Memorandum of Understanding

MEMORANDUM OF UNDERSTANDING dated 27 February 2003

PARTIES

THE SECURITIES COMMISSION a body corporate established by the Securities Act 1978 (the "Securities Act") (the "Commission")

NZSE Limited a company registered under the Companies Act 1993 and having its registered office at 2 Hunter Street, Wellington. (the "NZSE")

This memorandum of understanding ("MOU") sets out the parties' agreement relating to the provision of information to each other and co-operation with each other for the effective regulation of the New Zealand securities markets.

The Commission has functions under section 10 of the Securities Act 1978 (the "Securities Act") to keep under review practices relating to securities and activities on securities markets and to comment thereon to any appropriate body.

The Commission also has enforcement functions under the Securities Act relating to offers of securities to the public and under the Securities Markets Act 1988 (the "Markets Act") relating to insider trading, substantial security holders, and futures dealing.

NZSE has established and runs a market for the quotation and trading of securities, subject to rules binding on public issuers and market participants. NZSE has responsibilities for the surveillance of activities on its markets and for the enforcement of its rules.

NZSE and the Commission intend to work together for effective co-regulation of the listed securities markets run by NZSE. In the case of NZSE, some of the functions and responsibilities set out in this MOU may be performed or discharged by delegates of NZSE ("NZSE Delegates"). To the extent that NZSE has delegated responsibility for its surveillance and enforcement functions to NZSE Delegates, the NZSE will ensure that such NZSE Delegates comply with the terms of this MOU.

The Commission and NZSE recognise that this MOU does not limit either party in the assistance or information provided to the other.

NZSE and the Commission recognise that each has powers, functions, and obligations under law. Any statements of intention by either in this MOU are subject to the discretion of each to act as necessary to perform its legal functions or obligations and to exercise any statutory powers.

This MOU sets out the parties' agreement with respect to the discharge of certain statutory responsibilities. As such this MOU supplements the party's statutory responsibilities; it defines areas of agreed responsibility and agreed processes. This MOU accordingly does not repeat the parties' statutory obligations.

NZSE and the Commission recognise that they each have a critical role to play in the regulation of, and in ensuring the health of, the New Zealand securities markets. NZSE and the Commission have a shared goal of ensuring the optimal regulation of the New Zealand securities markets by promoting the confidence of investors, contributing to the efficiency of New Zealand's securities markets, enhancing the performance and reputation of NZSE's stock market as a fair, efficient, deep and well informed, internationally competitive market and by facilitating appropriate levels and quality of disclosure to ensure well informed markets, (the "shared goal").

NZSE and the Commission agree that in order to achieve this shared goal they must work collaboratively with each other. The parties have agreed that there are a number of principles which are important to the success of the collaborative relationship and with which they will comply in order to achieve the shared goal.

The principles, governing the way in which parties will each conduct themselves in relation to all matters arising out of or under this MOU, are:

(a)	To communicate in an open, honest and timely manner;
(b)	To respond promptly to requests by the other and to market participants;
(c)	To exchange information and ideas to improve surveillance and regulation by each organisation;
(d)	To work together, so far as is practicable, to avoid duplication of participant resources and time recognising that cost of compliance with the NZ regulatory framework is a key issue for the participants in that market;
(e)	To reduce potential disruption to the operations of public issuers by minimising duplication of surveillance and regulatory operations;
(f)	To promote efficient use of each organisations resource by minimising duplication of surveillance and regulatory operations;
(g)	To forewarn each other of actions taken, or proposed to be taken, of which the other might reasonably expect to be advised;
(h)	To aim to ensure that the most appropriate party, recognising the relative statutory and structural (and in NZSE's case contractual) issues of each party, responds to a regulatory issue;
(i)	To provide feedback after an investigation to ensure the parties are learning and updating knowledge and enhancing processes.

("Relationship Principles")

These Relationship Principles describe behaviour that the parties consider critical to the success of the co-regulatory environment and on achieving the shared goal. The parties agree to comply with the Relationship Principles.