Listed electronics company Rakon has been fined $30,000 and publicly censured by the stock exchange's disciplinary tribunal after it failed to immediately disclose the partial sale of a manufacturing subsidiary in China to the exchange.
The NZ Markets Disciplinary Tribunal heard that Rakon began negotiations last March to sell 80 per cent of Crystal (Chengdu) to Zhejiang East Crystal Electronic, a company listed on China's Shenzhen Stock Exchange.
Rakon's Crystal in Chengdu was owned by Rakon's Hong Kong subsidiary, in which the New Zealand parent company held a 85.4 per cent stake.
The negotiations ended in a sale agreement signed by both companies on July 4. The agreement was conditional on the buyer paying a deposit of US$500,000 (NZ$597,000) to Rakon Hong Kong.
On July 5, the New Zealand stock exchange (NZX) observed "a significant price rise and increase in trading volume" in Rakon's shares.
NZX said its initial investigations found that Zhejiang East Crystal Electronic had announced the sale to the Shenzhen Stock Exchange.
This information had been publicly available online via the Chinese media from July 4, but when the NZX contacted Rakon, the company was not aware that the announcement had been made in China.
Rakon submitted that until the deposit was received in cleared funds, it had considered that the agreement would not be legally binding and therefore no disclosure was required.
The tribunal said in its ruling that it was not convinced by this argument.
"An announcement could have been worded appropriately to ensure the market was made aware of the deposit requirement," the ruling said.
While there had been no suggestion that Rakon deliberately breached the stock exchange rules, the tribunal said, any breach of the continuous disclosure provisions was a serious matter that could be subject to a penalty of up to $250,000.
The tribunal ordered Rakon to pay costs to the tribunal and the NZX.
- Fairfax Media