Recommendation 1 Recommendation 2 Recommendation 3 Recommendation 4

Recommendation 5 Recommendation 6 Recommendation 7 Recommendation 8

Market selection

Recommendation 4

Each market must have clear rules assuring investor protection by safeguarding participants from the financial risks of failed settlement and ensuring that listed companies are required to follow sound policies on corporate governance, transfer of economic benefits and shareholder rights.

1.	Does the depository or the market have securities lending and borrowing schemes in place, and are these open to all market participants and their settlement agents?	Securities lending and borrowing facilities are not facilitated by the NZSE. Currently under New Zealand tax ruling lending is viewed as a transfer of legal title – and correspondingly there are tax impediments associated with lending. It is known that a number of participants do lend under private treaty.
2.	Does the settlement system mark fail trades to market and collect margin from the failing counterparty to protect the innocent counterpart's interest?	Late settlements attract a daily penalty charge – half of which is paid to the disadvantaged party (usually the buyer). These charges accrue every business day until the trade is settled. The NZSE has discretion to enter the market and to Buy-In on behalf of the defaulting party (seller).
3.	Does the market operate a guarantee fund or have an equivalent procedure to protect against the cost of failed transactions; and which sectors of the market does it cover?	FASTER: FASTER operates using SFIDVP and so therefore there is no principal risk. Capital adequacy is the main means of protection against other forms of risk. This covers all activities of NZSE Member Firms. NZCSD: No guarantee fund. See comments above.
4.	Are the stock transfer agents (share registrars) linked electronically to the depository?	FASTER: Yes. NZCSD: No.
5.	Is there a legal maximum time period to complete ownership transfers in the books of the issuer? If so, does market practice adhere to the deadline?	Ownership transfers electronically at time of settlement.
6.	Are investors entitled to all benefits arising on a security from the point of purchase; and how are any rules enforced?	Yes – investors become the beneficial owner at the time a trade is matched and/or reported. The buying investor is entitled to any and all benefits from this time and FASTER ensures that these entitlements are transferred. Enforcement is done by accruing entitlements (cash or script) to a trade and then delivering these entitlements as part of settlement.
7.	Is proxy voting permissible in the market and can such proxies be lodged by post or other remote delivery method?	Proxy voting is permitted. Proxy voting is permissible in the New Zealand market. These are usually lodged by post but, with permission, can be faxed through to the Registrar, two business days prior to meeting.
8.	Are there binding rules in the market stating the minimum and maximum lapsed time between the announcement and completion of key events, including registration, the calling of shareholder meetings, the payment of dividends or interest, rights issues, tender offers and other voluntary corporate actions?	Yes – these are contained in the NZSE's Listing Rules which constitute a contract between the NZSE and the Listed Companies. These are enforceable and this has been tested and confirmed in a New Zealand court. NZSE notification date is 10 days prior to record date for issues (bonus/cash), calls, income, conversions, quotations and name changes. For cash issues, ex date is the next business day after record date with a minimum of 18 days to application date. Allotment date is 5 business days maximum after application date. Notice of a company meeting may be called by not less than 14 clear days’ notice in writing.
9.	Are all voluntary corporate actions advised through a central mechanism assuring consistent information to all investors?	Yes for NZSE listed companies who must have such actions approved by the NZSE before they are announced to the market. Documentation is usually issued by the company directly to it's shareholders.
10.	Is information on corporate actions available electronically, and is the minimum lapsed time for responding to such actions sufficient to enable all domestic and foreign investors to respond in a timely and considered fashion?	Yes – for subscribers to NZSE systems or publications. For others, information on corporate actions is not available electronically at this time. In most cases there is sufficient time to enable domestic and foreign investors to respond in a timely basis.