Public Censure of NZME Limited

20 April 2021


PUBLIC CENSURE OF NZME LIMITED BY THE NZ MARKETS DISCIPLINARY TRIBUNAL FOR
BREACH OF NZX LISTING RULES 3.1.1 AND 3.20.1

1. The NZ Markets Disciplinary Tribunal (Tribunal) has approved a settlement agreement
between NZX Limited (NZX) and NZME Limited (NZM) dated 26 March 2021 (Settlement
Agreement).

Summary

2. NZM is a New Zealand incorporated company, with its ordinary shares quoted on the NZX
Main Board. NZM is a Listed Issuer and is therefore bound by the NZX Listing Rules
(Rules).

3. After an investigation NZX found that NZM had breached:

a. Rule 3.1.1 by failing to release Material Information to stakeholders through NZX’s
market announcement platform (MAP) “promptly and without delay"; and

b. Rule 3.20.1 by failing to release information about a decision to change a Director to
stakeholders “promptly and without delay”.

4. The breaches of Rules 3.1.1 and 3.20.1 relate to the same event, being the resignation on
11 June 2020 of NZM's former Chair.

Background

5. NZM is a provider of news and media services in New Zealand.

6. On 12 May 2020, NZM gave notice of its annual shareholders meeting (ASM) scheduled for
3pm on 11 June 2020 via MAP. The agenda for the ASM included an ordinary resolution
supported by the NZM Board that its current Chair, Mr Cullinane, be re-elected as a
Director.

7. However, once advance voting and proxies had closed for the ASM on 9 June 2020, it
became apparent that Mr Cullinane was unlikely to be re-elected as Director.

8. At 11.36am on 11 June 2020, NZM received a letter of resignation from Mr Cullinane which
was stated to be effective immediately.

9. After receiving the letter of resignation, and after taking external legal advice on their
disclosure obligations, the Board met to discuss the letter and its implications. In this
time, NZM also prepared a draft announcement, which it sent to Mr Cullinane seeking his
comments at 12.02pm. Mr Cullinane responded that he had no comments at 12.16pm.

10. NZM did not release an announcement to the market regarding Mr Cullinane’s resignation
until 2.44pm on 11 June 2020, 16 minutes before the ASM was due to commence. NZM
obtained and acted in reliance on external legal advice regarding the approach to
disclosure.

11. When the announcement was released, it was marked with the “P” flag to denote price
sensitivity. NZM's position is that the P flag reflected the package of information being
released in advance of the ASM, including the presentations and the announcement of Mr
Cullinane’s resignation. NZX disagrees with issuers taking this approach. NZX considers

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that every potential announcement should be individually assessed by issuers for
materiality and the application of the "P" flag, and the bundling of multiple announcements
detracts from this analysis.

12. NZX investigated the information held by NZM prior to the ASM for the purpose of
assessing whether any part of it constituted Material Information and whether NZM had
failed to comply with any of the Listing Rules. As a Listed Issuer NZM is required under
Rule 3.1.1 to promptly and without delay release Material information through MAP.
Additionally, under Rule 3.20.1, NZM is required to promptly and without delay release
through MAP information regarding any decision made to change a Director.

13. After conducting its investigation, NZX concluded that:

a. Mr Cullinane’s resignation was Material Information for NZM because the resignation
related to the Chair and the circumstances of it were sudden and unexpected. As a
result, NZX concluded that NZM had breached its obligations under Rule 3.1.1 by
failing to release this information promptly and without delay.

b. NZM's failure to release information about a change in a Director promptly and
without delay also constituted a breach of Rule 3.20.1.

Determination

14. NZM accepts the findings by NZX that it failed to release Material Information about a
change in a Director promptly and without delay, and thereby breached Rules 3.1.1 and
3.20.1. NZM accepts that a penalty should be imposed by the Tribunal for these breaches.

15. The Tribunal considers that a breach of the Rules relating to continuous disclosure is a
breach of a fundamental obligation. Compliance with these Rules by issuers is essential for
maintaining market integrity and investor confidence. The Tribunal recognises, however,
that the materiality of a change of Director will depend upon the particular circumstances
of the case.

16. Accordingly, the Tribunal considers that the breaches concern a fundamental obligation
and fall within Penalty Band 3 of Procedure 9 of the Tribunal Procedures. Under Penalty
Band 3, a financial penalty of between $0 and $500,000 may be imposed.

17. The Tribunal considered that there were aggravating factors in this case, namely:

a. NZM was aware that the Chair’s resignation was both unexpected and that it occurred
during a period when there was considerable market interest in its activities as a
result of the events surrounding its efforts to acquire Stuff.

b. The market announcement of Mr Cullinane’s departure lacked adequate context and
did not contain sufficient information for investors to understand and assess its
implications.

18. The Tribunal considered that there were mitigating factors:

a. The breaches were of limited duration, with Mr Cullinane's resignation received at
11.36am and the announcement to the market issued at 2.44pm on 11 June 2020.

b. There is no evidence of any impact on the market and investors.

c. NZM's Board and Management turned their minds to NZM’s continuous disclosure
obligations in accordance with NZM's continuous disclosure compliance processes and
obtained and acted in reliance on external legal advice regarding the approach to
disclosure.

d. NZM has co-operated with NZX's investigation and has entered into an early
settlement of NZX‘s referrals to the Tribunal.

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19. Taking the aggravating and mitigating factors into account, the Tribunal considers that,
while the breach comes within Penalty Band 3 of its procedures, a sanction at the lower
end of the available range is appropriate.

Penalties

20. NZX and NZM have agreed that:

a. A public censure will be made by the Tribunal;

b. NZM will pay to the NZX Discipline Fund a financial penalty of NZ$20,000 for the
breach of Rules 3.1.1 and 3.20.1;

c. NZM will pay the costs incurred by the Tribunal (plus GST, if any);

d. NZM will pay the costs incurred by NZX (plus GST, if any) in bringing this proceeding;
and

e. NZM will pay the external legal costs incurred by NZX (plus GST, if any) in bringing
this proceeding.

Approval

21. The Settlement Agreement is approved by the Tribunal pursuant to NZ Markets
Disciplinary Tribunal Rule 8, and as such, the Settlement Agreement is the determination
of the Tribunal.

Censure

22. The Tribunal hereby censures NZM for a breach of Rules 3.1.1 and 3.20.1.

The Tribunal

23. The Tribunal is a disciplinary body which is independent of NZX and its subsidiaries. The
Financial Markets Authority approves its members. Under the NZ Markets Disciplinary
Tribunal Rules, the Tribunal determines and imposes penalties for referrals made to it by
NZX in relation to the conduct of parties regulated by the NZX market rules.


ENDS