25 OCTOBER NEW ZEALAND GAZETTE 4141

firm’s stockbroking business, which, in the opinion of the Inspector, appears to need an explanation or to be at variance with these Rules or with what is recognised as good stockbroking practice:

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

23.3 Inspector to be satisfied by maintenance of records: Each member firm shall be required to satisfy the Inspector that its accounts and related subsidiary records are being maintained in a satisfactory and systematic manner and are being kept regularly up to date.

23.4 Inspector to be satisfied of internal systems: Each member firm shall be required to satisfy the Inspector that it has in place reasonable internal systems and checks, both in respect of the activities of employees able to initiate and control securities transactions and also in respect of principals, partners, shareholders and directors.

23.5 Supply of information to Inspector: Every member firm shall supply to the Inspector on a continuing basis such information as may be requested by the Inspector.

23.6 Failure to comply: Failure to comply with Rules 22 and 23 involving the supply of information shall render the member firm liable for immediate suspension by the Board.

24. Capital Adequacy Requirements

24.1 Member firm to maintain liquid capital: In order to ensure that member firms are at all times capable of meeting their financial obligations and except as otherwise provided in this Rule 24, every member firm shall at all times maintain its liquid capital at or above the prescribed level.

24.2 Exceptions: A member firm may be temporarily excused from compliance with Rule 24.1 in respect of a particular transaction if to do so is in accordance with good stockbroking practice.

24.3 Definitions: For the purposes of this Rule 24 the terms “liquid capital” and “prescribed level” shall be determined in accordance with good stockbroking practice.

24.4 Board’s power to suspend: Where a member firm is unable to comply with the requirements of Rule 24.1 and has not in terms of Rule 24.2 been temporarily excused from such compliance, the Board may, if it sees fit, pending any other action by the Board including possible expulsion from membership, suspend both the member firm and all or any of its principals until such time as it is satisfied that the member firm is once again in a position to comply with these requirements.

25. Fidelity Guarantee Fund

25.1 Board to make arrangements for fidelity guarantee fund: The Board shall make arrangements for a fidelity guarantee fund (the “fidelity guarantee fund”) for the purpose of meeting just claims from persons who have suffered pecuniary loss from a stockbroking transaction as a result of a member firm being unable to meet its financial obligations:

Provided however that nothing in this Rule or the establishment and maintenance of the fidelity guarantee fund shall constitute a legal obligation to any such claimant.

25.2 Management of fidelity guarantee fund: The management of the fidelity guarantee fund shall be vested in and controlled solely by the Board which may in its absolute discretion constitute a Fidelity Guarantee Fund Committee to assist with such management. The Fidelity Guarantee Fund Committee shall be accountable to the Board and shall have such powers as the Board from time to time determines.

25.3 Member firm to give security: Every member firm which is not a company and carries on any business in addition to the business of stockbroking shall give security by bond (at such time for such amount and in such form as shall be determined by the Board) to secure the fidelity of such member firm.

25.4 Member to give security in respect of partner/s: 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 Board actively engaged in stockbroking) shall (in addition to compliance with Rule 25.3) take out and maintain a bond to secure the fidelity of that person in respect of each type of business (other than stockbroking) engaged in by him, each such bond to be in the sum of $20,000 or such larger figure as the Board may from time to time determine, and such bond shall be in favour of or assigned to the Exchange, provided that this Rule shall not apply in respect of any business where that person is already covered by a fidelity arrangement covering real estate agents or chartered accountants or by some other fidelity arrangement approved for the time being by the Board.

25.5 Member firm to pay annual contribution: Every member firm shall pay such annual contribution and such additional levy as from time to time be fixed by the Board, provided that the total amount of all contributions and additional levies paid by member firms in any one year shall not, in aggregate, exceed the sum of $1,000,000 and the Board may differentiate between member firms in setting the amount of any levy payable by any class of member firm. No person shall be entitled to a refund of any contributions or additional levies paid under this Rule 25.5.

25.6 Insurance: The Board shall also have the power to enter into any contract of insurance which may either supplement, replace or otherwise contribute to any payment made from the fidelity guarantee fund as a result of any just claim being met.

25.7 Payment of premium: The premium for such insurance may at the complete discretion of the Board, be paid from the capital of the fidelity guarantee fund, the income of the fidelity guarantee fund, special levies upon member firms or upon market transactions or any combination thereof.

25.8 Limit on claims: Subject to Rule 25.10, a person claiming to have suffered under Rule 25.1 and seeking reimbursement under the fidelity guarantee fund or any scheme of insurance related thereto shall not be entitled to receive more than $20,000 (or such greater amount as the Board may in its absolute discretion determine) in respect of any loss suffered as a result of the acts or defaults of any one member or his member firm.

25.9 Further limit on claims: Subject to Rule 25.10, the total amount payable out of the fidelity guarantee fund or any scheme of insurance related thereto, to meet claims (as limited by Rule 25.8) arising out of the inability of any member firm to meet the financial obligations of such member firm shall be limited to the lesser of:

(a) the amount/s claimed; and

(b) $500,000, or such greater amount as may be from time to time determined by the Board.

25.10 Board’s discretion to determine claim: Subject to Rules 25.8 and 25.9, the Board in its absolute discretion shall determine the extent (if any) to which any claim on the fidelity guarantee fund shall be met.

26. Short Sales

26.1 Short sales to comply with good stockbroking practice: No member firm shall enter into a short sale contract, either on its own behalf or knowingly for a client,