Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 

FMA Statement On Director Liability And Continuous Disclosure

The Financial Markets Authority (FMA) has considered the need for regulatory relief in relation to director liability thresholds, following changes in Australia.

The Australian Government has, for a period of six months from 26 May 2020, relaxed the liability threshold for assessing the materiality of information to be disclosed to the market from a “reasonable person” test to one of “knowledge, recklessness or negligence” (civil proceedings). The move is to encourage Australian listed issuers to provide guidance and forward-looking information to the market, and to reduce the risk of “opportunistic” class actions for potential breaches of continuous disclosure obligations.

It is understood that the risks to directors from speculative class actions influenced the decision by the Australian Treasurer. It has been announced that litigation funders in Australia will need to be licensed.

The FMA believes New Zealand’s current legislative settings, and the manner in which they are applied, remain appropriate for the COVID-19 environment, and should already afford listed issuers and their officers’ sufficient protection to encourage disclosure.

The FMA’s view is that there has been very little evidence in New Zealand of an opportunistic class action culture developing in relation to director liability, but we will keep this position under review. We note that the Capital Markets 2029 review recommended more generally that the settings around director liability for continuous disclosure be reviewed.

The FMA intends to consult with MBIE and other stakeholders on the appropriate steps to reduce the risk of speculative class actions proliferating. However, the FMA does recognise that private class actions play a crucial part in addressing defective corporate disclosure and that litigation funding can be an important part of enabling investors to bring such actions.

In assessing regulatory action for possible breaches of continuous disclosure obligations, the FMA is mindful not to apply hindsight in determining the appropriateness of an issuer’s disclosure. Where an issuer and its officers can show evidence they have exercised appropriate due diligence and acted reasonably on information available at the time, the FMA is unlikely to pursue a continuous disclosure breach. This will include considering what market conditions and uncertainties existed at the time of disclosure when determining whether the action was ‘reasonable’.

FMA Chief Executive, Rob Everett urged directors to be brave in their disclosure decisions, and be willing to confront material uncertainties in their financial statements and forward-looking information.

“We want investors to get the best information available from the companies they invest in. If that information has to include cautionary statements about the ability to project future economic or trade conditions or about the reliability of particular data used, we would rather see that shared with investors than avoided altogether,” said Mr Everett.

The FMA urged listed issuers to carefully consider the content of their announcements, to ensure they use appropriate tone, context, and caveat statements, particularly where the information includes uncertainties or relies on assumptions.

© Scoop Media

 
 
 
Business Headlines | Sci-Tech Headlines

 

Stats NZ: Consents For New Homes At All-Time High

A record 41,028 new homes have been consented in the year ended March 2021, Stats NZ said today. The previous record for the annual number of new homes consented was 40,025 in the year ended February 1974. “Within 10 years the number of new homes ... More>>

Stats NZ: Unemployment Declines As Underutilisation Rises

The seasonally adjusted unemployment rate decreased to 4.7 percent in the March 2021 quarter, continuing to fall from its recent peak of 5.2 percent in the September 2020 quarter but remaining high compared with recent years, Stats NZ said today. ... More>>

ALSO:

Digitl: The Story Behind Vodafone’s FibreX Court Ruling

Vodafone’s FibreX service was in the news this week. What is the story behind the Fair Trading Act court case? More>>

Reserve Bank: Concerned About New Zealand's Rising House Prices

New Zealand house prices have risen significantly in the past 12 months. This has raised concerns at the Reserve Bank of New Zealand – Te Putea Matua about the risk this poses to financial stability. Central banks responded swiftly to the global ... More>>

Westpac: Announces Strong Financial Result

Westpac New Zealand (Westpac NZ) [i] says a strong half-year financial result has been driven by better than expected economic conditions. Chief Executive David McLean said while the global COVID-19 pandemic was far from over, the financial effect on ... More>>

MYOB: SME Confidence In Economic Performance Still Cautious

New insights from the annual MYOB Business Monitor have shown the SME sector is still cautious about the potential for further economic recovery, with two-in-five (41%) expecting the New Zealand economy to decline this year. The latest research ... More>>