Unlisted rejects 'Russian roulette' criticism from shareholders group

Unlisted, the New Zealand share trading platform, rejects criticism from the New Zealand Shareholders' Association that investing on its platform is akin to playing 'Russian roulette.'

Wellington-based Efficient Market Services, which operates Unlisted, is seeking support from interested parties such as the NZSA for its application to be exempted from being a licensed market under a stricter set of rules that came into force under the Financial Markets Conduct Act in December.

However NZSA chairman John Hawkins, in an editorial for an association newsletter, likened the share trading platform to playing 'Russian roulette' and said the association's board had resolved to "strongly oppose" Unlisted's application for an exemption.

"We fought hard and long to improve things for retail investors and we are not about to allow these to be watered down," Mr Hawkins said, adding the association had "no desire to encourage a return to the wild west."

In an open letter responding to the criticism, Efficient Market Services chairman Bevan Wallace said that while the Unlisted market may be riskier for investors than participation on a licensed market, it provided a cheaper alternative that wouldn't otherwise be available, with higher standards than over-the-counter trading.

Mr Wallace said Commerce Minister Paul Goldsmith was seeking a full range of financial product market options, with the risk profile of each option made evident before becoming available to the investing public.

"Without some risk-taking we will not achieve the necessary development of capital markets to unleash the potential for job and wealth creation contained in the business plans of many small-to-medium sized New Zealand enterprises," Mr Wallace said.

Allowing the development of crowd funding markets was "one such weapon of mass investment," while Unlisted "broadens the range of investment options available to savers and increases the finance available to businesses which cannot justify participation on a licensed financial product market," Mr Wallace said.

"Yes, in an attempt to stop individual investors losing money, we can deny them risky investment options," he said. "In doing so, we will also deny capital to enterprises that would otherwise be able to invest the funds to create jobs and provide the prospect of future returns commensurate with the risk. Surely informed participation in an exempt market is a better option than blanket investment prohibition."

Some 16 companies trade on Unlisted, including Silver Fern Farms, New Zealand's biggest meat processor and marketer, Queenstown tourism company Skyline Enterprises and biotechnology company PharmaZen.

(BusinessDesk)