Securities Commission completes Cycle 6 of its Financial Reporting Surveillance Programme

In Cycle 6 of the Securities Commission's Financial Reporting Surveillance Programme, the commission reviewed the financial reporting practices of 30 issuers with balance dates from 31 December 2006 to 30 April 2007. Twenty of the 30 annual reports reviewed had matters that prompted the commission to write to the respective issuers.

Numerically there was a higher incidence of matters raised in Cycle 6 compared with previous cycles. However, on reviewing the findings, the Securities Commission notes that it "does not believe that this higher incidence is symptomatic of poorer accounting given the nature of the findings. Generally, issuers' compliance with NZ GAAP is good and the commission continues to be encouraged by the commitment of issuers and their auditors to comply with NZ GAAP and to provide a true and fair view of the state of affairs of those issuers." The matters raised with issuers in Cycle 6 included:

• matters relating to NZ IFRS financial statements;

• matters relating to previous NZ GAAP financial statements; and

• market matters.

The market matters concerned failure to comply with substantial security holder obligations, not disclosing director share dealings and a failure by one issuer to disclose material information, relating to a restriction on the timing of any future acquisition of a business, in its annual report in accordance with the NZX Listing Rules.

In its report the Securities Commission made special mention of the new Securities Markets Act provisions relating to substantial security holder disclosures which came into force on 29 February and in particular noted that in future, failure to comply with substantial security holder obligations will be a criminal offence, subject to a fine of up to $30,000. Civil penalties of up to $1 million can be imposed by the court, which can also make a range of orders relating to any holding of securities, including orders to forfeit or dispose of securities.

See news release and report.

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