NZX will institute a new second step into its price enquiry process to further satisfy itself that issuers are in compliance with their continuous disclosure obligations.
The current practice has been to issue public price enquiry letters, with a quick timeframe for turnaround, and the response to be announced to the market. This won't change. The new aspect will involve a "confidential enquiry" where issuers will be required to provide more detailed information.
In particular, they will be asked to:
- confirm whether or not they are in possession of Material Information
- if so, whether they are relying on an exception from Listing Rule 10.1.1, and
- if so, the reasons why they can continue to rely on that exception, including how they have maintained confidentiality as this will inform an assessment of the risk that an information imbalance has developed in the market.
Responses to the confidential enquiry must be made to NZX Regulation intra-day (if the NZX enquiry is made before 1.00pm) or before the market opens on the next trading day (if the NZX enquiry is made after 1.00pm) but will not be made public.
But, as a result of the enquiry, NZX will be better informed regarding whether issuers should then make a disclosure to the market if it considers that confidentiality may have been lost or the market is trading as a false market.
In our view the more nuanced approach is to be welcomed, and is already familiar to those issuers also listed on the ASX. How it works in practice will depend on how much detail NZX expects as to how confidentiality is being maintained (which will always be a question of fact in the particular circumstances). This will be particularly important given NZX expects a quick turnaround on responses.
We regularly assist issuers to respond to price enquiries, and advise on governance processes to put in place to ensure a timely response should one emerge at short notice
NZX consulted the Financial Markets Authority before making this change. The NZX announcement is available here.