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Tougher NZX disclosure obligations get mixed response in listing rules review

Monday 23rd July 2018

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NZX's proposals to impose stiffer disclosure obligations received a mixed response, finding favour with investor groups whereas listed companies and law firms were more cautious or outright hostile to the added burden. 

The stock market operator wants to align continuous disclosure obligations with its Australian counterpart, requiring directors and senior managers be subject to those rules where they ought to have that information, rather than the current listing rules which only encompass actual knowledge. In its April consultation document, NZX said the proposal was to promote investor protections, meaning the market supervisor and operator could take into account what an officer should have known when determining whether an issuer met disclosure rules.

Investor groups including the New Zealand Shareholders' Association welcomed the greater disclosure obligation. Accident Compensation Corp, one of the biggest investors in NZX stocks, also backed the shift, but said "the effectiveness of this concept will depend on the effective monitoring of issuer disclosures to ensure they meet the (higher) standard" and establishing whether an issue had that knowledge "may require greater investigative powers than those exercised by the NZX."

Issuers were more circumspect with the Listed Companies Association opposing the extended obligation, saying it raised "considerable uncertainty around an often already difficult concept" and introduced "significant complexity". The opposition wasn't universal with Spark New Zealand supporting the change, while also seeking an updated guidance note on disclosure obligations. 

Similarly, law firms were split with Simpson Grierson strongly opposed, saying "it unreasonably exposes directors to civil liability" and was "unduly harsh". Chapman Tripp supported the introduction of the new framework, saying the narrower definition of a senior manager should allay concerns "as to this unduly broadening the requirement for disclosure" and that it would be prudent of the stock market operator to offer more education for issuers. 

NZX has previously said it planned to make final decisions in the third quarter of this year, which runs until the end of September. 

The changes are part of a wider review to improve liquidity and revive interest in the local market with more streamlined equity markets and updated rules and processes. 

NZX shares are unchanged at $1.11. 

(BusinessDesk)

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