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Securities Commission Focuses On Disclosure

Securities Commission Focuses On Disclosure Of Changes To Large Shareholdings

The Securities Commission may take action against people with large shareholdings who fail to disclose changes to their holdings or who do not make timely disclosure of changes to their holdings.

The disclosure rule applies to shareholders holding 5% or more of the shares in a listed company. They must immediately disclose any increase or decrease in their holding of more than 1%.

Under the Securities Markets Act 1988 these substantial security holders must notify both the company and NZX of any change of more than 1%.

Disclosure is required “as soon as the person knows or ought to know” that their holding has changed by 1%. “This means that the market must be informed immediately the interest arises. It is not acceptable to delay this disclosure,” Chairman Jane Diplock said.

At 1.30pm on Friday 6 May 2005, a stand was made in the market for 10% of Wakefield Hospital shares. The bidders behind the stand were H & G Limited and Royston Hospital Limited, but the market was unaware of their identities until after the stand had gone unconditional and the market had closed on Monday 9 May. Sir Selwyn and David Cushing who are majority shareholders in H & G already held 7.37% of Wakefield Hospital shares.

The Cushings’ relevant interest in Wakefield Hospital increased by 1% during the afternoon of Friday 6 May as shares were acquired through the stand.

Acquisitions through the stand hit 5% at 10.31am on Monday 9 May. The broker acting for H & G and Royston announced to the market at 11.30am on 9 May that 5% of Wakefield Hospital shares had been obtained under the stand. From that point the market became aware that an SSH notice was due.

The Cushings and H & G and Royston did not file SSH notices until after the market closed on Monday 9 May.

The Cushings’ lawyers advised that the Cushings believed that notice could be filed on Monday and be within generally accepted time periods. The Commission is of the opinion that this time period is not acceptable. … more …

The Commission does, however, accept that in this case there was no intention to withhold information from the market. “The aim of the disclosure is to keep the market fully informed of changes in the ownership and potential control of public companies,” Jane Diplock said.

“This is particularly important in a takeover or a stand in the market where delayed filing may result in material information being withheld from the market. There will rarely be any justification for delayed filing of SSH notices where parties involved in stands and takeovers are already substantial security holders. These parties should be well aware that further transactions in the security may trigger the disclosure rule.”

The Commission will not be taking any further action in the matter. However it will continue to focus on timely compliance with disclosure obligations and will take appropriate action where it sees any failure to immediately disclose changes in substantial holdings.

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