NZX's updated guidance
notes on continuous disclosure and trading halts and
suspensions have now been published.
They provide an important steer on how the NZX
interprets the relevant provisions in its own Listing Rules.
Contravention of continuous disclosure rules can give rise to civil
liability for issuers and persons involved in a contravention, via
the Financial Markets Conduct Act 2013.
Alignment with ASX guidance
Chapman Tripp was among the submitters in the consultation round
last year to recommend alignment, where practicable, with the
We think this is important given the increasing number of
companies that are dual-listed on both the NZX Main Board and the
ASX as any differences between the regimes give rise to a
compliance headache for those issuers.
The NZX has responded to this suggestion to some extent –
although the ASX guidance remains far more detailed (and, in our
view, more helpful to issuers).
Other key issues are identified below.
The reasonable person test – this is
fundamental to deciding what is "material information".
NZX has adopted the formulation used by ASX, where a
"reasonable person" is a person who commonly invests in
securities, "and holds such securities for a period of
time, based on their view of the inherent value of the
securities." The intention is to exclude traders whose
investments are based on short term fluctuations in price and
market dynamics, rather than the underlying fundamentals, as the
effect of including such investors would be to reduce the level of
price movements that might be regarded as material.
We assume NZX's motivation is the same although it has not
explained its rationale in the guidance. An explanation would have
been helpful as this represents somewhat of a grey area, given that
the exclusion of these types of traders is not contemplated by the
statutory definition from which the rules are drawn.
When material information must be provided -
NZX has adopted our submission in rationalising potentially
conflicting guidance as to when material information should be
released. It is now clear (as with ASX) that NZX considers the
obligation to release "immediately" to mean
"promptly and without delay". Where release to NZX's
MAP platform is not practicable at the time of public release, the
issuer should provide the announcement to NZX as soon as reasonably
practicable and before the next market open.
When price movements constitute a material
effect - NZX has adopted price movement "rules of
thumb" to indicate what is considered a material effect
(>10% will generally be treated as a material effect; <5%
will generally not be treated as a material effect). In response to
submissions, it has now also provided additional guidance on
factors which will be relevant – and which might adjust the
rules of thumb in particular circumstances (such as market
capitalisation and liquidity, price movements within the market
generally, and the period of time between the release of
information and the price movement).
Incomplete proposals or negotiations - some
issuers have run into difficulties when seeking to manage their
disclosure obligations via the scheduling of board meetings or
signing legal agreements. Again, more detailed guidance on this
area has been provided by ASX.
NZX has acknowledged the issues raised by Chapman Tripp.
Although in general a proposal or negotiation only requires
disclosure when legally binding documentation is executed between
the relevant parties, in some circumstances it can become complete
and binding prior to that point.
NZX has also sought to clarify a particular point of concern for
listed property investors, who operate in an industry where market
practice is to execute a preliminary option or conditional
agreement to buy at an early stage. It has done this by
agreements entered into for the purpose of facilitating the
negotiation of a transaction (which would generally not be expected
to be disclosed unless material in their own right), and
agreements which give effect to a transaction (which generally
should be disclosed).
NZX has identified a range of matters for further consideration
– either because further work is required (e.g. to align
procedures on trading halts with the ASX model) or because they
were out of scope (i.e. they would have required changes to the
Listing Rules, rather than to the guidance).
We will continue to encourage NZX to provide more detailed
practical commentary for issuers and to stay abreast of how market
practice develops, where possible aligning itself with ASX's
The information in this article is for informative purposes
only and should not be relied on as legal advice. Please contact
Chapman Tripp for advice tailored to your situation.
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