touched on governance or transparency issues.

Come on, boy wonder. Don't drag your heels - we need you to deliver.

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