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Market regulator grants exemptions after Meridian disclosure muddle

Monday 4th November 2013

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The Financial Markets Authority has granted exemptions to disclosure rules covering Meridian Energy's instalment receipts after an overseas investor mistakenly disclosed a substantial holding in the newly listed power company.

Bank of New York Mellon claimed an 8.12 percent holding in Meridian following its NZX debut last week, which was based on the 1.26 billion of instalment receipts on issue. But the power company subsequently clarified that 102 million receipts it held only amounted to 3.98 percent of its total shares on issue.

Adding to the confusion last week, NZX on its own website changed the number of Meridian securities on issue from 1.26 billion to 2.56 billion and back again, while including a note of clarification that has also evolved. Bank of Mellon's Newton Investment Management unit has since lifted its stake to 166 million receipts, or 6.49 percent of total shares on issue.

The effect of FMA exemption is to "look through" the receipts and treat relevant interests are if they were interests in the underlying shares, the FMA said. The exemption was appropriate because there is uncertainty in the market as to the appropriate disclosure of substantial holdings of the receipts.

"Although instalment receipts may be a class of listed voting securities, separate disclosure of instalment receipt holdings as a class of security would add additional compliance costs but would not provide the market with additional useful information and could be confusing," the FMA said.

The second exemption relates to the Crown and its disclosure obligations relating to trading in the receipts by the New Zealand Superannuation Fund. The government has a relevant interest in 100 percent of Meridian because of its 51 percent holding of the shares and its charge over the remaining shares pending the second payment of the receipts in 2015.

Because of the Crown owns the Super Fund, any changes in the fund's Meridian holding would force the government to make a new disclosure. Strict compliance with the rules "would add unnecessary compliance costs and would not provide any useful information to the market," the FMA said.

The receipts last traded on the NZX at $1.095, giving the company a market value of $1.38 billion, based just on the receipts on issue.

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