Bruce Sheppard: Crisis no time to relax NZX disclosure rules

Bruce Sheppard founded the Shareholders Association. Photo / File

Opinion

COMMENT:

The Institute of Directors (IOD) in advocating for its members, is pressing for a relaxing of continuous disclosure obligations for its members, out of an abundance of concern for liability at this time of crisis.

It is at such times that investors, and in particular small investors, are most vulnerable.

Markets are a trade in emotion as much as information. When information is scare, the volatility caused by the emotion is more extreme than it needs to be.

In such circumstances there will inevitably be winners and losers. In times of crisis the wins and losses will be higher than they need be, or should be, if disclosure obligations are relaxed.

I would have thought that if the environment is moving so fast that boards cannot continually keep the market informed, that they should have requested a suspension to the trading of their shares.

If continuous trading is the problem, then suspend it. Instead have fixed trading windows, following a trading and other update disclosure.

NZX should have led such a thought process, but did not. Of course NZX has a commercial profit to make from high trading volumes as every trade rewards NZX.

If directors are prepared to allow their equity instruments to be traded continuously and they are not prepared to request a trading halt, then they must accept the cost of that is the obligation to continuously inform the market.

Seeking to shy away from the cost of listing while seeking to retain the benefits, for example liquidity, and operating status, shows yet again how many fail to understand the social and moral contract of listing a company and the making of offers to the public.

It would be a shame if the FMA falls into step on this issue, as a consequence of the pressure being applied by public company directors, and their advocacy group the IOD.

I was involved in the establishment of the FMA. At the outset the underlying mantra was "customers first". To be clear Customers were Investors, not directors, stockbroker's advisors or anyone else. This focus was hard-won.

The FMA would be wise to examine the history of regulators that get captured by the population they are charged with regulating. It does not end well.

Our local case in point was the Securities Commission.

- Bruce Sheppard is a director of litigation funder LPF Group and was the founder of the Shareholders Association.