Missed opportunity to support NZX companies says Institute of Directors
Our current extreme market operating environment calls for extraordinary measures, including temporary relief from liability around company continuous disclosure provisions, the Institute of Directors says.
The IoD says it is disappointed the Financial Markets Authority (FMA) is not following the lead of the Australian government by temporarily changing the disclosure liability threshold here in New Zealand.
“The purpose of continuous disclosure is to inform the market as soon as possible of any material information that might affect share or bond prices,” the IoD’s governance leadership centre general manager Felicity Caird says.
“The IoD strongly supports robust continuous disclosure to keep investors informed and to maintain market integrity. But in the current uncertain environment some judgement calls about what and when to disclose can be particularly difficult. The risk of hindsight bias in the courts impacting on personal liability weighs heavy. It’s important to support listed companies and directors to lead through these tumultuous times to aid New Zealand’s economic recovery.
“Litigation and class actions are on the rise in New Zealand and following global trends, and we think there is a risk of future opportunistic actions against directors.
“The FMA issued a statement on director liability and continuous disclosure today, saying current settings remain appropriate, though it would consult stakeholders about how to reduce the risk of speculative class actions proliferating.
“This is encouraging but we would also have liked to see the FMA support a change to offer temporary liability relief now with company disclosures,” Felicity Caird says.
“The Australians have made this change, meaning that directors and officers will only be liable if there is ‘knowledge, recklessness or negligence’ related to updates on price sensitive information to the market.”
The IoD thinks there should be similar temporary relief in New Zealand to help support NZX listed companies, during these particularly uncertain and volatile times to help aid our economic recovery.
Background
On 25 May the Australian Treasurer announced that their government would temporarily amend the Australian Corporations Act 2001 (continuous disclosure provisions) to enable companies to more confidently provide guidance to the market during this next six months.
The FMA released its statement on director disclosure and liability on 17 June 2020.
Media contact:
Christine Field 027 326 9107
Senior Communications Advisor
Christine.field@iod.org.nz