Report On Access Brokerage Inquiry
13 December 2005
Securities Commission Report On Access Brokerage Inquiry
The securities markets operated by NZX are operated under a co-regulatory regime by the Securities Commission and NZX. The co-regulatory framework facilitates effective frontline regulation, discharged through a registered exchange, coupled with, and reinforced by, the Securities Commission as the statutory regulator.
NZX is a registered exchange under the Securities Markets Act. As such it forms one half of the co-regulatory framework under which New Zealand's securities markets are regulated and administered. Broadly speaking, NZX deals with compliance with its rules, while the Commission, as statutory regulator, deals with matters of law, matters that arise out of legislation, and the regulatory role of NZX.
NZX and the Commission both seek to increase investor confidence in the markets by effective co-regulation and efficient enforcement of both NZX’s rules and the law.
Consequently both NZX and the Commission have, in their respective roles, conducted inquiries following the collapse of Access Brokerage in September 2004.
The Securities Commission has today released its report which reviews the performance by NZX of certain of its regulatory functions as a registered exchange during 2003 and 2004, in the context of the collapse of Access Brokerage.
The Commission's inquiry did not seek to establish the cause of the collapse of Access Brokerage. The Commission notes in this regard that NZX is bringing disciplinary action against Access and its CEO, and that the Serious Fraud Office has also laid charges under the Crimes Act 1961. The Commission also recognises the effective action NZX took at and around the time of the Access collapse - affirming the value NZX can bring with decisive and timely action under its rules.
The Commission’s report looks at a snapshot in time which is no longer an accurate picture of the way the New Zealand markets are regulated. The report focuses on NZX’s broker compliance programme during the early stages of its development, in particular in 2003 when an inspection of Access Brokerage was conducted. The report concludes that there were some shortcomings in the development and early operation of the NZX broker compliance programme.
The Commission recognises the significant progress made by NZX, since its demutualization, to increase its focus on regulation in the listed market.
“NZX has already made improvements to address most of the issues identified in our report,” Commission Chairman Jane Diplock said. “We make recommendations on certain parts of NZX’s regulatory operations and have referred these to NZX for their consideration.”
NZX notes that the Commission further acknowledges the quality of the NZX compliance programme compared with what had been in place prior to 2004.
The outcome sought by both NZX and the Commission is to identify opportunities for further improvement of market operations in the interests of New Zealand investors and New Zealand companies. In this respect NZX looks forward to working with the Securities Commission and the Government on the future strategic development of the New Zealand capital markets.
“Whilst it is fair to say that NZX and the Commission continue to have differing views on some of the points made in the Commission’s report, where the Commission has made recommendations on possible further actions by NZX, we will be examining these and providing feedback to the Commission on a timely basis,” NZX CEO Mark Weldon said.
The report is available on the Commission’s website at www.sec-com.govt.nz.