17 DECEMBER NEW ZEALAND GAZETTE 3793

20 (3) Contracts with Defaulters:

(a) Subject to the provisions of these Rules every uncompleted contract with a member shall be deemed to be rescinded closed and terminated as from the time he becomes a defaulter and where the contract is partially uncompleted there shall be deemed to be recission closure and termination as to the uncompleted balance.

(b) The Board (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.

(c) 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.

(d) Every member involved with a defaulter on a rescinded contract shall forthwith inform the Exchange of the details.

20 (4) The Board may declare any member a defaulter and may suspend such member from membership of the Exchange for such time as it shall think fit.

20 (5) 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. Failure to so report such circumstances shall be deemed to be a breach of these Rules.

20 (6) The Chairman upon receiving a report that a member has failed to meet his obligations, shall immediately cause an investigation of the matter to be made and shall simultaneously advise the Board that the affairs of such member are under investigation. He shall similarly advise the result of such investigation when completed.

20 (7) Where any inquiries as to the credit or position of any member of the Exchange are being made by the Exchange every other member shall on request facilitate such inquiries and make all necessary inquiries into dealings with the member whose position is being investigated as aforesaid.

21. Members’ Books of Account and Audit

21 (1) 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 Board 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 21(2).

21 (2) When notified by the Board, 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 Board, may be appointed by the Board at the expense of the member. The certificate and report shall deal with such financial matters as the Board shall from time to time determine or prescribe by the regulations.

21 (3) The Board shall have full and absolute power at any time to call upon any member to produce forthwith, for inspection by the Board or its duly appointed representatives, all books, letters, telegrams, cables and other documents relating to his business as a sharebroker; and they may also require members and their clerks to appear before the Board or its duly appointed representatives at any time, and to give such information as may be required in connection with such business.

21 (4) The Board shall appoint either an individual or an appropriate firm, neither of whom shall be a member of the Exchange, to be or to provide appropriate personnel to carry out the duties of the Inspector of the Exchange. Any individual or firm so appointed shall be a chartered accountant, or a firm of chartered accountants, in public practice. The Board may, at its sole discretion, appoint an alternate Inspector (who shall be a chartered accountant or firm of chartered accountants, in public practice and not a member of the Exchange) if for any substantial reason it considers this necessary.

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

(b) 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 paramount 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.

21 (5) 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.

Provided that 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.

21 (6) Each member shall be required to satisfy the Inspector that his accounts and related subsidiary records are being maintained in a satisfactory and systematic manner and are being kept regularly up to date.

21 (7) Each member shall be required to satisfy the Inspector that reasonable internal systems and checks exist in his sharebroking firm both in respect of the activities of employees able to initiate and control share transactions and also in respect of partners, shareholders and directors.

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

21 (9) The powers in Rule 8(21) (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 operation of members and the supply by members of monthly returns of balances and other information to the Inspector.

22. Capital Adequacy Requirements

22 (1) In order to ensure that members are at all times capable of meeting their financial obligations and subject as hereinafter provided, every sharebroking firm