Within hours of announcing court proceedings against four Lombard Finance & Investments directors, the Securities Commission has dropped an unrelated bombshell with news it is charging one of its own commissioners.In the first case taken under continu
Within hours of announcing court proceedings against four Lombard Finance & Investments directors, the Securities Commission has dropped an unrelated bombshell with news it is charging one of its own commissioners.
In the first case taken under continuous disclosure regulations, the commission will file civil proceedings against Nuplex Industries and some current and former directors - including Nuplex director and Securities Commission member David Jackson.
The case should define the rules over timing of continuous disclosure announcements. Companies must offer "timely advice" to the market and "disclose events and developments as they occur" but there is widespread debate and confusion over what that means. The rules require information to be released "immediately".
Securities Commission members are appointed by the Commerce Minister. Simon Power could not be contacted to answer whether Mr Jackson would be asked to resign but a spokesperson said a statement was imminent. Calls to Mr Jackson went unanswered.
The Nuplex directors named by the commission are John Hirst (managing director, Sydney), Robert Aitken (chairman and non-executive director, Sydney), Barbara Gibson (non-executive director, Melbourne), Bryan Kensington (former non-executive director, Auckland), Michael Wynter (non-executive director, Sydney) - and David Jackson (non-executive director, Auckland),
Mr Hirst told NBR those facing proceedings 'vehemently' denied any wrongdoing and would 'vigorously' defend the case.
The commission is seeking declarations of contravention, pecuniary penalties – with a maximum penalty of up to $1 million per defendant - and compensatory orders.
“The commission alleges that from 22 December 2008 until 19 February 2009 Nuplex breached its continuous disclosure obligations under the NZX Listing Rules and the Securities Markets Act 1988 by failing to disclose to the market a breach of a banking covenant, and that both Nuplex and the directors are responsible for this failure,” commission chairman Jane Diplock said.
The commission will lodge a statement of claim with the High Court in Wellington on Wednesday morning (14 April 2010).
Nuplex is listed on both the NZX and the ASX.
This matter came to the commission’s attention through its own market surveillance. and after NZX provided information regarding an initial price enquiry.
In a statement released to the stock exchange, Nuplex expressed disappointment at the Securities Commission action.
Nuplex’s explanation said discussions took place with its banks to loosen the senior debt cover ratio (SDCR) covenant, effective as at 31 December 2008, as as soon as the company had a clear understanding of the impact of the global financial crisis on demand and of the rapid devaluation of the New Zealand dollar.
“The banks indicated they would consider loosening the covenant and, following completion of their internal processes, that is what they did. Given the banks' positive attitude, and after consideration by all board members, the board made the judgement in January 2009 that there was nothing material to disclose beyond the disappointing half year financial information,” Nuplex said.
The company said its board exercised reasonable, commercial judgement on disclosing the successful SDCR negotiations with the banks in the interests of the company and its shareholders.
“The board's view was, and remains, that while the company's negotiations with the banks remained incomplete, the company was complying with NZX listing rules in not making a disclosure. Furthermore, the board believes that disclosure while the negotiations were confidential and incomplete could have prejudiced the company, its shareholders and the banks.”
“Regrettably, the Commission's interpretation of the continuous disclosure required by the listing rules and the Securities Markets Act differs from the company's directors' considered judgement at the relevant time."
