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Vertex Group Holdings – insider trading inquiry

Vertex Group Holdings Limited – insider trading inquiry

The Securities Commission has undertaken an inquiry into trading in the shares of Vertex Group Holdings Limited (Vertex) during August and September of last year.

This work was in addition to the Commission’s inquiry into the offer and allotment of Vertex shares.

On 4 September 2002 Vertex announced a downgrade of projected earnings and revenue. The New Zealand Stock Exchange referred the matter of trading in Vertex shares to the Commission.

The inquiry considered whether any insider of Vertex, who had advance knowledge of the content of the downgrade announcement, may have traded in Vertex shares, or may have tipped another person to trade.

The Commission reviewed trading and identified sellers of significant amounts of the shares in the period before the announcement. Significant volumes of shares were traded on 27 and 28 August (722,115 and 304,505 shares respectively) compared to daily average volume at the time of around 100,000 shares per day. One party sold a considerable number of Vertex shares ahead of the downgrade.

The Commission questioned this party about the circumstances of its trading, its knowledge of the company and its reasons for selling. The party’s broker was also asked about the circumstances of the sales.

After thorough investigation, the Commission has found no evidence that this party knew of the downgrade in advance.

Vertex provided us with names of people who knew about the content of the downgrade announcement before it was released (insiders). There does not appear to be any connection between any insiders and any sellers of Vertex shares during the review period.

The Commission’s inquiry is now complete.

Norman F Miller Director of Enforcement

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