NZX has set itself a busy agenda for this year, including the launch of its updated corporate governance code and a comprehensive review of its equity and debt market listing rules – a significant project on which there will be several stages of consultation.
NZX has also bolstered membership of the NZ Markets Disciplinary Tribunal (NZMDT), with appointment of four new members including Chapman Tripp Partner Rachel Dunne.
NZX's rules, technology and processes are major areas of focus in the Regulatory Agenda for 2017.
NZX plans to publish its revised Corporate Governance Code in Q2. NZX now anticipates that issuers will be required to commence reporting against the Code for reporting periods from 31 December 2017.
This affords issuers a transition period but we expect most will choose to report against the new Code earlier, as the current requirements are inadequate.
NZX has also begun scoping for a review of its Main Board equity market and the Debt Market Listing Rules. Likely changes it has identified from this exercise include: simplification, more tailoring to reflect the more diverse range of financial products, alignment with the new Corporate Governance Code and provisions to address situations where routine waivers are required to decrease compliance costs.
NZX will implement its revised Administrative Trading Halts regime in mid-2017. This will require issuers (rather than NZX) to flag information being released where:
- it fits within a series of prescribed categories, or
- is an NXT market interim update, or
- is material information under the NZX Main Board/Debt Market Listing Rules.
The Administrative Trading Halts will then be applied and removed automatically where necessary.
Also for implementation this year are the revised NZX Participant Rules. Alongside the rule changes, NZX is planning to launch a Participant Portal to be used by brokers to access information on their business and compliance obligations.
NZX's second area of focus concerns the frontline monitoring of its markets to prevent trading misconduct and help participants understand the limits of permitted trading conduct.
During 2016, NZX and the Financial Markets Authority (FMA) consulted with brokers and fund managers on acceptable trading practices. NZX has now issued a formal consultation document with the objective of implementing this guidance at the same time as the revised NZX Participant Rules are released.
NZX's annual risk assessment inspection programme for 2017 will focus on NZX Participants' understanding and planning for the implementation of the new Participant Rules and trading conduct guidance. As in previous years, NZX will work with the FMA on these inspections.
NZX will review its surveillance processes in order to support real-time and post-trade monitoring of trading conduct, particularly through new rules for flagging trades, using client reference numbers to identify wholesale client trading and requiring clear identification of all individual NZX dealers accessing the trading system.
NZX will seek certification of its status as a foreign regulator in relation to the administration or enforcement of foreign business law under the Mutual Assistance in Business Regulation Act (Australia) (MABRA). Once certified under MABRA, NZX will be able to directly request information from ASIC to increase the efficiency and effectiveness of its surveillance and investigation operations.
NZX will initiate this year a policy of annual reporting to increase the public visibility of its enforcement function. Activities to be reported on are: NZX's enquiries and investigations, other work performed by NZX Regulation and NZX's current approach to oversight and compliance.
NZX will also continue to engage with issuers and brokers, including workshops to help brokers to comply with the new Participant Rules and trading conduct guidance.
Risk-based approach to regulation
“Thematic reviews" - this will include a review of offer documents and of the issues, practices and conduct in respect of market disclosure.
As part of its issuer engagement, NZX is planning to develop pragmatic materials and training to help new listed companies, small to medium sized issuers and any new directors and senior managers.
NZX notes the increased variety of financial products on offer and distribution channels for making these offers. As part of its proposed review of the NZX Main Board/Debt Market Listing Rules, NZX will be reviewing its policies in relation to managed investment schemes, different types of listed corporate structures and issuers/products listed in other jurisdictions.
NZX's overall aim is to ensure that investors have access to a diverse range of products for investment while ensuring that its markets remain fair, orderly and transparent.
Our thanks to Kit Adamson for writing this Brief Counsel.