New Zealand: NZX continuous disclosure thematic review - essential reading for all listed issuers

NZX has released its inaugural thematic review on continuous disclosure.

The review has a practical focus, with case studies using real examples to illustrate the key takeaways. NZX undertook a voluntary survey to gain a better understanding of the current practices followed by issuers.

The review is a useful companion piece to the NZX Continuous Disclosure Guidance Note, the NZX Corporate Governance Code and NZX's practice notes. We consider this essential reading for those responsible for continuous disclosure at all listed issuers.

Steps in the disclosure process

NZX has outlined the steps involved in the disclosure process that all issuers should be considering:

  • being prepared to disclose
  • identifying and managing information
  • knowledge and responsibility
  • using safe harbours, and
  • effective disclosure

Being prepared to disclose

NZX expects that all issuers have adequate arrangements in place to enable the release of Material Information as soon as they become aware of it. NZX's survey revealed that 85% of the issuers surveyed had a written continuous disclosure policy, with a further 10% being in the process of adopting one.

Only around half of the issuers surveyed provided training to their executive officers, and most did not provide specific training to their directors.

NZX refers to its earlier Continuous Disclosure Guidance Note, which sets out recommendations as to compliance procedures that an issuer should put in place, and encourages all directors and management to actively engage in training on continuous disclosure. Helpfully, NZX's review includes an appendix with discussion prompts to enable issuers and their directors to understand their obligations and identify policies and procedures that may assist in meeting those obligations.

NZX also notes that while issuers may seek advice from their external legal advisers, ultimately the decision on whether to release information is for the issuer to make. This is underscored by the recent public censure of Veritas Investments Limited for a breach of the Listing Rules in relation to continuous disclosure. In that case, the NZ Markets Disciplinary Tribunal noted that while it was a mitigating factor that Veritas had taken legal advice in relation to the specific issue, it was ultimately a matter for the board to exercise its own commercial judgement based on its knowledge of the issuer and its business to determine whether disclosure is required.

Identifying and managing information

As the obligation to release material information is immediate, issuers must have processes in places to ensure timely disclosure following a sudden or unexpected event. NZX gives some examples from its survey of when disclosure had to be considered urgently, including the unexpected resignation of a director, a misleading media article and the awarding of a significant tender.

NZX notes that it encourages issuers to engage with it when dealing with urgent or unexpected disclosure events, particularly if they may need to announce material information during the trading day.

Ongoing monitoring and assessment of material information is also an important consideration. NZX notes that when information is developing, issuers are not able to wait until scheduled meetings of the board to address those matters. A developing situation may require board meetings to be called early or special board meetings held in order to address the developing information. Appropriate delegations to persons other than the full board may also help with managing urgent continuous disclosure obligations.

NZX also notes the importance of monitoring external sources of information, but repeats its earlier guidance that issuers do not have a general obligation under the Listing Rules to correct analyst reports or forecasts. On the topic of forecasts, NZX expressly cautions that issuers may come into possession of information about their actual results immediately prior to, and immediately following, the issuer's balance date, as well immediately prior to the release of the issuer's preliminary announcement for the relevant period.

NZX highlights the following case studies in this section:

  • Using special board meetings and a delegation to a sub-committee to effectively manage continuous disclosure obligations in relation to a significant transaction.
  • Pre-drafting a release to cover the possibility of a leak during a transaction and effectively using a trading halt to make a release when an issuer is no longer able to rely on a safe harbour to disclosure (for an incomplete negotiation in relation to a proposed transaction), where an executive officer of that issuer mischaracterised the status of the transaction in a media interview which was then reported.

Knowledge and responsibility

It is important to note that anyone at an issuer may become aware of potential material information. As such, issuers should have processes in place to ensure that potential material information is escalated efficiently and effectively.
Clear allocation of responsibility is also important to ensure compliance with continuous disclosure obligations. Based on NZX's survey, all but one issuer had a nominated disclosure officer to whom disclosures should be made. Most issuers had specified persons who were authorised to communicate with analysts and some required at least two issuer representations to be present when communicating with analysts.

NZX also highlighted that based on the survey, some issuers did not appear to be correctly applying the concept of who is an "executive officer" – this is relevant as the knowledge these people hold is an important element of the continuous disclosure obligation. One issuer responded that they did not understand the question, while another responded that its board is responsible for compliance with the Listing Rules.

Most issuers noted that board minutes generally record the reasons for the board deciding to disclose or not disclose information. However, practice was varied and some issuers noted that reasons for the board's decision are not recorded or only recorded on an ad hoc basis.

One key advantage of recording these decisions in board minutes is that it makes undertaking an offer in reliance upon the exclusion for offers of financial products of the same class as quoted financial products more straightforward, as issuers can more readily consider whether there is any excluded information that needs to be disclosed in a cleansing notice.

Using safe harbours

NZX notes that none of the issuers surveyed reported having any difficulty in applying the safe harbour to disclosure provisions. NZX highlights that one of the key requirements is that the confidentiality of information is maintained. In this regard, it is important for issuers to be prepared with appropriate market announcements in case confidentiality is breached (to the extent possible).

NZX also notes that it has not experienced many issuers making inappropriate trading halt applications – instead, there have been instances where NZX has engaged with issuers to understand why a trading halt was not sought.

NZX highlights the following case study in this section:
Making an announcement in the middle of a trading day that an issuer expected NPAT to be significantly lower than previously released forecast NPAT guidance. NZX sought further information and identified that the issuer had held a board meeting on the morning of the announcement, outside of its usual cycle, specifically to consider new information provided by management, and was satisfied that the issuer was not required to make a disclosure prior to the board meeting. A draft announcement had been provided in the board papers, and the issuer had to make some amendments following conclusion of the board meeting and seek approval of the revised announcement (each of which the issuer considered it had completed as quickly as practicable). NZX was satisfied that the issuer had released the announcement in compliance with Listing Rule 10.1.1, but noted that the issuer should have considered a trading halt in the circumstances.

Effective disclosure

Again, NZX reiterates that while an intra-day announcement may be necessary to disclose material information immediately, issuers should try to manage their activities to enable material information to be released outside trading hours. Examples of how this can be done include managing the timing of:

  • board meetings at which potential material information will be considered, and
  • signing material contracts.

NZX also provides some practical guidance about how to manage the release of information where an issuer is listed on both the NZX and ASX.

Our comments

The review provides a useful companion piece to the NZX Continuous Disclosure Guidance Note, the NZX Corporate Governance Code and NZX's practice notes by providing a practical and comprehensive guide to the continuous disclosure issues that we see arising day to day for our issuer clients. We strongly recommend that all directors and executive officers at issuers (and others responsible for continuous disclosure) make the time to read this review.

NZX has also recently released its fourth and final batch of practice notes for 2017. Again, these provide useful practical guidance for issuers on:

  • changing balance date
  • relying on the QFP exemption set out in Financial Markets Conduct Act 2013
  • approaching a bond redemption or call
  • making more effective announcements, and
  • making an application for listing and quotation of new equity securities.

NZX has also updated a number of its existing practice notes.

NZX should be commended for the more proactive approach it is taking in publishing these useful resources for issuers, which should promote a more consistent approach across the market.

It is also worth noting that there is an increasing amount of overlap between a number of the practice notes and the guidance notes, with some key areas, such as continuous disclosure, being covered in a number of different documents. As such, it is important for issuers to ensure that they are not just focusing on the Listing Rules, but are keeping up to date with the latest regulatory publications from NZX more generally.

NZX's strong focus this year on issuer education and guidance will be capped off with the NZX Issuer Forum next week.

The forum is intended to provide issuers with an opportunity to meet NZX staff, network with peers and better manage the practical requirements of being listed.

Chapman Tripp will provide an update on what's on the legislative horizon for issuers at the forum and we look forward to seeing many of you there.

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Roger Wallis
Similar Articles
Relevancy Powered by MondaqAI
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions