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Forsyth Barr breaches NZX rules, pays $5,000 penalty

Thursday 24th March 2011

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Forsyth Barr has admitted being in breach of an NZX rule when it did not follow a client's instruction to sell a stock in 2008.

The unnamed client instructed the broker to sell an entire portfolio as soon as possible.

A security, which formed part of the portfolio, was not put on market as the Forsyth Barr adviser, operating under an assumed discretion under market Rule 11.3.2, decided that it was not in the client's best interests to sell at that time. A complaint was made to NZX Market Supervision (NZXMS).

Forsyth Barr's failure to bring the trade to market was a breach of NZX Participant Rule 11.3.1(b). Although the rule allows discretion it cannot be used to validate a situation where a client order was never executed.

Forsyth Barr has admitted the breach, while NZXMS acknowledged that Forsyth Barr believed that it was acting in the best interests of the client.

Forsyth Barr will pay the $5000 penalty to the NZX Discipline Fund, meet costs, and will make an offer to the client to make good the loss on the terms specified in the settlement agreement.

Forsyth Barr will review its procedures more generally and take appropriate remedial action.



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