Insider Trading Announcements Spurious

Wednesday 28th Mar 2001 Stephen Franks Media Release -- Other

Stephen Franks, ACT’s Justice spokesman and lawyer involved in suing Kerry Hoggard for insider trading in Fletcher Challenge shares today described as laughable the Government’s announcement about insider trading enforcement.

“It is ‘sound bite’ law reform, drip fed out to look active and tough, but without changing things that really make a difference. Legislation is not expected until the middle of 2002, shortly before the election. Effective reform with bite could happen straight away if the Government meant what it says.

“So-called continuous disclosure is a fraud – every country that claims to have it puts in exceptions that mean the result is pretty much what New Zealand now requires.

“Immediate disclosure of share dealings by directors is sensible, if the fine print can be made to work.

“But prior disclosure of intention could be even better, as an optional alternative. The current exemption procedure is open to abuse by the dishonest and is a pain in the neck to the honest.

“The obligation on the New Zealand Stock Exchange to tell the Securities Commission about securities law breaches just beg the question, “What will they do with it?”

“My experience of the Securities Commission’s foot dragging in the Hoggard case convinces me even more that the Minister is heading down the wrong track if he believes insider trading should be tackled by leaving it to the ‘authorities’. Around the world the ‘authorities’ drag their feet unless they have open and shut cases to keep up a track record. They build their empires taking only easy cases. . They shy clear of the hard cases involving establishment figures. If high profile cases are taken it is often where the accused has offended the establishment in some way or other

“We got a Court order in December that the Securities Commission and the brokers involved must hand over their evidence. The Court decision was commendably clear and straightforward.

“The Securities Commission has still not complied.

“They argue that people may be more slow to volunteer information and tip-offs to the Commission, if they think all the details might be handed over to some hostile party in court. I understand that.

“But people only volunteer tip-offs to the Commission because they hope it will do something.

“The Minister is now going to put enforcement into the hands of a Commission that wants to confine itself to issuing reports, but not helping punish wrong doers. People won’t bother to provide information to a Commission like that.

“The Commission has dragged its feet since we started the action. They were so precious they never bothered to discuss common sense co-operation. They had instead a “see you in court” attitude.

“Well they lost, quite rightly. There is now no question but that they must hand over the evidence.

“How much more is the Government going to spend on the Commission, when the Police chasing murderers and rapists haven’t got enough to pay their cell phone bills? The Minister says the Commission wont have to worry about “the time or cost involved” in taking insider trading actions. If so, they will be uniquely privileged. The Serious Fraud Office, the Police, the Commerce Commission have to chase cheap and easy little villains, because they can’t match the pockets of the big villains.

“Our Minister of Commerce is trying to look tough by calling for criminal sanctions. But the UK is just adopting civil penalties (which we already have) because they are more easily prosecuted. And our insider trading definitions are so flawed the Courts will be loathe to convict.

“The things needed to fix our law are not difficult or complicated. They just need a willingness to deal with boring details instead of looking for political king hits.

“As time drags on it seems more and more likely we could end up with an insider trading law cure that is worse than the disease. If promises to enforce the law are shown to be empty, the perceived lack of integrity in the market will be worse than our current defective law, inadequately enforced,” Mr Franks said.

ENDS

For more information visit ACT online at http://www.act.org.nz or contact the ACT Parliamentary Office at act@parliament.govt.nz.

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