NZSE targets reputation revival

The Stock Exchange is going ahead with moves aimed at bolstering its position and improving customer confidence.

Yesterday it issued a detailed set of regulations governing relationships between brokers and clients.

The exchange has also decided to expand its trading hours from the present 9.30 am-3.30 pm to 9 am-4 pm from September 1.

And from November 1, it will meet the longstanding pressure to provide market-depth information.

The exchange's managing director, Bill Foster, last night confirmed the decisions on hours and market-depth information and said full details would be given within a few days.

The three measures were part of a process to ensure the exchange was up with international best practice, he said.

Chairman Simon Allen said the regulations on customer-client relations essentially put into a written code what was already normal practice.

"There is already a requirement that brokers are not allowed to do anything that is in conflict with the interests of clients," he said.

"What we have done is to put in writing what amounts to a best practice guideline for complying with that rule."

Mr Allen said the procedures outlined were already followed by most of the large member firms, as a result of in-house rules or linkages with other markets where such regulations already existed.

The desire was to ensure uniformly high standards across the broking industry.

"The aim is to afford maximum protection to both investors and members . . . and ensure that high ethical standards are present and adhered to."

The regulations include:

* Employees are not allowed to sell shares within 10 days of buying them.

* Where members (or relatives) have a beneficial, indirect or professional interest in a security or company, they may not advise or deal in a transaction without fairly disclosing their interest.

* Members must disclose if they are acting for both parties in a transaction.

* Members must ensure that advice is properly researched, should not initiate rumours and should refrain from commenting in the media without properly identifying themselves.

* Transactions must be carried out in order of precedence and, in particular, transactions on behalf of members should not be filled ahead of unexecuted orders on behalf of clients.

* Senior persons or compliance officers must supervise discretionary accounts to ensure excessive trading or unsuitable investment selection is avoided.

* Members who suspect unusual trading is taking place should advise the exchange.

* The use of voice-recording systems to confirm telephone orders is encouraged.

* Employees of member firms who deal in securities must receive written authority to do so.

* Members must give clients details of their allocation policies in relation to pooling of orders and the allocation of securities to buy and sell orders.

The regulations also urge brokers to familiarise themselves with the circumstances of clients - including employment, taxation, investment, family structure and other relevant personal information - so as to be able to provide the best advice.

But Mr Foster said that if clients did not wish to provide that information it was entirely up to them. The exchange was firmly committed to enforcing these rules.

"We are well aware that there is no point having these regulations if we don't enforce them.

"We are going to maintain the confidence of investors only if we observe and are seen to observe the highest standards."

Compliance with the rules would be supervised by a firm's compliance officers, the exchange's inspectors, customers and by the exchange's monitoring of any unusual market activity, Mr Foster said.

"When we believe there is cause for action, we already have a disciplinary process."