New Zealand Securities Commission - The Bulletin: April 2006

Tranz Rail Case – Berkshire and Ferenbach settle with Securities Commission

The Securities Commission has reached a settlement of the insider trading proceeding against Berkshire Fund III, a Limited Partnership, which was a former Tranz Rail shareholder, and Carl Ferenbach, a former director of Tranz Rail.

Mr Ferenbach and Berkshire Fund III have agreed to pay the full compensatory amount sought by the Commission, NZ$7,030,509.12 and

NZ$350,000 by way of contribution to the Commission’s costs of the proceeding.

'The Commission is very pleased with the outcome. We think it will be of benefit to shareholders in New Zealand,' Chairman Jane Diplock said.

Mr Ferenbach and Berkshire Fund III have agreed to make these payments without any admission of liability.

They consider they have defences to the Commission’s claims against them.

Mr Ferenbach and Berkshire Fund III have agreed, if requested, to provide the Commission with information relevant to the proceeding.

The settlement has been approved by the High Court. No judgment has been entered against Mr Ferenbach and Berkshire Fund III.

Commission’s Oversight Review of NZX

The Commission and NZX work together as co-regulators to promote the integrity of and confidence in New Zealand’s capital markets.

The 2004 report of the IMF’S Financial Sector Assessment Programme review of New Zealand recommended that the Commission should develop a formal oversight plan of regulated exchanges. The oversight review announced on 1 March 2006 implements that recommendation.

The Commission and NZX agree that an oversight review is a crucial component of the co-regulatory objective of market integrity and investor confidence.

The Commission expects to complete its review and publish a report by 31 August 2006.

Terms of reference

The Securities Commission is conducting an oversight review of NZX under sections 10(b), 10(c) and 10(caa) of the Securities Act 1978. The purpose is to review NZX’s performance of its co-regulatory function, in particular its obligations

under Section 36G of the Securities Markets Act 1988 and, in respect of futures and options dealers, NZX’s regulation of dealers under its Futures and Options Participant Rules.

In particular, the Commission will review the following aspects of NZX’s activities:

supervision of market participants and enforcement of the Participant Rules;
supervision of listed issuers and enforcement of the Listing Rules;
allocation of human, technological and financial resources as it affects performance of the regulatory functions of NZX;
internal practices and procedures associated with investigations, price enquiries, complaints-handling and referrals;
discipline practices, procedures and resources;
arrangements for market infrastructure development and maintenance;
Special Division practices, procedures and resources; and

corporate governance arrangements, including board composition, policy setting, crisis response and oversight of executive management, with reference to regulatory standards relating to governance of demutualised exchanges under IOSCO and other international principles.

AND accordingly, will obtain, consider and utilise information for the purposes of any recommendation, report or comment the Commission may decide to make under sections 10(b), 10(c) or 10(caa) of the Securities Act 1978 in relation to the above matters.

SUBJECT to the Commission’s discretion to amend these Terms of Reference as it may consider fit.

ALSO IN THIS ISSUE:

Trans Tasman securities offerings	p2
Exemption summaries phased out	p2
Seeking authorisation ...	p3
Second Cycle reviews of financial reports	p3

THE BULLETIN April 2006