By PAUL PANCKHURST
The new formal agreement between the Securities Commission and the Stock Exchange sets up a master and slave relationship, says Act MP and securities law expert Stephen Franks.
The servant is the Stock Exchange.
Franks said the danger for listed companies was the increased potential for political interference, because the Securities Commission ultimately reported to a political master.
He was left to kick off the debate after both regulatory bodies refused to comment on the document - a memorandum of understanding - before a media briefing due next Tuesday.
The document sets out how the Securities Commission and NZSE Ltd - the Stock Exchange - will communicate and work together.
It says the pair want to promote investor confidence, enhance the reputation of the sharemarket, and facilitate disclosure for a well-informed market.
The document details an "operations group", with representatives from both bodies to handle day to day matters, and also a "strategic group".
It also lays out key principles - such as the exchange's role as a front-line regulator.
Franks is a former Securities Commission member and was a founding member of the market surveillance panel.
He said the scope of the required reporting from the Stock Exchange to the commission on issues such as the handling of continuous disclosure rules "isn't the mark of a respected partner".
"That is the mark of an untrusted servant."
The practical effect was that "anyone in a listed company has to now assume the potential for political interference".
"If you were really going to effectively co-operate, you would do it by a pattern of conduct and by trusting each other and by getting stuck in and doing it."
The document can be found at www.sec-com.govt.nz.
Securities Commission head Jane Diplock and Stock Exchange heads Simon Allen and Mark Weldon signed it on February 27.
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