Ethical standards ignored—Pearson

Press, 9 March 1988, Page 39

Ethical standards ignored—Pearson

Some sharemarket participants appear to have forgotten or ignored, the fundamentals of proper ethical standards, says the retired president of the New Zealand Stock Exchange, Mr Rex Pearson. In the Stock Exchange’s annual report, he says that the organisation’s proven framework was insufficient to restrain the excesses of the marketplace.

“In the past, the intent of Stock Exchange rules and listing requirements was more than sufficient to ensure proper compliance by participants in line with their perceived responsibilities to themselves and the marketplace.”

However, last year it was the actual rules, regulations, and requirements, rather than their intent, which in far too many cases, became the arbiter.

No group was immune, including brokers, investors, listed companies, advisors, and company directors, says Mr Pearsori.

To prevent the situation | from recurring a number ’ of have been in- j troduced. or proposed. ! Thhse include: J • For brokers officers, I new capital requirements, | exchange of credit in- i formation and other in- ! formation relating to f client failure, and tighter • registration deadlines. i

• For the Stock Ex- {

change, better surveillance, improved information storage, and redrafting listing requirements, plus recommended outside participation on the council and executive.

• For listed companies, more stringent reporting requirements, participation in a scripless trading programme, and a more active Listed Companies Association.

• For investors, more stringent credit rating and control, and closer supervision of scrip performance.

• For share registries, participation in scripless trading programme, tighter monitoring of processing, and tighter requirements on replacing lost share certificates.

The Stock Exchange’s efforts in these areas will supplement two recent reports — one on insider trading released by the Securities Commission and the other on company law reform released by the Law Commission, Mr Pearson says. The first scripless trading on the Stock Exchange may occur this year.

During this month the Exchange and member firms plan to instal broker-to-broker accounting (BBA) which will undertake accounting settlements and automate the buy-in process, he says.

The Exchange expects that investors will find a

substantial improvement in receiving share certificates after equity transactions through BBA. “Over time,” the Australian and New Zealand Stock Exchanges will be working on harmonising listing requirements to minimise variations between the two markets. There are now 160 Australian stocks listed in New Zealand, and seven New Zealand issues listed in Australia.

In spite of the market fall, both exchanges believe that dual listing will expand and that there should be no artificial restraints on such listings.

The effects of the October sharemarket crash are shown in market capitalisation at December 31 of $24.2 billion, down 42.9 per cent on the previous year's record figure of 542.48.

However, market capitalisation peaked at $48.28 in October, just before the crash.

The total number of shares traded last year rose 7.1 per cent to $2.48, although in value it was down 7.5 per cent to $4.58.

However, there was a net gain of 28 companies for the year, and equity funds raised were $2.98 ($2.48 previously). Share trading peaked at 314 million shares in September after averaging 150 M shares in the first six months.