An adequate and effective insider trading regime plays an important part in determining how NZ and overseas investors perceive the New Zealand market.

A perception currently exists in the New Zealand market that insiders go unpunished and that our regime is inadequate. This has been highlighted again recently by the Fletcher Challenge case. This perception undermines confidence in our market and needs to be addressed as a matter of urgency.

If investors believe that insider trading exists and goes unpunished, they may presume that securities are the domain of those with access to privileged information and that others will inevitably miss out as the gains go to insiders.

There seems to be differing views among the public as to whether it is problems with the substantive law, or the fact that our law is not adequately enforced, that have led to the lack of successful prosecutions and the lack of confidence in our regime.

Last September we released a discussion document on New Zealand's insider trading regime. While the discussion document focused primarily on improving prevention, detection and enforcement of the current insider trading regime, it also sought views on the definitions and other substantive provisions of our insider trading legislation.

The purpose of the discussion document was not only to obtain people's views on prevention, detection and enforcement - in order to get some quick runs on the board and resolve many of the problems with our regime - but also to see whether there was public support for a more fundamental review.

This discussion document has enabled the government to identify the concerns the public may have with existing law and regime.

Many of the submissions received on the discussion document supported the current focus of the review on enforcement, prevention and detection and appreciated the fact that government is keen to get moving on this.

Some submitters also identified problems with the definitions and other substantive provisions of the legislation.

The key thing to remember in this is that business has been demanding changes to the present regime. The government has not made any forgone conclusions about what those changes will be, that is why we have had the discussion document process.

Officials will report to me in February and I will be making announcements soon after.

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