KEY POINTS:
Strategic Finance has been censured and ordered to pay a $20,000 penalty after it was found to have disclosed material information to other parties before telling the market through NZX.
Strategic said it accepted it breached the rules on disclosure, but said it did so inadvertently while providing explanations to brokers regarding some capital restructure planning options being explored.
In its decision, 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, the 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.
Strategic's past record of good compliance was also relevant.
Last month Strategic suspended redemptions, affecting 15,000 investors with $325 million of funds.
At the start of this month it was announced that an agreement had been reached for the sale by Australian investment company Allco HIT of all the shares in Strategic Investment Group.
The company is being bought by a consortium of managers and former owners of Strategic, and a subsidiary of the Halifax Bank of Scotland.
Work is under way on a capital restructure proposal to be made to investors.
- NZPA
