Regulating finance companies
Jane Diplock, Chairman
NZX’s performance as a registered exchange continues to be good, the Commission’s second annual oversight review of the exchange has found. NZX is satisfying its obligation to operate its markets in accordance with its conduct rules.
"These annual reviews show investors that they can have confidence in NZX’s performance as a registered exchange," Chairman Jane Diplock says.
The Commission made some recommendations for improvement, and communicated these to NZX, NZX Discipline and the Special Division. Some recommendations are:
- NZX should ensure that the practical measures used to ensure the practical separation between its commercial and regulatory functions have reference to the information in relation to for-profit exchanges the Board receives on conflict management.
- NZX Discipline should review its resource requirements and structure, and communicate its needs to NZX, so that delays in dealing with non-urgent work are minimised or removed.
- NZX should increase the amount of information it provides about the Special Division and make it easier to find.
NZX’s actions and response to these recommendations will be considered by the Commission as part of next year’s review.
Oversight Review of NZX 2006 is available from www.seccom.govt.nz
Statement of Intent
The Commission’s Statement of Intent 2007-2010 was tabled in the House of Representatives on 18 July 2007. The SOI sets out the main objectives the Commission will achieve over the next three years and how those will be measured. It also presents the Commission’s forecast financial statements and forecast statement of service performance for the next 12 months.
The SOI is published on www.seccom.govt.nz.
Update on new law
There is still no date for the coming into force of new law on insider trading, market manipulation and new disclosure requirements for substantial security holders and investment advisers. The law was passed in October 2006 and regulations are now being finalised. The Commission will publish a Guide to New Securities Law 2007 when the regulations are settled. This can be ordered, at no cost, from www.newsecuritieslaw.govt.nz.
Corporate governance review
Relations with shareholders and stakeholders are the aspects of corporate governance least reported by New Zealand listed companies.
We reviewed corporate governance reporting in 2006 against the Commission’s nine Principles of Corporate Governance. Almost all companies reported on some aspects of corporate governance. Relatively high numbers of companies reported on the composition of the board, use of committees to increase efficiency, and maintaining the quality and independence of external auditors.
The review identified only reported corporate governance practices. Companies may have implemented the Principles, but not reported on their practices. The Commission’s view is that implementing the Principles includes reporting on how they have been implemented in the annual report. Issuers should tell shareholders and other stakeholders how they achieved each of the Principles.
The Commission will continue to monitor corporate governance reporting, so that trends will become evident.
The Principles were published in 2004 by the Commission after extensive consultation. A Corporate Governance Handbook for Directors, Executives and Advisers is available at no charge from seccom@seccom.govt.nz or by
telephoning 04 472 9830.
| Company has a code of ethics | 43% |
| Composition of the board is disclosed | 85% |
| Board has a majority of non-executive directors | 72% |
| Minimum one-third of board are independent directors | 72% |
| Chair and CEO are separate | 75% |
| Company uses committees to increase efficiency | 83% |
| Company has an audit committee | 79% |
| Chair of the audit committee is an independent director | 53% |
| Chair of audit committee is not the chair of the company | 61% |
| At least one member of audit committee is a chartered accountant | 42% |
| Auditor is independent | 48% |
| Audit fee is disclosed | 83% |
| Non-audit work carried out by the auditor is disclosed | 65% |
| Executive remuneration partially depends on performance | 25% |
| Company reports on risk management | 54% |
| Company has up-to-date website | 73% |
| Company encourages shareholders to participate | 11% |
| Company reports on stakeholder relations | 31% |
THE BULLETIN JULY 2007