About NZ RegCo

NZX Limited operates licensed securities and derivatives markets under a legislative framework established under the Financial Markets Conduct Act 2013. Those markets operated under a “self regulating organisation” (SRO) model. That means NZX is both an operator and a regulator of markets.

The International Organisation of Securities Commissions (IOSCO) identifies substantial benefits for securities exchanges, such as NZX, that operate under a SRO model:

• SROs may impose ethical and business conduct standards which go beyond government regulations
• SROs may have broader powers to compel the production of information than government regulators
• SROs are likely to have considerable depth and expertise regarding market operations and practices, and may be able to respond more quickly and flexibly than the government authority to changing market conditions
• SROs often build and maintain technology infrastructure to undertake their own, and the regulator's regulatory functions, with this infrastructure being funded entirely by regulated persons, not taxpayers.

Operating and governance model

The exchange’s regulatory functions are performed by NZX Regulation Limited (NZ RegCo), a separate, independently governed entity. All regulatory decision-making has been delegated to the NZ RegCo Board and NZ RegCo management.

NZ RegCo does not regulate NZX as a listed issuer, or any related entities of NZX that are subject to the exchange’s market rules. This means NZ RegCo also does not regulate Smart (as the listed issuer of the Smart ETFs) or NZX Wealth Technologies Limited (as an accredited NZX Participant) NZX and its related entities are regulated by the Special Division of the NZ Markets Disciplinary Tribunal.

NZ RegCo's functions in relation to regulation of operations on NZX’s markets include:

• monitoring and enforcing compliance with NZX’s market rules by issuers listed on NZX’s markets
• monitoring and enforcing compliance with the NZX Participant Rules and the NZX Derivatives Market Rules by participants operating on NZX’s markets, such as NZX Firms, NZX Advisors and Trading Participants
• working with FMA as a co-regulator under the FMCA in relation to continuous disclosure, market manipulation and insider trading.

NZ RegCo is subject to a charter, which sets out the objectives, responsibilities and framework for the operation of NZ RegCo management and the NZ RegCo Board. The charter can be accessed here.

Our people

The NZ RegCo Board provides strategic and governance support to NZ RegCo management on the delivery of regulatory decision-making and oversight of NZX’s markets, and in pursuing NZ RegCo’s principal objectives. The NZ RegCo Board also ensures the adequacy of the arrangements within the NZX Group for managing any conflicts between regulatory activity and the commercial interests of NZX.

The majority of the NZ RegCo Board, including the chair, comprise directors independent of the NZX Group.

Trevor Janes

BCA, FCA

Trevor’s early career was in Investment Banking and Financial Analysis. More recently he has been a Director and Chairman of a number of listed and unlisted companies. He is a Chartered Fellow of the NZ Institute of directors, and a Fellow of both Chartered Accountants of Australia and New Zealand and of the Institute of Financial Professionals of NZ.

Elaine Campbell

Independent Director

Elaine was appointed as a director in February 2019. She has more than 20 years’ executive experience, primarily in financial and capital markets, and the IT and telecommunications industry. Elaine is the Executive GM of Fibre Access at NZX-listed Chorus. During her time on the executive team at NZX from 2002 to 2008, Elaine led the demutualisation and listing of NZX and was responsible for the insourcing of regulatory functions, along with chairing Smart. Elaine spent five years at the Financial Markets Authority as Director of Compliance before joining AMP as an executive director and General Counsel. She has previously worked in the UK and USA for multinational Sun Microsystems.

Pip Dunphy

CFA

Pip's background is financial markets and investment banking. She is now a professional director, with broad industry experience including funds management and infrastructure. Her previous governance roles include serving as Chair of Transpower New Zealand Limited and Abano Healthcare Group Limited. She is a former member of the NZ Markets Disciplinary Tribunal. She is a Chartered Member of the NZ Institute of Directors and a Chartered Financial Analyst from the CFA Society USA.

John Hawkins

John led the New Zealand Shareholders Association (NZSA) as Chairman/Executive Chairman for 10 years to 2019, and has been a strong advocate for the voice of retail shareholders and lobbied for the separation of NZX’s regulatory responsibilities from the company’s commercial and operational interests. During his tenure, NZSA forged strong relationships with Government, regulators, and New Zealand companies – and he has been closely involved in advising on governance issues in listed companies, including working with MBIE, the Financial Markets Authority, NZX, the Takeovers Panel and Institute of Directors. Mr Hawkins is Chairman of a private property company and has a long commercial background in the manufacturing sector.

Michael Heron

KC

Michael is a KC (barrister) based in Auckland at Britomart Chambers. He was formerly Solicitor-General of New Zealand and before that a partner in Russell McVeagh and Meredith Connell. He has significant governance and management experience in a range of organisations. His practice includes a broad range of regulatory and financial markets matters.

NZ RegCo management has primary responsibility for monitoring and enforcing compliance with NZX’s market rules and surveillance of NZX’s markets.

Joost van Amelsfort - Chief Executive - NZ RegCo

With the establishment and structural separation of NZX’s new regulatory agency NZ RegCo on 10 December 2020, Joost, formerly Head of Market Supervision became Chief Executive of NZ RegCo. Joost has 20 years’ legal experience advising capital markets Participants, including roles with Simpson Grierson and Linklaters LLP, London and Dubai. Joost’s particular areas of expertise include corporate governance, equity and debt capital markets, and mergers and acquisitions.

NZ RegCo teams

NZ RegCo comprises four functional teams:

• Issuer Regulation
• Participant Compliance
• Surveillance
• Market Conduct

NZ RegCo is lead by Joost van Amelsfort as Chief Executive Officer, who reports directly to the NZ RegCo Board.

The Issuer Regulation team administers the NZX Listing Rules and FSM Listing Rules.

Principal activities undertaken by the Issuer Regulation team include:

• considering applications for new listings
• considering applications for waivers and rulings in relation to the NZX Listing Rules, if there exist commercial and policy reasons why an issuer will not be able to comply
• reviewing documents for compliance with the NZX Listing Rules
• managing trading halt applications, and
• general assistance and advice in relation to Listing Rule compliance

Contact details Email: issuer@nzregco.com Phone: +64 4 495 2825

The Participant Compliance team administers the NZX Participant Rules, NZX Derivatives Market Rules, Clearing & Settlement Rules and Depository Operating Rules. The team supervises compliance with those rules by market participants. Principal activities undertaken in Participant Compliance include:

• considering applications for accreditation as a market participant
• considering applications for waivers and rulings, if there exist commercial and policy reasons why a market participant will not be able to comply
• capital and prudential inspections and
• investigating rule breaches

The Participant Compliance team performs regular on-site and desk-based inspections to check whether participants are meeting their obligations. The inspection process is also designed to test a participant’s procedures in light of best practice.

Contact details Email: participant@nzregco.com Phone: +64 4 498 2279

The Surveillance team monitors price movements, trading volumes, market releases (on NZX and other exchanges) and other media information to ensure trading on NZX’s markets:

• remains fair, orderly and transparent and
• does not breach the conduct obligations that apply in respect of market manipulation and insider trading under the FMCA and NZX’s market rules.

In-depth analysis is undertaken of abnormal market conduct or trading, which may include analysis of activity by security, by participant, or by client. In addition, Surveillance investigates allegations of market misconduct in relation to securities quoted on NZX’s markets.

To support these activities Surveillance uses market-monitoring software (SMARTS), market information from the NZX’s trading system, databases that update in real time with securities movements and volume statistics from information providers such as Iress and Bloomberg, as well as NZX's historical database of market activity.

If Surveillance considers market conduct warrants investigation, it will refer that matter to Participant Compliance and/or the FMA for investigation.

Contact details Email: surveillance@nzregco.com Phone: +64 4 495 2829

The Market Conduct team is responsible for delivery of oversight, monitoring, investigation and enforcement activity, as well as education and project initiatives that support conduct outcomes. Market conduct work includes:

• seeking to facilitate compliance by issuers and participants with their NZX market rules obligations, through engagement and guidance; and
• investigating suspected breaches of NZX's market rules and taking action in accordance with NZ RegCo's enforcement policy.

A variety of enforcement tools exist, depending on the circumstances and the regulatory outcomes sought. For example:

• Referral to NZMDT: NZ RegCo may refer the matter to the NZ Markets Disciplinary Tribunal. This tool is available to NZ RegCo in relation to all alleged NZX market rule breaches. Referrals to the Tribunal are likely to be made for breaches of NZX’s enforcement priorities or if it is necessary to get additional guidance from the Tribunal in relation to the interpretation of a market rule.
• Issue Infringement Notices: NZ RegCo may issue infringement notices to issuers and participants. This tool is available to NZ RegCo in relation to NZX market rules breaches of a minor nature (as defined by the NZ Markets Disciplinary Tribunal Procedures – Penalty Bands) on reasonable grounds that there has been a breach and is most likely to be used where there is clear evidence that a breach has occurred. Infringement fees cannot exceed $10,000.
• “Obligations” letter: NZ RegCo may issue an ‘obligations’ letter noting the breach and requiring the issuer or participant to review its policies or processes regarding its compliance framework. This tool is likely to be used for minor issues and first time breaches. It may also be used if it appears a rule has been breached but there is insufficient evidence to pursue the breach further.
• Impose additional requirements: NZ RegCo may impose additional requirements on a participant or issuer. This tool is likely to be used where NZ RegCo considers it would assist the participant or issuer to comply with the market rules or to address a particular risk to investors or clients.
• Halts and suspensions: NZ RegCo may halt, or suspend, the quotation of all or any of an issuer’s securities. This tool is likely to be used if immediate action is required in relation to an alleged breach, in particular when there is a measureable market impact.
• Cancellation of listing: NZ RegCo may cancel an issuer’s listing. This tool is more likely to be used for very serious breaches, repeated breaches, or if it is in the best interests of the market to take such action.
• Revocation of designation: NZ RegCo may revoke an individual’s designation as an NZX advisor. This tool is likely to be used for very serious breaches, repeated breaches, or if it is in the best interests of the market to take such action.
• Participant suspension/revocation: NZ RegCo may suspend or revoke a firm’s designation as a market participant. This tool is more likely to be used for very serious breaches, repeated breaches, or if it is in the best interests of the market to take such action.
• Referral to FMA: NZ RegCo may refer the matter to the FMA for investigation, if the matter is also one where the FMA has jurisdiction to enforce a party’s obligations.

NZ RegCo may use other regulatory tools, such as increasing its surveillance or monitoring of a particular issuer or participant’s conduct.

In some cases, NZ RegCo may decide to take no action in respect of a breach (for example, if there is a lack of evidence).

NZ RegCo’s enforcement policy explains:

• NZ RegCo’s enforcement goals and priorities
• NZ RegCo’s processes for investigating potential breaches of the Rules
• what NZ RegCo considers when deciding whether or not to take enforcement action
• what happens if NZ RegCo decides to take enforcement action.

A copy of the NZ RegCo enforcement policy can be found here.

Contact details Email: conduct@nzregco.comPhone: +64 4 498 2878

Conflicts management

NZX considers that conflicts management is an integral part of its operating model, and has put in place a Conflicts Management Policy. The policy sets out NZX's arrangements for dealing with potential conflicts, and ensuring that any other potential conflicts are identified and managed in a timely and robust manner.

A copy of the Conflicts Management Policy can be obtained here.

NZX's conflict management arrangements are based on the following principles:

• it is fundamental to NZX that the markets operate and are seen to operate in a fair, orderly and transparent way and that there is no credible suggestion of unmanaged conflict
• a credible perception of conflict may be as damaging as an actual conflict and must be managed accordingly
• commercial areas of the business and commercial interests will not be allowed to influence regulatory decision-making
• regulatory activity and information is quarantined from commercial activity and
• regulatory activity and decision-making must be consistent and transparent and free from undue influence.

External stakeholders

• Financial Markets Authority
• Takeovers Panel
• NZ Markets Disciplinary Tribunal

Financial Markets Authority

The FMA has responsibility for oversight of NZX as a licensed market operator. Under the FMCA, NZX is required to have adequate arrangements for operating its markets, including arrangements:

• to ensure that the markets NZX operates are fair, orderly and transparent
• for notifying disclosures made to NZX as market operator, and continuing to make these disclosures available
• for monitoring the conduct of participants
• for enforcing compliance with NZX's market rules
• for handling conflicts between the commercial interests of NZX
• to ensure that NZX has a sufficiently independent adjudicative body to adjudicate on contraventions of market rules that are referred to it and
• have sufficient resources (including financial, technological, and human resources) to operate licensed markets

These are collectively called NZX's “General Obligations".

The FMA is required to undertake a review, at least annually, of NZX's compliance with the General Obligations. As part of this process, NZX provides FMA with an annual “market assessment" report on NZX's compliance with these General Obligations for the preceding financial year. This report must be provided to FMA and Minister of Commerce no later than 31 March each year.

NZ RegCo and the FMA have adopted a memorandum of understanding (MoU) that established various operational and governance arrangements in support of their mutual regulatory objectives and to facilitate open discussion and flow of information. The MoU provides protocols between the NZX and FMA to deal with external communications and matters on which they frequently engage. The MoU can be accessed [here]

Takeovers Panel

NZX and the Takeovers Panel have adopted a memorandum of understanding (MoU) to support their mutual regulatory objectives and to facilitate open discussion and flow of information.

Under the MoU, NZX and the Takeovers Panel:

• have agreed a framework for the exchange of information and provision of assistance in order to facilitate them carrying out their regulatory functions
• will collaborate on matters of mutual interest, such as law reform and policy development
• have agreed to meet regularly to discuss other matters relevant to their respective regulatory responsibilities.

NZ Markets Disciplinary Tribunal

The NZ Markets Disciplinary Tribunal (Tribunal) contributes to the operation of the markets as an independent disciplinary body. The Tribunal makes determinations on enforcement matters referred to it by NZ RegCo.

The Tribunal can impose financial penalties and censures for breaches of NZX's market rules. Any monetary penalties imposed by the Tribunal are paid into a discipline fund which is used for prescribed purposes, including the costs of enforcement and to fund education initiatives relating to regulation of NZX's markets.

To provide further transparency of NZX's enforcement activities, NZX provides annual reporting to the Tribunal. That information includes details of breaches and complaints that have arisen in the preceding year, the enforcement action taken by NZ RegCo in each case, if any, and explanations on the choice of a particular enforcement action. The information is included by the Tribunal in its annual report.

The Special Division is a separate division of the Tribunal, established under the Tribunal Rules. The Special Division has the same powers and functions as NZ RegCo under NZX's market rules, and acts as regulator in respect of NZX and “Related Entities” of NZX as listed issuers or participants in NZX markets. NZ RegCo does not regulate NZX or its Related Entities. The objective of the Special Division is to ensure that NZX's market rules are applied to NZX and Related Entities in an impartial and independent manner.

Further information on the Tribunal can be found here