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Securities Commission Report Released

26 April 2002

The Securities Commission has released a report of its inquiry into statements in the media that led to the trading halts in Air New Zealand (Air NZ) shares in September 2001.

“The Commission has reviewed the circumstances surrounding trading in Air NZ shares in September 2001. This first report covers our findings on various statements in the news media at the time,” Chairman Jane Diplock said.

The report covers statements by the Prime Minister and by Mr Greg Terry, a former director of Air NZ, and media statements that the Office of the Prime Minister approached broking houses about possible steps to be taken by the Government in relation to Air NZ.

The inquiry focused on:

- reported approaches to broking firms by the Office of the Prime Minister;

- whether there is evidence of insider trading in the shares of Air NZ;

- how insider trading rules apply to statements by the Prime Minister;

- how insider trading rules apply to statements by Mr Terry;

- whether the Prime Minister’s statements and the statements of Mr Terry were appropriate.

“It has been an exhaustive and painstaking inquiry,” Jane Diplock said. “We gathered evidence from more than 70 people, and as more evidence became available we sought additional answers from some witnesses. Submissions made by affected parties were carefully considered.”


The Commission found:

- no evidence that the Prime Minister’s Office approached broking houses about possible steps to be taken by the Government in relation to Air NZ;

- no evidence of insider trading by any person in the shares of Air NZ during the period of this inquiry;

- the Prime Minister’s statements about shareholders on 25 September 2001 did not constitute tipping under the Securities Amendment Act 1988;

- Mr Terry’s statements about the share price on 27 September 2001 did not constitute tipping under the Act.

The Commission considers that from a securities market perspective the Prime Minister’s statements regarding shareholders on 25 September and Mr Terry’s statements about the Air NZ share price on 27 September were inappropriate.

“The statements did not breach the law, however they were not appropriate given the status of the people involved and the intense public interest in Air NZ at the time,” Jane Diplock said.

The Prime Minister was at the time an insider of the company. She is an influential figure whose statements are accorded significant weight by the New Zealand public. The Prime Minister’s responses should have distinguished questions about shareholding from issues of confidence in the viability of the airline’s business. A statement referring to shareholders should not have been made in advance of orderly disclosure to the market, through the proper channels, of information about the possible recapitalisation by the Government.

Mr Terry was a director of Air NZ. He was an insider with inside information at the time of his statement on Thursday 27 September 2001. The proper functioning of an orderly, informed market is jeopardised when an insider of a public issuer with inside information publicly makes a statement about possible movements in the level of the share price at a time when the market is already subject to extensive rumour and media speculation.

Potentially price sensitive statements about listed companies made by insiders should be made through proper market information mechanisms, including those of the New Zealand Stock Exchange.


“We recommend that guidelines be drawn up for Ministers and their advisers regarding public statements about listed companies where the Government may have or be perceived to have inside information,” Jane Diplock said. “We understand that such guidelines are being developed.”

The Commission notes Government’s intention to review insider trading law, and recommends that the definition of tipping generally, and “encouragement” in particular, be included in this review.

Further work

The second part of the Commission’s review will consider questions arising from the New Zealand Stock Exchange’s decisions to impose and subsequently lift trading halts in Air NZ in September 2001.

NB The full report is available on our website -


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