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FMA publishes report about Wynyard

Chris Hamblin, Editor, London, 30 November 2018

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The Financial Markets Authority of New Zealand has published some inconclusive findings from its investigation of the compliance of Wynyard Group, the failed anti-financial-crime software developer, with its legal obligations regarding continuous disclosure and fair dealing.

After Wynyard’s failure in October 2016, the FMA and the New Zealand Exchange on which it was listed began to investigate the conduct of the company and its directors. This done, the FMA does not believe that any individuals contravened the Financial Markets Conduct Act 2013, but it is worried about the quality of some of Wynyard's announcements, pronouncing itself 'concerned' that Wynyard may have contravened its continuous disclosure obligation in late September 2016. The regulator cannot prove, however, that the now-moribund company broke New Zealand's 'fair dealing' provisions. The company suffered from a lumpy revenue profile, dependent on small and infrequent high-value sales.

Despite the FMA’s views about the company's potential contravention of its obligations to disclose information to the market, it has decided not to pursue enforcement action against the company. Wynyard is now in liquidation and its shares are no longer being traded, so there is no reasonable prospect of recovery for investors.

Garth Stanish, FMA Director of Capital Markets said, “The report aims to provide transparency about our processes and consideration of this matter, and educate other issuers as to the standards the FMA expects. In this case, the FMA is not confident the board rigorously tested whether they were in possession of material information that required disclosure. Disclosure is a priority area for the FMA. This is why we supported the extension of the continuous disclosure obligation to cover information that a director or manager ‘ought to have known.’”

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