Public Censure of Truscreen Group Limited

IN NZ MARKETS DISCIPLINARY TRIBUNAL NZMDT 8/2023


UNDER NZ Markets Disciplinary Tribunal Rules


IN THE MATTER OF breach of NZX Listing Rule 2.13.2(b)



BETWEEN NZX LIMITED
Acting by and through NZX Regulation
Limited (NZ RegCo)


AND TRUSCREEN GROUP LIMITED
(TRU)

___________________________________________________________

DETERMINATION OF NZ MARKETS DISCIPLINARY TRIBUNAL
15 DECEMBER 2023
____________________________________________________








Rachel Batters
Executive Counsel
NZ Markets Disciplinary Tribunal
Email: rachel.batters@nzmdt.com

2
1. This is a decision of a division of the NZ Markets Disciplinary Tribunal (the
Tribunal) comprising Mariëtte van Ryn (Division Chair), Charles Bolt and Matt
Blackwell. 

2. Capitalised terms that are not defined in this decision have the meanings given
to them in the NZX Listing Rules (the Rules) or the Tribunal Rules as the case
may be.

Procedural background

3. On 24 November 2023, NZ RegCo filed a statement of case (SOC) alleging TRU
had breached Rule 2.13.2(b), which requires an Audit Committee to have at least
three members.

4. On 5 November 2023, TRU advised the Tribunal that it accepted the findings of
NZ RegCo and had no additional information to submit, noting it had taken action
to correct the breach.

5. On 6 November 2023, NZ RegCo advised that it would not be filing a rejoinder.

6. On 7 November 2023, the Tribunal sought further information from TRU as to
when its breach of Rule 2.13.2(b) had begun, as this was not clear from the
SOC. This information was provided by TRU on 10 November 2023.

Factual background
7. TRU is Listed on the NZX Main Board and is an Issuer of Quoted Equity
Securities. TRU is subject to the Rules.

8. NZ RegCo has recently undertaken a review of Issuers’ Audit Committees to
ensure compliance with the Rules, particularly with regard to composition.
During that review, NZ RegCo identified that for a period between 2020/2021
and 2023, TRU’s Audit Committee appeared to have only two members
1
.

Audit Committee composition

9. Under Rule 2.13.1, TRU must have an Audit Committee. Rule 2.13.2 requires
the Audit Committee to:

a. be comprised solely of Directors of the Issuer;

b. have at least three members;

c. have a majority of Independent Directors; and

d. have at least one member with an accounting or financial background.

10. TRU’s annual report for the financial year ended 31 March 2020 stated that its
Audit, Finance and Risk Committee (Audit Committee) comprised three members
– Independent Directors Christopher Horn (Audit Committee Chair), Con Hickey
and Anthony Ho (TRU Board Chair)
2
.

11. At TRU’s Annual Meeting on 10 September 2020, Mr Hickey retired from the TRU
Board and Juliet Hull was elected as a non-executive Director
3
. Ms Hull was
determined by TRU to be an Independent Director. TRU advised NZ RegCo that
Ms Hull replaced Mr Hickey on the Audit Committee on 10 September 2020.

1
The reference to TRU being in breach “From 2013 to 2023” on page 2 of the SOC is an error.
2
Pages 11 and 52 of the TRU Annual Report 2020 released to the market on 29 June 2020.
3

TRU market announcement of 11 September 2020.

3

12. TRU advised the Tribunal that Mr Ho ceased to be a member of the Audit
Committee on 20 October 2020, reducing its number to two members –
Independent Directors Mr Horn (Chair) and Ms Hull.

13. On Friday 26 February 2021, TRU advised the market that Ms Hull would assume
an executive role as Interim CEO, after the departure of TRU’s then CEO
4
. Ms
Hull ceased to be an Independent Director because of her role as Interim CEO.

14. On 2 March 2021, TRU advised the market that Dr Dexter Cheung had been
appointed as a non-executive director of TRU. The Companies Register records
his appointment date as 1 March 2021. Dr Cheung was determined by TRU to be
an Independent Director.

15. TRU advised NZ RegCo during its investigation that Dr Cheung replaced Ms Hull
on the Audit Committee on 1 March 2021
5
. The Tribunal notes that TRU’s annual
report for the financial year ended 31 March 2021 (the 2021 Annual Report)
records its Audit Committee as comprising two members – Independent Director
Mr Horn (Chair) and Ms Hull
6
.

16. TRU’s annual reports for the financial years ended 31 March 2022 and 31 March
2023 both stated that its Audit Committee comprised two members –
Independent Directors Mr Horn (Chair) and Dr Cheung
7
.

17. On 19 July 2023
8
, NZ RegCo notified TRU that its Audit Committee appeared to
have only two members in breach of the Rules and noted that its Audit
Committee Charter (available on TRU’s website) appeared to envisage a two-
member Committee
9
.

18. In its response to NZ RegCo of 2 August 2023, TRU accepted that it had not
complied with the Rules requirement to have three members on its Audit
Committee. TRU advised that it had sought to have sufficient separation
between its Board and Audit Committee, and to maintain an independent Audit
Committee. It noted that when Ms Hull was appointed Interim CEO, TRU
considered that it was inappropriate for her (then an Executive Director) to also
sit on the Audit Committee, and to maintain an independent Audit Committee of
three would have required including its Board Chair as a member (which it
considered to not be best corporate governance practice). TRU advised NZ
RegCo that it would appoint Ms Hull
10
to the Audit Committee and amend its
Audit Committee Charter to remedy the breach
11
.

19. TRU confirmed to NZ RegCo on 7 September 2023 that Ms Hull was appointed to
the Audit Committee at a board meeting on 29 August 2023
12
. As a result,
TRU’s Audit Committee now has three members. TRU has updated the Audit

4
TRU market announcement of 26 February 2021.
5
Annexure 7 of the SOC – TRU email to NZ RegCo of 2 August 2023. The Tribunal notes that
while there appears to be a two-day gap between Ms Hull’s appointment as Interim CEO on
Friday 26 February 2021 and Dr Cheung’s appointment to the Audit Committee on Monday 1
March 2021 – during which time Ms Hull was no longer an Independent Director - these two days
occurred over a weekend.
6
Page 53 of the TRU Annual Report 2021. The 2021 Annual Report states that “subsequent to 31
March 2021”, Ms Hull retired from the Audit Committee and Dr Cheung was appointed. This
statement appears to be incorrect based on TRU’s advice that Dr Cheung replaced Ms Hull on 1
March 2021.
7
Page 64 of the TRU Annual Report 2022 and Page 63 of the TRU Annual Report 2023.
8
Annexure 6 of the SOC.
9
Annexure 5 of the SOC.
10
Ms Hull ceased to be an Executive Director of TRU on 6 October 2022, following TRU’s
appointment of a new CEO.
11
Annexure 7 of the SOC.
12
Annexure 9 of the SOC.

4
Committee Charter available on its website, which now requires the Audit
Committee to have three members
13
.

Breach

20. TRU was in breach of Rule 2.13.2(b) from 20 October 2020 until 29 August 2023
because during that period its Audit Committee had only two members. TRU
admitted it breached Rule 2.13.2(b)
14
.

Tribunal approach to penalty

21. Under the Tribunal Rules, the Tribunal can impose a fine of up to $500,000 for a
breach of the Rules
15
. Section 9 of the Tribunal Procedures (the Procedures)
provide guidance to the Tribunal on assessing the appropriate financial penalty
for a breach of the Rules. The Tribunal’s determination in NZMDT 1/2023 NZX
Limited v Hallenstein Glasson Holdings Limited (the HLG decision) outlines the
Tribunal’s approach to the Procedures. As noted in the HLG decision, the
Procedures are not determinative. The Tribunal will ultimately exercise its
discretion to determine the appropriate penalty when considering the overall
circumstances of the matter.

22. The Procedures set out a two-step process for the Tribunal to follow:

Step 1 – identify a starting point penalty by assessing the factors relevant to the
breach and the impact or potential impact of the breach; and

Step 2 – adjust that starting point penalty to reflect all the aggravating and
mitigating factors relevant to the respondent.

Step 1: Factors relating to the breach

23. The Procedures set out three starting point penalty bands, within which
the Tribunal will identify a starting point penalty:

Penalty Band Range of Financial Penalty
Penalty Band 1 – Minor Breaches $0 to $40,000
Penalty Band 2 – Moderate Breaches $30,000 to $250,000
Penalty Band 3 – Serious Breaches $200,000 to $500,000

24. Procedure 9.2.1 states that the appropriate penalty band for a breach of the
Rules will be determined based on an overall assessment of the seriousness of
the breach in each case.

25. Procedure 9.2.2 sets out factors which fall within each penalty band which the
Tribunal may consider when assessing the most appropriate penalty band and
the starting point penalty within that band
16
. These factors all relate to the
obligation breached and the impact or potential impact of the breach. As noted
in Procedure 9.2.2, it is unlikely that all the factors within one penalty band will
be present in a particular matter. In most cases, a matter will likely have a
combination of factors from two or more penalty bands. It is also possible for a
matter to fall within a penalty band where only one factor exists. Accordingly,

13
TRU Audit and Risk Management Committee Charter – see here.
14
Annexure 7 of the SOC.
15

Tribunal Rules 9.1.2(e) and 9.2.2(f).
16

See Appendix 1 for a copy of the table of factors which fall within each penalty range.

5
the Tribunal will use its discretion to weigh up all the factors present to ensure
that they are appropriately balanced.

Step 2: Factors relating to the respondent

26. Once the Tribunal has determined the appropriate penalty band and the starting
point penalty, it must then determine the final penalty by adjusting the starting
point penalty to reflect all the aggravating and mitigating factors relevant to the
respondent (Procedure 9.2.3).

27. Procedures 9.2.5 and 9.2.6 set out a non-exhaustive list of factors which are
likely to lower or increase (or reduce the ability to lower) the starting point
penalty
17
. Procedure 9.1.1 notes that the ultimate financial penalty for the
breach may fall outside of (above or below) the starting point penalty band
initially identified by the Tribunal.

Submissions on penalty
28. In summary, NZ RegCo submits that the appropriate penalty band for TRU’s
breach is Penalty Band 2 and that the appropriate starting point penalty is
$60,000. NZ RegCo submits that the mitigating factors in this case outweigh the
aggravating factors, and considers that a final penalty of $30,000 is appropriate.

29. TRU has not made any submissions on penalty, but noted that it is a small
company with ongoing challenging trading conditions
18
.

Step 1: Tribunal assessment of the starting point penalty

Penalty Band factors

30. The Tribunal has considered the applicable penalty band factors relevant to the
breach and outlines its assessment of these below.

Applicable Penalty Band 1 factors

a) Not caused any loss;

31. NZ RegCo has not identified any loss caused by the breach.

b) No/minor impact on investors and the market;

32. NZ RegCo has not identified any market impact associated with the breach.

c) No financial benefit or commercial advantage;

33. NZ RegCo has not identified any financial benefit or commercial advantage to
TRU arising from the breach.

Applicable Penalty Band 2 factors

d) Moderate compliance breach

34. The Tribunal notes that having at least three members is an important
component to ensuring a robust Audit Committee, in conjunction with the
requirements that all members are Directors, there is a majority of Independent
Directors and at least one member has an accounting or financial background.

17
See Appendix 2 for a copy of the non-exhaustive list of factors which are likely to lower or
increase the starting point penalty.
18
TRU email to the Tribunal of 5 December 2023.

6

35. While TRU’s Audit Committee had only two members during the period it was in
breach, TRU did comply with the other requirements of Rule 2.13.2 - both
members were Independent Directors
19
and at least one member had an
accounting background
20
. The Tribunal considers that these facts reduce the
seriousness of the breach, as noted in its decisions NZMDT 4/2023 NZX Limited
v Millennium & Copthorne Hotels New Zealand Limited and NZMDT 5/2023 NZX
Limited v CDL Investments New Zealand Limited (the MCK and CDI decisions).

36. The Tribunal considers that the breach was a moderate compliance breach.

e) Potential to cause a moderate impact on investors and the market;

37. As noted in the HLG decision, the key to whether there is potential harm is to
look at the nature of the harm that the relevant Rule is seeking to prevent and
to assess the potential for that harm to occur at the time of the breach.

38. The Rules requirement that an Audit Committee have at least three members is
intended to ensure there are sufficient different perspectives to perform an Audit
Committee’s responsibilities. The potential harm here is that TRU’s Audit
Committee was less robust because it had two members, not three. During the
period TRU was in breach, the members of the Audit Committee were both
Independent Directors
21
and the Audit Committee Chair (Mr Horn) was an
Independent Director with significant accounting expertise. While not alleviating
TRU from its obligation under the Rules, in the Tribunal’s view this combination
of factors lessened the potential impact of the Audit Committee breach on
investors and the market. TRU also submits that its Audit Committee meetings
typically had its full board or at least three Directors in attendance
22
.

39. The Tribunal considers that in these circumstances, the breach had the potential
to cause a moderate impact on investors and the market.

Applicable Penalty Band 3 factors

f) Breach continued for an extended period of time;

40. The breach continued for 2 years and 10 months, which the Tribunal considers
to be an extended period of time
23
.

g) Breach continued to occur once discovered

41. NZ RegCo submits that TRU delayed in taking remedial action because it notified
TRU of the apparent breach on 19 July 2023, but TRU did not appoint a third
member to its Audit Committee until 29 August 2023
24
.

42. The Tribunal considers that TRU should have acted urgently to rectify the
breach, rather than wait for its next scheduled Board meeting. However, the
brief continuation of the breach likely had a minimal impact in this situation,
given the Audit Committee had two Independent Directors and, accordingly, the
Tribunal considers this factor to have limited weight.

19
Noting the Tribunal’s comments at footnote 5 above.
20
Mr Horn is noted in TRU’s annual reports as being a Fellow of the Chartered Accountants in
Australia and New Zealand and was a partner of KPMG and its predecessor firms for 20 years.
21
Noting the Tribunal’s comments at footnote 5 above.
22
Annexure 7 of the SOC, TRU email to NZ RegCo of 2 August 2023. TRU also noted in an email
to the Tribunal of 10 December 2023 that Mr Ho had attended the Audit Committee meetings
held on 25 June 2021 and 29 June 2022.
23
This is consistent with the Tribunal’s determination of a 2½ year breach of Rule 2.13.2(b) in
the MCK and CDI decisions as being a breach of extended duration.
24
Annexure 9 of the SOC, TRU email to NZ RegCo of 7 September 2023.

7

Starting point penalty

43. After weighing up the factors outlined above, the Tribunal considers that the
breach falls within Penalty Band 2. While the breach occurred over an extended
period, this factor was counter-balanced by no loss, impact or financial gain
being identified as arising from the breach. Given that the Tribunal considers
the breach to have been a moderate compliance breach with the potential to
have caused a moderate impact on investors and the market, Penalty Band 2 is
appropriate.

44. In the MCK and CDI decisions, the Tribunal assessed the appropriate starting
point penalty to be $55,000 for their respective breaches of Rule 2.13.2(b) in
very similar circumstances (MCK and CDI’s Audit Committees also had two
members - both Independent Directors and at least one with an accounting
background - and the duration of the breach was 2½ years). NZ RegCo submits
that the appropriate starting point penalty in this case should be higher to reflect
that in TRU’s case, it did not ‘self-identify’ the breach (as MCK and CDI did) and
did not act swiftly to rectify it. The Tribunal does not consider that these factors
indicate that a higher staring point penalty is warranted in this case, noting that
it did not consider that MCK and CDI’s self-identification of breach (which was
not self-reported) should lessen the penalty in those cases
25
and that the brief
continuation of TRU’s breach has limited weight.

45. The Tribunal considers that the appropriate starting point penalty is $55,000.

Step 2: Tribunal assessment of factors relating to TRU

46. To determine the final level of penalty, the Tribunal must adjust the starting
point penalty to reflect the relevant aggravating and mitigating factors.

Aggravating factors

(1) Breach was careless;

47. NZ RegCo submits that TRU was “negligent” in its understanding of the Rules and
that a review by TRU of its obligations under the Rules would have identified the
breach.

48. TRU advised NZ RegCo that it had sought to separate the Audit Committee from
the Board to focus on the matters outlined in its Audit Committee Charter. TRU
noted that it did not consider it best practice for the Board Chair to also be on
the Audit Committee (Mr Ho ceased to be a member of the Audit Committee on
20 October 2020). TRU also noted that following the departure of its then CEO,
Ms Hull was appointed Interim CEO and TRU considered it was inappropriate for
her to sit on the Audit Committee while holding this role.

49. TRU may have had good intentions with regard to its Audit Committee
composition. However, TRU appears to have been unaware of the requirement in
the Rules to have at least three members, given its Audit Committee Charter had
stipulated two members, not three.

50. As noted in its decision on appeal of NZMDT 2/2023 NZX Ltd v 2 Cheap Cars
Group Ltd, the act of breaching a Rule may not of itself be negligent, rather
some additional element is required to elevate a breach to this level. The
Tribunal considers that TRU was careless with regard to Rules compliance.



25
See paragraphs 66 of the MCK and CDI decisions.

8
(2) Compliance history;

51. TRU was referred to the Tribunal in 2018 for a breach of then NZAX Listing Rule
3.2.1 for failing to have at least two Directors who were ordinarily resident in
New Zealand. There were a number of mitigating factors in that case which led
the Tribunal to publicly censure TRU, but not impose a penalty (including that the
Director had withdrawn suddenly from re-election at TRU’s AGM, TRU self-
reported the breach and promptly appointed a replacement Director within 18
Business Days).

52. Previous Rule breaches are relevant when assessing an Issuer’s compliance
history
26
. While the Tribunal considers that TRU’s previous breach is a relevant
factor, it is not a significantly aggravating factor given the circumstances of that
breach.

Mitigating factors

(1) Early admission of breach;

53. TRU admitted the breach when it was first brought to its attention by NZ RegCo.

(2) Full cooperation with investigation;

54. NZ RegCo submits that, while its engagement with TRU was limited given the
simple nature of the breach, TRU was “complete and open in its responses”
(although the Tribunal notes that TRU overlooked responding to NZ RegCo’s
question on when Mr Ho ceased to be a member of the Audit Committee, which
necessitated the Tribunal having to seek this information itself).

(3) Adverse effect on ongoing commercial viability

55. NZ RegCo submits that a reduction in the starting point penalty is appropriate in
this case to recognise TRU’s “adverse financial position”.

56. Under Procedure 9.2.5(i) the Tribunal may consider, as a factor likely to lower
the starting point penalty, the “starting point penalty having an adverse effect on
the ongoing commercial viability of the Respondent”. This is a new mitigating
factor introduced when the Procedures came into force on 17 October 2022.

57. This mitigating factor does not relate to the size of an Issuer. As noted in the
appeal of the 2CC decision, all Issuers are required to comply with the Rules,
regardless of size, and an Issuer’s size is not, of itself, a mitigating or
aggravating factor. Rather, this mitigating factor relates to the financial position
of an Issuer and whether the starting point penalty would adversely effect its
ongoing commercial viability. A relatively high threshold is required before this
factor will apply given that the penalties imposed by the Tribunal are intended to
be punitive.

58. TRU released its financial statements for the year ended 31 March 2023 on 30
June 2023, in which it recorded a $2.4million loss, with net assets of $2.5million.
TRU’s 2023 financial statements record at note 1(a):
“Going concern...there is material uncertainty in relation to the
Group’s ability to meet forecasts and to raise additional capital, if and
when required. These factors cast significant doubt on the Groups ability
to continue as a going concern. If the going concern assumption is not
valid, the consequence is the Group may be unable to realise the value

26
See NZMDT 2/2023 NZX Ltd v 2 Cheap Cars Group Limited.

9
in its assets and discharge its liabilities in the normal course of
business.”
27

59. The audit report by TRU’s auditor, RSM Hayes Audit (RSM), noted that the group
needed to achieve forecast revenue growth, maintain its cost base and obtain
additional funding (via capital raising or an alternative transaction) to finance its
operations. RSM noted that these events or conditions indicated that material
uncertainties exist that may cast significant doubt on TRU’s ability to continue as
a going concern.

60. TRU’s unaudited interim financial statements for the half year ended 30
September 2023, released on 6 November 2023, recorded an operating loss of
$1.35million and net assets of $1.2million. As at 30 September 2023, TRU had
cash and cash equivalents of $0.8million.

61. The Tribunal notes that the application of this mitigating factor is necessarily fact
specific, and that a respondent’s financial position may, in some circumstances,
have the effect of reducing the starting point penalty.

62. While the starting point penalty of $55,000 is not significant given the penalty
range available under Penalty Band 2, the Tribunal considers that in the
circumstances of this case, a penalty at this level may well have an adverse
effect on TRU’s ongoing commercial viability. Accordingly, the Tribunal has taken
this factor into account when determining the appropriate overall penalty.

Penalty

63. The Tribunal considers that having regard to the factors noted above, a
significant reduction from the starting point penalty is warranted. The Tribunal
imposes an ultimate penalty of $25,000. In determining the final penalty, the
Tribunal has given particular weight to (i) TRU’s immediate admission of breach;
(ii) cooperation with NZ RegCo and the Tribunal; and (iii) the penalty having an
adverse effect on TRU’s ongoing commercial viability.

64. In the MCK and CDI decisions, the Tribunal determined that an overall penalty of
$50,000 was appropriate, with $35,000 attributable to their respective breaches
of Rule 2.13.2(b). The Tribunal considers that a lower penalty is appropriate in
this case given (i) that MCK and CDI also breached Rule 3.8.1 (multiple Rule
breaches attract higher penalties); and (ii) the additional mitigating factor of the
penalty having an adverse effect on TRU’s ongoing commercial viability.

65. The Tribunal considers that the penalty of $25,000 in this case is significant
enough to act as a deterrent with respect to Audit Committee composition
breaches.

Public censure
66. Procedure 9.3 provides guidance on when the Tribunal may be likely to exercise
its power under the Tribunal Rules to publicly censure a respondent.

67. NZ RegCo submits that none of the grounds favouring non-publication have been
demonstrated in this case and that a public censure of TRU is appropriate
because the breach falls within Penalty Band 2, there is educative value in
naming TRU and benefit in signalling NZ RegCo’s expectations regarding
corporate governance. TRU made no submissions on censure.

68. Having regard to the guidance set out in Tribunal Procedure 9.3, the Tribunal
considers it is appropriate to publicly censure TRU given the breach fell within

27
Page 29 of the TRU Annual Report 2023.

10
Penalty Band 2. The Tribunal notes that its public censure of TRU will be
released together with a copy of this determination.

Costs

69. NZ RegCo submits that TRU should pay the costs incurred by NZX and the
Tribunal in relation to this matter. TRU made no submissions on costs.

70. Generally, where a respondent is found to have breached the Rules the Tribunal
will award the actual costs of NZX and the Tribunal against that party. Given
TRU’s breach of the Rules, the Tribunal considers that it is appropriate to make a
costs award against TRU. However, in the particular circumstances of this case,
as discussed above, the Tribunal caps the award at $5,000 (excluding GST, if
any).

Orders
71. The Tribunal orders that TRU:

a. be publicly censured in the form of the announcement attached to this
determination (which will include a full copy of this determination);

b. pay $25,000 to the NZX Discipline Fund; and

c. pay the costs incurred by NZX and the Tribunal in considering this matter
up to a maximum amount of $5,000 (excluding GST, if any).

72. The Tribunal encourages NZ RegCo to discuss the possibility of deferred payment
terms with TRU (although acknowledges that the collection of penalties and costs
under the Tribunal Rules is at the discretion of NZX).

DATED 15 DECEMBER 2023

11
Appendix 1
Penalty Band Factors
Penalty Band 1 Minor
Breaches
• The breach is a minor administrative, operational
and/or compliance breach.
• The breach has not caused any loss.
• The breach has not had an impact on or has only
had a minor impact on investors, clients, and/or the
market.
• The breach was promptly addressed.
• The breach did not result in a financial benefit
and/or commercial advantage to the Respondent.
Penalty Band 2 Moderate
Breaches
• The breach is a moderate administrative,
operational and/or compliance breach.
• The breach has caused a moderate impact on
investors, clients, and/ or the market.
• The breach had the potential to cause a moderate
impact on investors, clients, and/or the market.
• The breach occurred for a short period of time.
• The breach resulted in a minor to moderate financial
benefit and/or commercial advantage to the
Respondent.
Penalty Band 3 Serious
Breaches
• The breach is a serious administrative, operational
and/or compliance breach.
• The breach has caused significant impact on
investors, clients and/ or the market.
• The breach had the potential to cause significant
impact on investors, clients and/or the market.
• The breach continued for an extended period of
time.
• The breach continued to occur once discovered.
• The breach resulted in a significant financial benefit
and/or commercial advantage to the Respondent.
• The Respondent committed the breach to obtain a
financial benefit and/or a commercial advantage.

12
Appendix 2
9.2.5

The following non-exhaustive factors relating to the Respondent may be considered
by the Tribunal as factors that are likely to lower the starting point penalty:
(a) The Respondent admitted the breach at an early stage, and/or self-reported
the breach;

(b) The Respondent cooperated fully and openly with NZX or CHO (as the case may
be) with any investigation surrounding the breach and provided all material
facts;

(c) The Respondent has implemented or has undertaken to implement or enhance
processes, systems, or procedures to prevent similar future breaches;

(d) The breach occurred even though effective compliance / administrative /
operational processes were in place;

(e) The Respondent provided prompt redress for any harm caused as a result of
the breach;

(f) The breach is a one-off event and does not form part of a pattern of behaviour
or conduct;

(g) The Respondent has a good compliance history;

(h) where applicable, the Respondent obtained independent legal, accounting or
professional advice that the conduct did not constitute a breach and reasonably
relied upon that independent advice; and

(i) the starting point penalty having an adverse effect on the ongoing commercial
viability of the Respondent.

9.2.6

The following non-exhaustive factors relating to the Respondent may be considered
by the Tribunal as factors that are likely to increase the starting point penalty or
reduce the ability to lower it:
(a) The breach was caused intentionally by the Respondent, or through the
Respondent’s recklessness;

(b) The Respondent hindered NZX or CHO (as the case may be) with any
investigation surrounding the breach and did not provide all material facts;

(c) The Respondent should reasonably have been aware that the breach could
occur and did not implement or undertake to implement or enhance processes,
systems or procedures to prevent similar future breaches;

(d) The Respondent was aware that its compliance / administrative / operational
processes were not adequate or ineffective and failed to rectify them;

(e) The Respondent failed or delayed in providing redress for any harm caused as a
result of the breach;

(f) The breach is a recurring breach, or forms part of a pattern of behaviour or
conduct;

(g) The Respondent has a poor compliance history; and

(h) Where applicable, the Respondent either failed to seek independent legal,
accounting or professional advice or acted contrary to legal, accounting or
professional advice obtained that the conduct did constitute a breach.

---

3 January 2024

PUBLIC CENSURE OF TRUSCREEN GROUP LIMITED BY THE NZ MARKETS
DISCIPLINARY TRIBUNAL FOR BREACH OF NZX LISTING RULE 2.13.2(b)

In a determination of the NZ Markets Disciplinary Tribunal (the Tribunal) dated
15 December 2023, the Tribunal found that Truscreen Group Limited (TRU) breached
NZX Listing Rule (Rule) 2.13.2(b).

Under Rule 2.13.2(b) an Audit Committee must have at least three members. From
October 2020 until August 2023, TRU’s Audit Committee had only two members. The
breach was identified by NZ RegCo following a review of Issuers’ Audit Committees to
access compliance with the Rules. Following notice by NZ RegCo, TRU rectified the
breach by appointing a third Director to the Audit Committee on 29 August 2023.

The Tribunal noted that having at least three members is an important component to
ensuring a robust Audit Committee. However, the seriousness of TRU’s breach was
reduced given that both members of the Audit Committee were Independent Directors
and that the Audit Committee Chair had significant accounting expertise.

In determining penalty, the Tribunal had regard to TRU’s early admission of breach,
cooperation with NZ RegCo and the Tribunal, and the adverse effect the penalty could
have on TRU’s ongoing commercial viability.

The Tribunal ordered TRU to pay a financial penalty of $25,000, pay the costs of NZX
and the Tribunal up to a maximum amount of $5,000 (excluding GST, if any), and be
publicly censured in the form of this announcement.

The determination of the Tribunal in this matter is attached to this announcement.