The Proposed Conduct Rules of the
New Zealand Stock Exchange

Discussion Questions

Complete this section if you wish Name: Address:

1.   Demutualisation (the NZSE's role in the context of a demutualised exchange)

The Panel

(a) Is the Panel sufficiently independent under its present constitution?
      Yes      No

(b) Is the definition of "independent" in the Listing Rules sufficient to ensure adequate separation between the Panel and the NZSE?
      Yes      No

(c) Are the provisions for appointment of Panel members appropriate?
      Yes      No

(d) If not, in what respects do you think they are inappropriate?

(e) Should the Panel have its own separate powers under the Listing Rules rather than acting as a delegate of the NZSE?
      Yes      No

The Disciplinary Committee

(f) Is the Disciplinary Committee, as proposed, sufficiently independent from the NZSE Board?
      Yes      No

(g) Should there be a separate body to monitor and enforce the Business Rules?
      Yes      No

Appointment of the Panel and Disciplinary Committee

(h) Should the Board of the NZSE appoint the Disciplinary Committee and the Panel?
      Yes      No

(i) Should there be a requirement to involve any other person or organisation in the appointment of the members of either body? If so, who?
      Yes      No

(j) If the answer to (i) is yes, what should be the extent of that involvement (i.e., power to appoint, obligation to consult)?

(k) Are the proposed appointment arrangements likely to detract from public confidence in the effective functioning of our market, or from international perceptions of the market?
      Yes      No

The Proposed Special Division

(l) Are the proposed Special Division appointment procedures under the Conduct Rules sufficient to achieve appropriate independence and integrity in the body that monitors and enforces compliance with the Listing Rules by NZSE as a listed company?
      Yes      No

(m) Would international perception of the market, and the market's integrity, suffer if compliance by a listed NZSE entity were monitored and enforced by a body whose members are drawn from a body appointed by the NZSE? If so, what other arrangement might be most appropriate?
      Yes      No

(n) In terms of the public interest criteria against which the Conduct Rules are to be assessed, how much weight should each of the above issues be given?

2.   The incentives on the NZSE to enforce the Conduct Rules

(a) Do the Conduct Rules place sufficient obligations and incentives on the NZSE to monitor and enforce those Rules?
      Yes      No

(b) If not, could this adversely affect public confidence in the proper functioning of the market, or international perceptions of the market?
      Yes      No

(c) Should the Conduct Rules expressly give the NZSE primary responsibility for monitoring compliance and for enforcing its Conduct Rules?
      Yes      No

(d) Should the NZSE state in its Rules that it has this responsibility?
      Yes      No

(e) Should the NZSE state that it will take actions for breach of the Conduct Rules for the benefit of shareholders, in priority to encouraging private actions by aggrieved shareholders?
      Yes      No

(f) Is the requirement for an issuer to provide a bond to the NZSE still appropriate? If so, is $75,000 the appropriate amount?
      Yes      No

(g) In terms of the public interest criteria against which the Conduct Rules are to be assessed, how much weight should these issues be given?

3.   Responsibility to monitor and enforce legislation

(a) What role (if any) should the NZSE have under the Conduct Rules in monitoring or enforcing compliance with applicable legislation by listed issuers and brokers?

(b) Is such a role important in terms of New Zealand's market integrity and international perceptions of our market?
      Yes      No

(c) If the answer to (a) was yes, which specific statutes should be referred to in the Conduct Rules for this purpose?

(d) What impact, if any, do you think there would be on the effective functioning of the Panel if the Panel were required under the Listing Rules to report to the Commission on likely or actual breaches of the Conduct Rules, and legislation relating to primary offers and secondary trading?

(e) If the SMI Bill is not passed into law, should the Conduct Rules contain an obligation on the NZSE to report relevant legislative and Conduct Rule breaches to the Commission and require co-operation and information sharing with the Commission, Takeovers Panel or other regulatory bodies in relation to any such suspected breaches?
      Yes      No

(f) If so, what should be the extent of any such obligation on the NZSE (e.g. actively monitoring compliance, reporting known or suspected breaches, acting on suspected breaches under its own powers)?

(g) In terms of the public interest criteria against which the Rules are to be assessed, how much weight should these issues be given?

4.   Waivers and Rulings

(a) Is the process under the Listing Rules by which the NZSE can grant and publish waivers a matter that may affect either public confidence in the effective functioning of the market or international perceptions of the market?
      Yes      No

(b) Should the Listing Rules require the NZSE to publish each waiver that is granted, as and when it is granted?
      Yes      No

(c) If the answer to (b) is yes, should the Listing Rules also require the NZSE to publish its reasons for each waiver?
      Yes      No

(d) Should any Listing Rules not be subject to waiver? If so, which rules, and why?
      Yes      No

(e) Should the NZSE be required to consult with an independent body (such as the Commission) before granting waivers from any Listing Rules, as is contemplated in relation to waivers of the proposed new Listing Rule 10.1?
      Yes      No

(f) If the answer to (e) is yes, on which Rules should the NZSE be required to consult, and who should be consulted?

(g) Should the approval of an independent body be required in order to grant any generic or class waivers?
      Yes      No

(h) Alternatively to (g), should the Listing Rules require consultation with any independent body before any generic or class waivers are granted?
      Yes      No

(i) Would a requirement for the Panel to consult with the Commission before granting specific waivers impact on the effective functioning of the Panel?
      Yes      No

(j) If the answer to (i) is yes, do you think the benefits of requiring consultation exceed the potential for any detriment to the effective functioning of the Panel?
      Yes      No

(k) Bearing in mind the NZSE's intention to deliberately set a low threshold for related party transactions, is there any concern over the number of waivers that have been granted from Listing Rule 9.2?
      Yes      No

(l) In terms of the public interest criteria against which the Conduct Rules are to be assessed, how much weight should these issues be given?

5.   NZSE discretion to accept new entities for listing

(a) Is transparency in the listing process important to a market's integrity and perceptions of that market?
      Yes      No

(b) Should the NZSE be required to disclose its reasons for refusing a listing?
      Yes      No

(c) If the answer to (b) is yes, should the NZSE have to disclose its reasons to the public, or only to the unsuccessful applicant?

(d) What further protections should there be for the applicant and the NZSE, if any, to deal with issues of confidentiality and defamation? How can these be implemented within the scope of the Conduct Rules?

(e) Should the jurisdiction of the Panel, or perhaps some other regulatory body, be extended to hearing appeals from NZSE decisions on listing applications?
      Yes      No

(f) In terms of the public interest criteria against which the Conduct Rules are to be assessed, how much weight should this issue be given?

6.   Adequacy of sanctions

(a) Do the sanctions that are currently available to the NZSE for breaches of its Conduct Rules provide an adequate deterrent?
      Yes      No

(b) If not, what additional sanctions could or should be imposed under the Conduct Rules, and for which breaches?

(c) Does the NZSE have jurisdiction or power under the Conduct Rules to impose financial penalties on, or seek damages from, issuers or directors of issuers?
      Yes      No

(d) Would a penalties or damages regime for issuers, directors or officers be appropriate in the context of ensuring that the Conduct Rules create confidence in the New Zealand sharemarket?
      Yes      No

(e) If the answer to (d) is yes, what should those penalties entail? Under what authority could they be imposed and enforced?

(f) Is this a matter to be addressed in the context of statute law reform or in the Conduct Rules?

(g) If this is a matter that should be addressed in the Conduct Rules, then in terms of the public interest criteria against which the Rules are to be assessed, how much weight should this issue be given?

7.   Disclosure of information

(a) Will the adoption in the Conduct Rules of the proposed new continuous disclosure regime contribute to and improve confidence in, and international perception of, the New Zealand share market?
      Yes      No

(b) From a public interest perspective, are there any reasons why it is inappropriate to adopt a continuous disclosure regime that is broadly the same as that of the ASX?

(c) Is the combination of general disclosure obligations and specific disclosure requirements desirable?
      Yes      No

(d) In the context of the New Zealand market, are there any other particular matters that should be addressed in the continuous disclosure rules or in the specific matters required to be disclosed as referred to above?
      Yes      No

(e) In terms of the public interest criteria against which the Conduct Rules are to be assessed, how much weight should this issue be given?

8.   Dissemination of Information

(a) Should there be an obligation on the NZSE, under the Listing Rules, to release to the market price-sensitive information provided to it by listed issuers?
      Yes      No

(b) Is the lack of such an obligation likely to reduce public confidence in the effective functioning of the market?
      Yes      No

(c) Taking into account the NZSE's statements about the effect on its financial position that might flow from the immediate free provision of information, should there be a positive obligation on the NZSE to release price-sensitive information to the public/market generally, immediately upon receiving the information from the issuer?
      Yes      No

(d) Should the NZSE publish whole announcements on its website? If so, when?
      Yes      No

(e) Has the NZSE struck the correct balance between commercial and public interest with its practice of releasing price-sensitive information immediately on receipt only to subscribers and twenty minutes later to non-paying market participants?
      Yes      No

(f) Should it be left to the NZSE to balance how it derives its revenue - through listing and trading fees and through charges for the dissemination of information?
      Yes      No

(g) Should the Listing Rules require listed issuers to publish announcements on their websites?
      Yes      No

(h) Would the answers to the above questions be any different if there were a statutory backing for the continuous disclosure rules?
      Yes      No

(i) In terms of the public interest criteria against which the Conduct Rules are to be assessed, how much weight should these issues be given?

9.   Corporate governance of listed issuers

(a) In the context of ensuring that the Listing Rules promote international confidence in the New Zealand market what role, if any, should the NZSE have under those Conduct Rules in enforcing good corporate governance practice?

(b) Should the NZSE's role be limited to requiring disclosure of the corporate governance practices and policies?
      Yes      No

(c) Are the proposed Listing Rules adequate in relation to the disclosure of corporate governance practices?
      Yes      No

(d) If the answer to (c) is no, how should the Rules be altered? For instance, should issuers be required to report compliance with a set of non-binding corporate governance principles written into the Listing Rules?

(e) Should the Listing Rules provide that the NZSE can impose sanctions for inadequate corporate governance systems and procedures?
      Yes      No

(f) in terms of the public interest criteria against which the Conduct Rules are to be assessed, how much weight should this issue be given?

10.   Surveillance by member network

(a) Should NZSE sharebrokers be obliged to report suspected breaches of the Business Rules, Listing Rules, or securities markets legislation?
      Yes      No

(b) Would a reporting obligation improve public confidence in the effective functioning of our capital markets?
      Yes      No

(c) Would there be any negative implications of a reporting obligation?
      Yes      No

(d) In terms of the public interest criteria against which the Conduct Rules are to be assessed, how much weight should this issue be given?

11.   Capital adequacy and fidelity guarantee fund

(a) Are the NZSE's proposed broker capital adequacy requirements adequate?
      Yes      No

(b) Should the capital adequacy requirements be higher or lower in view of the level and extent of trading on the NZSE and the other protections that are in place?

(c) Does the fidelity guarantee fund as proposed contribute to investor and public confidence in our markets?
      Yes      No

(d) Should the size of the fidelity guarantee fund or the size of the maximum claim be increased (bearing in mind that the NZSE has noted doing so will almost inevitably lead to an increase in trading charges)?
      Yes      No

(e) Would international perception of, or public confidence in the New Zealand sharemarket be adversely affected if the capital adequacy requirements and fidelity guarantee fund arrangements were to remain as currently proposed?
      Yes      No

(f) Should brokers be required to advise clients of the limitations on the protections provided by the fidelity guarantee fund and a summary of the procedures for making a claim?

(g) In terms of the public interest criteria against which the Conduct Rules are to be assessed, how much weight should this issue be given?

12.   Review of the Rules

Given that the Minister has to approve or disapprove each set of Rules as a whole:

(a) What are the positive aspects of these Rules that are likely to add to public confidence in and international perceptions of our capital markets?

(b) What are the negative aspects of these Rules that are likely to detract from public confidence in and international perceptions of our capital markets?