8 JULY
THE NEW ZEALAND GAZETTE
2143

22.014 estate for the benefit of his creditors.

where his regional exchange committee resolves
that in its opinion other circumstances exist
which justify such member being considered a
defaulter in order to protect the financial interests
of members or of the investing public or for such
other reasons as may be considered to be relevant
in the interests of the Exchange and its members
in the proper and efficient conduct of the
Exchange’s affairs.

22.02 Where a member has been deemed to be a defaulter under
Rule 22.01 that fact shall be communicated forthwith by
the chairman to the Executive Director for promulgation
to all members.

22.03 Contracts with Defaulters—
22.031 Subject to the provisions of these Rules every
uncompleted contract with a member shall be
deemed to be rescinded closed and terminated
as from the time he becomes a defaulter and
where the contract is partially uncompleted there
shall be deemed to be rescission closure and
termination as to the uncompleted balance.

22.032 The Executive (whose decision shall be final) shall
determine the market price on the day the
member becomes a defaulter and any surplus or
deficiency, in respect of such uncompleted
contract or balance thereof shall be determined
accordingly.

22.033 The defaulter shall be liable to the other member
for any such deficiency and such other members
shall account to the defaulter for any surplus.

22.034 Every member involved with a defaulter on a
rescinded contract shall forthwith inform the
Exchange of the details.

22.04 The Council may declare any member a defaulter and
may suspend such member from membership of the
Exchange for such time as it shall think fit. The Council
may alternatively require the regional exchange of which
he is a member to declare such member a defaulter and
may also require a regional exchange whereof a member
is in default to deal with such member in accordance with
these Rules or any of the regulations made hereunder.

22.05 In any case where it comes to the knowledge of a member
that another member of the Exchange has failed to
meet his obligations such member shall forthwith report
the circumstances of the case to the chairman of his regional
exchange who shall, if the member reported to have failed
to meet his obligations be a member of another regional
exchange, forthwith report the circumstances of the case
to the chairman of that exchange. Failure to so report
such circumstances shall be deemed to be a breach of
these Rules.

22.06 The chairman of a regional exchange upon receiving a
report that a member of his exchange has failed to meet
his obligations, shall immediately cause an investigation
of the matter to be made and shall simultaneously advise
the chairmen of each regional exchange and the Executive
that the affairs of such member are under investigation.
He shall similarly advise the result of such investigation
when completed.

22.07 Where any inquiries as to the credit or position of any
member of the Exchange are being made by any regional
exchange or by the Exchange every other regional exchange
shall on request facilitate such inquiries and make all
necessary inquiries into dealings of its members with the
member whose position is being investigated as aforesaid.

23.0 Members’ Books of Account and Audit
23.01 Every member shall keep books of account and records
containing complete and correct records and explanations
of the affairs and transactions of his sharebroking business.
The books, records and explanations to be kept shall be
such as the Executive shall from time to time determine
or prescribe by the regulations. They must be sufficient
to enable an auditor to supply the certificate of audit
and report as required by Rule 23.02.

23.02 When notified by the committee of his regional exchange,
a member shall, within the time specified in such
notification, supply to the chairman a certificate of audit
and report from a practising chartered accountant who,
failing appointment by mutual consent between the
member and the committee, may be appointed by the
committee at the expense of the member. The certificate
and report shall deal with such financial matters as the
Executive shall from time to time determine or prescribe
by the regulations.

23.03 The committee of a regional exchange, in addition to the
powers conferred by Rule 20.44 in respect of Rule 20.15
shall have full and absolute power at any time to call
upon any member to produce forthwith, for inspection
by themselves or their duly appointed representatives, all

books, letters, telexes, telegrams or copies thereof, and
other documents relating to his business as a sharebroker;
and they may also require members and their clerks to
appear before the committee or their duly appointed
representatives at any time, and to give such information
as may be required in connection with such business.

23.04 Each regional exchange will appoint an Inspector who shall
be a chartered accountant in public practice, and not a
member of the Exchange. The committee of a regional
exchange may, at its sole discretion, appoint one alternate
Inspector (who shall be a chartered accountant in public
practice and not a member of the Exchange) if for any
substantial reason it considers this necessary.

23.041 Each Inspector or alternate Inspector shall be
directly responsible for work carried out by him
under the provisions of these Rules or the
regulations.

23.042 Neither the Inspector nor the alternate Inspector
(if any) nor any member of their firm shall take
any part in the accounting work involved with
the day to day recording of sharebroking
transactions for a member. Provided the principle
of independence of the Inspector remains
paramount, an Inspector may undertake for a
member such accounting work as the preparation
of annual accounts from a trial balance supplied
by the member, preparing and lodging tax
returns, or offering advice to the member on
improving his accounting methods or his office
procedures.

23.05 The Inspector is empowered to inspect the financial
records and related documents of each member at any
time he considers necessary and to require from any
member an explanation of any item or state of affairs
whatsoever in relation to the member’s sharebroking
business, which, in the opinion of the Inspector, appears
to need an explanation or to be at variance with these
Rules or the regulations or with recognised sharebroking
practice.

23.051 The Inspector may require to be given access to
information concerning the member’s assets,
either private or of another business when in the
Inspector’s opinion, it is advisable to demonstrate
the member’s overall solvency.

23.06 The responsibilities of the Inspector are to satisfy himself
that the accounts and related subsidiary records of
members are being maintained in a satisfactory and
systematic manner and are being kept regularly up to date.

23.07 The Inspector shall be satisfied that reasonable internal
systems and checks exist in member firms not only on
the activities of staff members able to initiate and control
share transactions and related accounting activities but
also on the partners.

23.08 Every member shall supply to the Inspector on a
continuing basis such information as may be prescribed
by the regulations.

23.09 The powers in Rule 8.08 (relating to the making of
regulations) shall without in any way limiting the powers
in that Rule, be deemed to extend to regulations relating
to the inspection of the books of members and the supply by
members of monthly returns of balances and other
information to an inspector.

24.0 Fidelity Guarantee Fund
24.01 There shall be a Fidelity Guarantee Fund (“the fund”)
for the purpose of meeting just claims from persons who
have suffered pecuniary loss from a sharebroking
transaction as a result of a member being unable to meet
his financial obligations provided however that nothing
in this Rule or the establishment and maintenance of the
fund shall constitute a legal obligation to any such
claimant.

24.02 The management of the fund shall be vested in and
controlled solely by the Executive which may in its
absolute discretion constitute a Fidelity Guarantee Fund
Board (“the Board”) to assist with such management. The
Board shall be accountable to the Executive and shall have
such powers as the Executive from time to time
determines.

24.03 Every member who carries on whether alone or in
partnership any business in addition to the business of share-broking shall give security by bond (at such time for such
amount and in such form as shall be determined by the
Executive) conditioned to secure the fidelity of such
member.

24.04 Every member who is in partnership with any person who
is not a member (whether or not such person is in the
opinion of the Executive actively engaged in sharebroking)
shall (in addition to compliance with Rule 24.03) take out
and maintain a bond to secure the fidelity of that person