"Unlisted engaged with regulatory agencies and operating without incident for over a decade on a basis well understood and respected by its market participants," said Bevan Wallace, chairman of Efficient Market Services.
Unlisted, the share trading platform, is rejecting claims by stock market operator NZX that its request to be exempted from new rules that would make it a licensed market could undermine confidence in New Zealand's financial markets.
"Unlisted has been a significant contributor to the hard-fought gains in building investor confidence in New Zealand, engaging with regulatory agencies and operating without incident for over a decade on a basis well understood and respected by its market participants," said Bevan Wallace, chairman of Efficient Market Services, the operator of the Unlisted market.
NZX, which is New Zealand's only registered stock market operator, said Unlisted operates without disclosure requirements and is not subject to insider trading or market manipulation restrictions. NZX gained an exemption for its NXT market aimed at smaller companies, allowing less onerous disclosure obligations and reduced costs for issuers.
Unlisted is concerned about the increased costs that would come with being licensed by the Financial Markets Authority, as required by the Financial Markets Conduct Act which came into force in December.
"It should be up to issuers and their shareholders to determine the financial product market that best matches their requirements," Wallace said. "For small and medium sized issuers, the annual five to six figure cost of maintaining an NZX listing cannot be justified. Absent Unlisted, these issuers and their shareholders would only have informal over-the-counter trading options available."
Unlisted has 17 securities trading on its platform, including Silver Fern Farms, New Zealand's biggest meat processor and marketer, Queenstown tourism company Skyline enterprises, and biotechnology company PharmaZen. It has facilitated more than 12,000 transactions with a value of almost $200 million, and its issuers have raised more than $200 million in support of their business strategies, it said.
"We are firmly of the view that issuers and shareholders should not be denied the opportunity of a formal trading mechanism such as Unlisted," Wallace said. "The business model that has been successfully employed by Unlisted over the last decade has struck an appropriate balance between compliance obligations, investor protections and maintaining the integrity of the market."
Unlisted says it is seeking to broadly retain its existing regulatory status and operating protocols as part of its exemption application.
"Our existing terms of use have been incorporated into a set of Market Rules and these will come into full effect should an exemption be granted," Wallace said. The market rules make it explicit that although specific provisions of the act do not apply to issuers, such as market manipulation, insider trading, ongoing disclosure and substantial product holding, it will not tolerate misconduct that threatens the reputation, effectiveness or integrity of the Unlisted market.
As well as having to comply with various existing disclosure obligations and investor protections, Unlisted issuers are screened and all investor trades are required to be placed through registered brokers, who are authorised financial advisors and who have a duty of care to investors and Unlisted.
It believes that the granting of an exemption by Commerce Minister Paul Goldsmith would be consistent with the purpose of the new act to promote diversity and growth in New Zealand capital markets, and is a way to encourage more issuers to use public markets and help facilitate investment in small to medium sized enterprises.
"NZX has every right to be fearful but rather than mask its concerns as the risk of the undermining of New Zealand's markets, it should be forthright and acknowledge that it is competition that it fears," Wallace said.
(BusinessDesk)
