Gentrack disclosure is warning to other listed companies, FMA's Everett says

Monday 8th September 2014

Rob Everett, head of the Financial Markets Authority, is warning listed-companies not to skirt continuous disclosure rules in light of recent complaints about Gentrack Group and Lyttelton Port Co, and has urged investors to manage risk as the stock market trades at record highs.

The regulator is looking closely at the disclosure of price sensitive information, particularly around private analyst briefings, Everett told the New Zealand Shareholders’ Association annual general meeting and investor conference in Auckland over the weekend.

In Gentrack's case, the utilities and airport software company slashed its profit forecast just six weeks after debuting on the NZX, blaming the delay in signing an updated contract and a dispute with a customer. The company subsequently gave private briefings to analysts, without making further details public until several days later.

“We’re still looking at Gentrack, so I am not going to comment specifically,” Everett told BusinessDesk after his speech. “The issue is a real one which is companies, including new companies who may not have quite the experience of how to handle this as others, do need to be incredibly careful about that issue of giving information, or depth of information, to selective audiences.

"The point we’re trying to make is the boards and management need to be thinking of the shareholders first rather than shareholders after the analyst community because the analysts community is not a proxy for shareholders," Everett said. "So any analysts' briefings that aren’t held in a public forum or subsequently published means companies need to be really careful on what they do."

The regulator is also looking closely at how Lyttelton Port announced a proposed takeover by Christchurch City, which was effectively disclosed in a substantial shareholders' notice, without any price sensitive flag.

More broadly, Everett said investors need to manage risk as the stock market trades at record highs, with the benchmark index having gained 11 percent since the start of the year. He invoked former US Treasury Secretary Timothy Geithner in saying while he wasn’t "taking the punch away when the party got started", he was "turning down the music”.

"When you’ve had a steadily rising market, some people may feel they’re missing the boat and they want to jump in," Everett said. "We’re not saying to people don’t invest, we’re just saying always be aware, particularly when you’re at the top of the market that things can turn."

Also speaking at the conference was NZX chief executive Tim Bennett. The local bourse has benefited from a flurry of listings, with nine new companies debuting since the start of the year, which he said is deepening the markets.

Bennett said the stock market operator was becoming more effective at enforcing its own rules but rules didn’t make good companies, and good governance in boards and management played a major role.

The local bourse is also looking to see the next generation begin to more actively invest, as much of their Kiwisaver funds were invested through equities, Bennett said.

Among other speakers, Shamubeel Eaqub, principal economist at the NZIER, warned of an uneven domestic and global economic recovery since the global financial crisis, saying the "long shadow of recession" would linger, and investors needed "nimble and agile" portfolios.

Richard Phillips, marketing manager at Xero, Peter Mence, chief executive of Argosy Property, Simon Challies, managing director at Ryman Healthcare and Simon Mackenzie chief executive of Vector, all spoke, representing major sectors of NZX 50 Index companies.

The association's AGM saw the re-election of board members Gayatri Jaduram and Lyn Lim.

BusinessDesk.co.nz

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