The Securities Commission has launched an investigation into trading of Allied Farmers shares following a decision by the New Zealand Exchange to inform a select few that the finance company was to be included in the top 50 index.The NZX subsequently reve
The Securities Commission has launched an investigation into trading of Allied Farmers shares following a decision by the New Zealand Exchange to inform a select few that the finance company was to be included in the top 50 index.
The NZX subsequently reversed its decision to include Allied Farmers in the index but by then a large amount of trading had taken place without the market being fully informed.
Last Monday NZX Limited told its exclusive Data Customers that Allied Farmers would be included in the main index from today.
Only paid subscribers, such as brokers and institutions, have access to the data announcements, after NZX Limited created the system as a new revenue stream for itself.
Allied shares climbed more than 20% on Thursday, most likely because many institutions are required to weight their portfolios with Allied stock in accordance with their mandates.
However, on Friday Allied received an email from NZX reversing the earlier advice saying it would no longer be included in the top 50.
Allied’s share price fell more than 10% on Friday as a result.
Securities Commission spokesman Roger Marwick said today that NZX's regulatory arm had referred last week's trading to the Securities Commission.
He could not comment further.
The NZX has issued two statements seeking to clarify the situation, although its explanation left open the issue of why it decided to initially include Allied in the top 50.
“During the six-month period preceding the index calculation, a significant corporate event occurred for Allied Farmers Limited (ALF), this being the acquisition of Hanover Finance.
“Whilst on a six-month calculation ALF would meet the criteria, the significance of the Hanover acquisition has distorted the six-month ranking. A decision has been taken not to include ALF in the NZX 50 at this time. ”
Shareholders Association head Bruce Sheppard has in the past publicly accused the NZX of "facilitating insider trading" by favouring subscribers over the public in its release of announcements that listed companies are obliged to make to the exchange under its Listing Rules.
