NZX's disciplinary arm to review penalties
NZX's disciplinary arm to review penalties, flags director fines, infringement notices
By Suze Metherell
April 20 (BusinessDesk) - NZX is looking to
beef up the penalties its disciplinary arm imposes for
breaches of stock market rules, including the introduction
of fines for directors of companies which break listing
rules.
The NZ Markets Disciplinary Tribunal, established in 2004, is an independent body and the front line regulator for enforcing the stock market's rules, including those for listed companies, traders and shareholders. NZX is looking for feedback on whether the tribunal has sought appropriate penalties in relation to rule breaches, and on the possibility of a new infringement notice regime for minor rule breaches and fines for directors or officers of companies, the Wellington-based stock market operator said in a statement.
“Given the tribunal has been in
operation since May 2004, we consider that now is an
appropriate time to review the penalty provisions available
to the tribunal, to ensure that they remain fit for
purpose,” said Hamish Macdonald, NZX head of policy.
The tribunal reviews cases passed to it by NZX
Regulation, to determine whether breaches have been made,
and is able to impose penalties if breaches are found. NZXR
doesn't pass every rule breach on to the tribunal, and last
year there were 114 breaches noted, of which 18 were
referred to the tribunal, NZX said.
The tribunal can
impose fines of up to $500,000 for an issuer and can fine
market participants additional fines of up to three times
the amount of any profit made by the market participant. NZX
found in a review that tribunal penalties over the last four
years have fallen within the lower end of the fine range,
while some existing penalty bands were not being used and
their application was unclear.
If a rule is broken by
an issuer there is no obligation for individual directors or
officers to pay any of the imposed fines. The NZX wants to
be able to impose penalties on individuals, similar to the
power of the Financial Markets Authority.
The NZX
proposes an alternative penalty regime, which looks at the
overall conduct of either the issuer or market participant,
rather than a single rule breach. The bands would be broken
into three categories of minor, medium or serious breaches,
to allow better flexibility in relation to the fines needed.
The tribunal also has the power to publically censure
after breaches, although it uses its discretion when it
comes to minor infringements. The stock market operator is
seeking feedback on whether the tribunal needs further
guidance on when to name issuers or market participants for
breaches.
Earlier this month, the tribunal censured
Pyne Gould Corp, whose 2014 accounts are being looked into
by the Financial Markets Authority, after it failed to
ensure it had at least two independent directors, its second
breach of corporate governance rules in recent months. The
censure included paying $960 in NZX costs. Last week, RIS
Group, a shell company listed on the NZAX, was publicly
censured and fined $80,000 plus costs after missing the
deadline to file its 2014 annual report, the third such
breach since
2011.
(BusinessDesk)