COMMERCIAL Stock exchanges move to sort out share deals

Press, Volume CXII, Issue 32848, 23 February 1972, Page 5

COMMERCIAL Stock exchanges move to sort out share deals

The Stock Exchange Association of New Zealand is taking steps to clear up the tangle of NMA share deals, in which brokers suddenly found themselves—through no fault of theirs—after the retrospective clause of the prohibition to sell NMA shares to J. H. Vavasseur and Company, Ltd.

The association said in a statement last night that it had been unable to persuade the Government to alter the clause. In consequence, contracts where the Reserve Bank does not approve the buyer, will be considered frustrated and therefore regarded as not having been made.

The association had “fully discussed the implications of the recent interference by the Government with trans-

actions in NMA shares,” said the statement.

The statement said that the Minister of Finance (Mr Muldoon) had stated when he took action for Order in Council that “those who sold shares on February 2 and 3, however, did so in spite of a clear statement by me on February 1 that in the view of the Government and Vavasseur take-over was not in the national interests. When it was clear that this I warning was having no I effect, action was taken.” I The association’s statement said that whatever the ■ Minister’s statement on February 1 might have meant ito Vavasseur, it could not be considered to have been a warning to either the stock exchange or vendors that the \ market was likely to be interfered with.

“The association has made representations, but has been unable to persuade the Government to alter the retrospective clause of the new regulations on dealing in NMA shares.”

“It appears to the Committee of the Stock Exchange Association, upon consideration of the Order in Council

.dated February 3, that the provisions of contract law and the rules, customs and traditions of the stock exchanges have been overridden by decree of the Executive Council,” said the statement. “The retrospective nature of the order has the effect of invalidating contracts which, at the time they were made between members of the exchanges, were both lawful and in accordance with the rules and regulations of the stock exchange. “Under compulsion of the regulations therefore, steps

are now being taken to deal with transactions entered into on February 2 and 3.

“Today, an instruction was issued through exchanges as to the actions required by brokers to test each individual transaction for consent of the Reserve Bank. “In the event that the Reserve Bank does not approve the purchaser, it would appear that the contract has been frustrated by supervening law, and is at an end. The books of the brokers will be amended accordingly, and their clients advised,” said the association.

“This unprecedented step is taken with extreme reluctance by the Stock Exchange Association, and only at a time when it is unlikely that the situation can be improved by delay. “The retrospective clause

of the regulations results in injustice when applied to the normal stock exchange situation in which the seller cannot choose his buyer, yet the onus has been placed on the seller, in contract already laid, to deal only with buyers acceptable to the Reserve Bank.

“After the fall in the price of NMA shares, acceptable buyers are now being held to contracts they may well wish to forgo, while willing sellers are prevented from completing and obtaining the proceeds of sale.

“On the other hand buyers unacceptable to the Reserve Bank are relieved of the necessity of paying the price they bid for their shares, and in fact are legally prevented from doing so.”

More commercial news on Page 20.