NZX has released the first of what will be annual reports into its enforcement and monitoring activities.
The Oversight & Engagement Report, produced by NZX Regulation (NZXR), shows that 2016 was a busy year.
Investigations
The Issuer Compliance team completed 256 investigations, two in every three of which related to continuous disclosure obligations or the obligation to release various pieces of administrative information to the market.
Breaches of continuous disclosure centred on the timing of market announcements. NZXR acknowledges that is not always clear when the continuous obligation has been triggered and notes that issuers are improving in their understanding of their obligations.
Breaches of administrative announcements arose predominantly from late provision of allotment notices for the issue of new securities, late notification of changes to an issuer's directors or senior managers, and changes to an issuer's name.
NZX Participants were the subject of 76 investigations - mostly relating to trading conduct, clearing and settlement obligations and the management of client assets.
Enforcement
Nine market rule breaches were referred to the NZX Markets Disciplinary Tribunal, one less than in 2015. Obligation letters were sent to 32 issuers and 14 NZX Participants. These record the details of the breach and may require the recipient to review their policies or processes.
NZXR has signalled that it will rely more in future on infringement notices. It issued four in 2016, one of which was revoked on appeal. The infringement notice is time and cost effective for NZXR while still allowing a formal sanction to be imposed. Fines of up to $10,000 can be levied for minor breaches.
No use was made last year of the NZXR's more draconian powers to revoke an issuer's listing or a NZX Participant's accreditation.
Outlook for 2017
As noted in our commentary on the NZX Regulatory Agenda for 2017, NZX will continue to focus on issuers' continuous disclosure obligations. An updated Continuous Disclosure Guidance Note is scheduled for release this year as is a new Trading Conduct Guidance for NZX Participants.
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.
