KEY POINTS:
Strategic Finance investors will bear the brunt of a $20,000 fine slapped on the company for breach of NZX disclosure rules.
The finance company was censured and ordered to pay the fine yesterday after it was found to have disclosed material information to other parties before telling the market.
Chief executive Kerry Finnigan said Strategic was disappointed with the fine and felt a telling-off may have been more appropriate given its ramifications.
"We told them we would prefer the money to go to investors," Finnigan said.
Although it is not a huge amount compared with the $325 million that 15,000 investors have tied up in the business, Finnigan said every bit counted.
NZX Discipline said the breach happened on August 7 when Strategic telephoned certain market participants regarding details of the sale of its parent, Strategic Investment Group.
Strategic had been obliged to release the information to NZX before releasing it to third parties, its decision said.
The breach was exacerbated on August 8 when Strategic distributed an email to a wider group outlining the proposed terms for a capital restructure of the company.
Extracts of the email were published in the media.
The breach continued until August 11, when Strategic made an announcement to the market at 10.07am.
NZX Discipline said mitigating factors included the fact that Strategic's shares were in a trading halt for the duration of the breach, aside from seven minutes during which time no trading took place. So no security holders were harmed by the breach.
Also, communication between NZX and Strategic on August 8 appeared to have contributed to Strategic's misunderstanding that it could communicate with brokers before the release of any announcement to the market, while the trading halt was in place.
The apparent vagueness of that communication and the impression it left with Strategic - that no market disclosure was needed because of the trading halt - was a significant factor in determining the penalty, NZX Discipline said.
It considered the breach was not intentional, but rather stemmed from Strategic's failure to understand and therefore comply with its obligations.
Finnigan said he had broken the rules inadvertently while providing explanations to brokers regarding some capital restructure planning options being explored.
"We were full of genuine intentions and that clearly went awry."
The company is in the process of working through a capital restructure plan for its investors after reaching an agreement with owner Allco HIT to sell all the shares in Strategic Investment Group to a consortium of managers and former owners of Strategic, and a subsidiary of the Halifax Bank of Scotland.
