Diligent faces NZX rules breach

TOM PULLAR-STRECKER
Last updated 16:27 26/03/2013

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NZX-listed Diligent, which provides software to help run corporate boardrooms, could face penalties ranging from having to "issue a statement" through to a suspension of its shares after the NZX declined to agree to its use of a non-approved auditor.

Diligent said it would be "almost impossible" for the company to have its 2012 financial statements audited by a firm that was approved under the Financial Reporting Act (FRA) while still meeting a deadline to submit its annual report to the NZX by the end of the month.

The company has used United States firm Holtz Rubenstein Reminick (HRR) to audit its accounts since 2008, but Diligent said HRR wasn't and couldn't be registered in New Zealand under the Auditor Regulations Act (ARA), as was now required by the FRA following a rule change.

The company said in a statement to the NZX that it only became aware of the "oversight" this month and the Financial Markets Authority, which administers the FRA, had agreed in a letter to take no action against the company in relation to the breach. 

Diligent had also sought a waiver from the NZX that would have let it use HRR as the auditor of its results for the year to December 2012, but the NZX refused to grant it.

The NZX said Diligent was still required to release its annual report no later than on Sunday. If a company didn't conform to the rules, there could be "a number of possible responses, depending on the nature and the severity of the breach", a spokeswoman said.

"Where an immediate response is required to safeguard the integrity of the market, the NZX may halt trading or suspend securities from quotation.

"Other actions that the NZX might take to enforce the listing rules include requiring an issuer to release information to the market, imposing additional conditions for continued listing, or referring the matter to the NZ Markets Disciplinary Tribunal." 

The NZX could take into account the effect on the market and investors and "whether the matter is relevant to wider market issues" when considering what action was appropriate, she said.

"In relation to the particular issuer, NZX Regulation will consider the number and frequency of breaches, the general compliance history, and whether the issuer has co-operated with NZX Regulation," she said.

Diligent spokesman Geoff Senescall said Diligent did intend to have its 2013 accounts audited by a firm that was registered under the ARA. 

The company's shares were unchanged at $6.30 in late afternoon trading.

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- BusinessDay.co.nz

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