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Securities Commission probing disclosure of NZX indices news on Allied Farmers

Posted in News February 22, 2010 - 03:36pm, Emma Geraghty

Securities Commission spokesman Roger Marwick has confirmed to Interest .co.nz the Commission was "looking into issues related to the release of recent information by the NZX regarding Allied Farmers".

Allied Farmers has asked the NZX for an explanation of what happened last week in regards to informing a non-public group that ALF shares were to become part of  the benchmark NZX50 Index from today, and then rescinded that position on Friday, as noted in The Herald.

Allied Farmers' share price has gyrated within a 25% range over the last three days between 10.5 cents and 12.5 cents after the apparent disclosure of the news about Allied's index inclusion and then its exclusion on Thursday and Friday.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

We welcome your comments below. If you are not already registered, please register to comment in the box on the right or click on the "'Register" link at the bottom of the comments. Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making these comments.

11 Comments

by David Cunliffe | 22 Feb 10, 4:31pm

Without wishing to pre-judge the

Without wishing to pre-judge the Commission 's process, the matter is a very serious one. NZX is a co-regulator whose role it is to enforce market disciplines including continuous disclosure. To breach its own rules, and in favour of paying clients, would, if verified, amount to a serious breach of trust and process.

by andy hamilton | 22 Feb 10, 4:58pm

What an earth were they

What an earth were they thinking? That this wouldnt get noticed?

by Les Rudd | 22 Feb 10, 6:10pm

If proven, will we be

If proven, will we be surprised. Drill through this:

http://www.interest.co.nz/ratesblog/index.php/2009/06/26/bernard-hickey-...

If not, how long before the next issue? Issues that so negatively affect 'legitimacy and trust', how can we ever expect to build a balanced, healthy and whole economy?

It goes wider than this kind of thing doesn't it. See:

http://asianinvasion2006.blogspot.com/2010/02/nz-under-regulated-offshor...

"NZ's lax regulation and stodgy, sporadic approach to legislative reform in my view makes it the perfect offshore centre. Perfect for the crims. Against any jurisdiction I've been involved with and dealt with regulators directly, NZ measures up badly at present."

David C - what would you guys do?

Cheers, Les.

by KW John | 22 Feb 10, 8:18pm

@Mr Cunliffe Les asks what

@Mr Cunliffe

Les asks what "would you guys do"

I go one stage further. Publish unequivocally and immediately the solution, as though you had the power to act.
Get it right - help National get it right.
Do the job for them - people may remember.

by Jacko | 23 Feb 10, 6:59am

Maybe be, some are content

Maybe be, some are content with regulation just the way it is. Some are content with taxation as it is. Some are content with manipulation of land supply as it is. Some are content with inflation regulation as it is.

Isn't it just great to be in land/farm/property specualtion, whoops, I mean, investment.

Get with the programme and just enjoy it - become a member of parliament today!

by Chris B | 23 Feb 10, 8:43am

Surely this is cock-up rather

Surely this is cock-up rather than conspiracy? NZX have been recrutiing like the blazes recently - this looks like some newbie's done something stupid and now NZX are in damage limitation mode - hence the self-referral to the commission.

Not that incompetence is any better than perfidy, but lets not hang NZX out to dry without a few more facts...

by Nicholas Arrand | 23 Feb 10, 8:48am

My understanding, Chris B ,

My understanding, Chris B , is that if you were a paid up subsriber to one of the NZX's services you got the info. along side all the other paid up subscribers. I didn't see that as a cock up, but a true rewards for 'user pays' ( and gets!). The cock up was the NZX changing it's mind.

by Alan | 23 Feb 10, 8:51am

@Chris: Are you saying that

@Chris:

Are you saying that if someone just 'jumped the gun' and sent out the 'heads up' information to a select group on Monday, then it is all okay?

Isn't the issue here insider trading? Any price-sensitive information should be disclosed to the entire market simultaneously.

Giving a nod to 'business partners' before publicly announcing that a given security is going to become more in demand (and hence likely to see a price increase) should be a criminal offence and punished with jail time.

Alan.

by Chris B | 23 Feb 10, 9:56am

Alan - NZX has had

Alan - NZX has had a pay-subscription news service for years - is it appropriate to provide info preferntially to this service ahead of public disclosure about a matter pertaining to the make-up of the flagship index? Personally (and like you) I'm not sure, but that's not really the point here.

The point here is that people acted upon information received to cause price movements. That initial info turns out to have been posted incorrectly, and disclosure of this fact caused a swift reversal in price. Its the second price movement thats causing the grief.

Whilst I sympathise with NZX's desire to wait and watch to see whether Allied farmers is going to be able to keep hanover down after having swallowed it whole, I also question whether its own regulations actually allow them to make this discretionary choise about the make-up of the NZX50. This question is particularly acute with relation to the constitution of its own tracker funds.

by Alan | 23 Feb 10, 8:21pm

@Chris: I can't agree -

@Chris:

I can't agree - any price-sensitive information should be disclosed to the entire market simultaneously.

Alan.

by Les Rudd | 24 Feb 10, 6:09am

'Power's silence puts markets at

'Power's silence puts markets at risk' - by Fran O.Sullivan.

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=1062...

More smiling and more waving.