Cactus Kate has done a very lengthy and detailed post on the conflicts of interest around NZX as both a regulator and a commercial player. Her summary is:
- NZX is privy because of their Regulatory position to information that makes them a trusted source.
- NZX charges for dissemination of this information to the marketplace and generates 45% of its operating revenue in this fashion.
- NZX is spreading its Regulatory role of a trusted source collector and disseminator of this information into commercial publications it is planning to purchase.
- NZX has had no permanent Head of Supervision for a year and it is arguable that this person is truly independent anyway.
- NZX claims that its Supervisory and Commercial operations are “quarantined”.
- NZX Supervisory staff have been financed into an employee share scheme. The NZX CEO is according to the latest accounts, the third largest shareholder in the company and has a sole financial incentive to increase the earnings per share to receive more shareholding.
- The Securities Commission has previously raised issues of conflict with respect to NZX.
- The Securities Commission is over stretched and under resourced, more so due to recent finance company issues.
- The Securities Commission has called internationally for “independent, strengthened, and well-funded regulators for implementation at the domestic level” due to recent subprime crisis issues.
- The NZX CEO has a new politicised role and is seen by political advisors as having large influence on John Key.
I suspect we will see ongoing scrutiny.