Government to review disclosure rules

Another area of business regulation is about to come under Government review.

This time, it is the sharemarket disclosure regime for company officers and directors, which some believe are a disincentive to listing.

Commerce Minister Lianne Dalziel told the Securities Law Update conference in Wellington yesterday that the Government had received feedback from sharemarket participants that disclosure obligations were harder for companies to comply with than was originally anticipated, particularly in relation to officer disclosure.

As a result, she said directors' and officers' disclosure obligations under the Securities Markets Act would be reviewed "to see if we can lighten that burden".

Industry participants had told her the definition of officer was too wide under the act and was acting as a disincentive for companies listing here.

Under the Act, an "officer" in a listed company can include a person who reports directly to the board of directors. However, the definition extends to two lower tiers of responsibility and also includes people who manage a principal business unit or division of a public company.

The review will also look at the "potentially misleading effect" of officers having to disclose to the market transactions involving non-beneficial shareholdings, such as those in employee superannuation share schemes.

Dalziel said policy proposals would be announced after further consultation with the industry. Discussions would also be held with the Australian Government, which is looking at the same issues.

Scott Moran, partner of law firm Duncan Cotterill, said the regime would be of most concern for small companies where senior management were not necessarily career corporate managers.

However, he said there was a risk the review might result in the relaxation of a regime in place to discourage insider trading. "For the integrity of the markets, we hope any alteration of this definition is balanced with other moves to retain confidence in the markets."

He did not see the regulations as a particularly strong disincentive to listings but said they might be one of a number of reasons for a company electing not to list.

With growing concerns about the number of companies leaving the sharemarket, the moves might also be seen as Government assistance for the NZX.

Securities law expert Stephen Franks, of Chapman Tripp, also did not believe the requirements were a significant disincentive.

Franks said the rules had always been problematic "because they try and cast a wide net for anti-avoidance purposes and then catch a whole load of people who are of no interest to the market and who just find the procedures irksome". He welcomed the review but said: "I hope [Dalziel] then comes back and looks at the more serious problem of the continuous disclosure rules that were pushed through only 2 1/2 years ago."

In plain language, please

New disclosure requirements for financial advisers and brokers will be consumer friendly and in plain language, Commerce Minister Lianne Dalziel says.

She said industry consultation on disclosure obligations for investment advisers and brokers under the Securities Legislation Bill "will be used as a standard-setter for disclosure obligations of other intermediaries".

Numerous concerns have been voiced that the Government's review of Financial Products and Providers may result in mind-numbingly long and technical statements becoming a mandatory part of consumers' dealings with financial advisers. However, Dalziel said: "To be effective, disclosure should be meaningful which means it must be consumer focused, well timed and easily understood."