New Zealand's stock exchange operator, NZX, is to start making confidential enquiries of listed companies that experience large, unexplained share price movements, to determine whether they may be holding undisclosed "material" information even while remaining in compliance with the market's Listing Rules that require disclosure of material information at certain trigger points.

In an announcement this morning, NZX also warned investors not to assume that a listed entity's Listing Rules compliance statements meant they did not have material information in their possession which would potentially require eventual disclosure.

"NZX has observed that participants in the market occasionally assume that issuers do not have any Material Information in their possession if the issuer states they are in compliance with their continuous disclosure obligations," the NZX statement said. "That is not necessarily the case. Issuers can also state that they continue to comply with their continuous disclosure obligations if they are relying on the exceptions to immediate disclosure prescribed in the Listing Rules."

Examples might include a company that is close to concluding a major transaction, but whose board has yet to sign off the deal.


NZX said it would continue its practice of seeking a public explanation from listed issuers for large, sudden share price movements and expected issuers' responses would "remain broadly similar in tone and content as those currently provided."

Companies routinely respond to such enquiries by saying they are not holding material information which should be known to the market under continuous disclosure requirements.

The new second leg of the process, a confidential enquiry, would see NZX seek confirmation from issuers as to "whether or not they are in possession of material information", confirm whether they are relying on exception clauses to the continuous disclosure rules, and to explain "the basis on which the issuer can continue to rely on that exception, and with reasons."

"NZX will be particularly interested in how the issuer has maintained confidentiality, as this is expected to inform an assessment of the risk that an information imbalance has developed in the market for the issuer's securities."

It was engaging with the Financial Markets Authority on the initiative and responses to confidential enquiries would be required on the same day as the enquiry was made or before opening of trade the following day where a request was made after 1pm.

While NZX said it "welcomes feedback" on the proposal, it is implementing the changes without formal consultation.