Between the lines: Australian silence leaves Air NZ investors to stew

By JIM EAGLES

The Australian Securities and Investment Commission seems to be breaking its own rules with its inquiry into Air New Zealand.

One of the commission's primary functions is to ensure there is a fully informed sharemarket. But in this case it has gone out of its way to leave the market confused.

The ASIC's only statement on the issue said it "believes, depending upon the outcome of further enquiries, the public interest may be served by the commencement of a representative action for damages against Air NZ in relation to the level of its financial disclosures".

Legally any such action has to be against the airline itself, rather than the directors, and so investors have good reason to want to know the implications.

Is the ASIC proposing to represent creditors who might not have continued to provide goods and services to Air NZ subsidiary Ansett if the sharemarket had been better informed? If that is what is proposed it would potentially involve Air NZ with liabilities around the $1 billion mark. Such an action would break new ground legally and would also conflict with the $184 million settlement reached with the Ansett administrators which supposedly ended Air NZ's liabilities.

Or is it taking the slightly more logical option of acting on behalf of Australian investors who might have behaved differently if they had known more about Air NZ's position? If that is the intention then the potential liabilities are probably just a few million.

Shouldn't investors be advised whether the threat to Air NZ is a lethal $1 billion or an insignificant amount? The ASIC doesn't think so. Asked to clarify, an ASIC spokesperson said: "That was deliberately not made clear in our statement."

Equally puzzling is how the ASIC plans to bring any action. As a foreign exempt company listed on the Australian Stock Exchange Air NZ is required only to conform with the rules of our Stock Exchange.

The company's disclosure has already been investigated by the NZSE Market Surveillance Panel and cleared.

The ASIC knows that because it said "the findings of that report were carefully considered by the ASIC before deciding to proceed with the investigation".

So is the ASIC going to bring an action claiming the Market Surveillance Panel got it wrong and Air NZ did breach New Zealand's disclosure rules?

It is possible to sympathise with that view because the panel bent over backwards to excuse the airline. But for a market surveillance body in one country to bring an action alleging a market surveillance body in another country has got its own rules wrong would be extraordinary.

Furthermore, the ASIC's intervention comes before New Zealand's other market surveillance body, the Securities Commission, has finalised its investigation into the Air NZ affair.

Given that our Securities Commission is chaired by Jane Diplock, an Australian who was formerly with the ASIC, it would not have been difficult for any Australian concerns to be passed on.

Instead New Zealand politicians, investors, brokers, directors and market surveillance officials have been left deliberately in the dark about what the Australians are up to.

Various unworthy motives are now being suggested. Some see a politically inspired attempt to humble New Zealand and divert attention from fiascos a little closer to Canberra.

Others imagine a campaign to crush Air NZ so that Qantas can take over and use it as a feeder service. Still others ponder a plan - along with the ASX's withdrawal of mutual recognition of the NZSE - to discredit the New Zealand securities market so Australia can take over.

None of that inspires confidence in Air NZ shares or in the sharemarket in general.

Surely, as Australia's premier market surveillance body, the ASIC should explain what it is up to.

"We've said what we can say," said a spokesperson helpfully. "When we can say more we'll do so."

In the circumstances it would be in order to lay a complaint with the NZSE and Air NZ that the ASIC is in possession of relevant information.

Then our own Market Surveillance Panel can return the compliment and investigate the actions of the ASIC.

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