28 March, 2001 Media Statement

Insider Trading Regime Changes Announced

Acting Commerce Minister Trevor Mallard today announced changes to improve New Zealand’s insider trading regime

“An effective insider trading regime plays an important part in determining how domestic and overseas investors see the New Zealand market,” Trevor Mallard said.

“There is a perception that in New Zealand insiders go unpunished and our regime is inadequate. This undermines confidence in our market and must be addressed.

“Last September the government released a discussion document on New Zealand’s insider trading regime - that document focussed on improving prevention, detection and enforcement.

“Following submissions on that discussion document the government has decided to make several improvements.

Prevention
“The government plans to introduce two measures to prevent insider trading.

"First, a statutory continuous disclosure regime that requires companies to provide ongoing and timely disclosure of information that would have a material effect on the price of securities.

"Secondly, requiring directors to disclose their share dealings at the time they are made.

“These measures would act as a deterrent to improper trading on the market, counter the distortion of the market through rumours and enable investors to make informed investment decisions.

Detection
"We intend placing a statutory obligation on the NZSE to provide information about breaches of securities law, as it becomes aware of them, and on request, to the Securities Commission.

"This will provide a signal to the market that clear lines of accountability and obligations exist between the two parties regarding information about breaches of securities law.

"Officials are also exploring the costs and benefits of improving surveillance systems for insider trading in New Zealand.

Enforcement
"At present there is no public enforcement body to undertake prosecutions of insider trading in New Zealand - the only recourse is through costly and time consuming private legal action.

"To improve enforcement we intend establishing the Securities Commission as a public enforcement agency. This could act as a deterrent to insider trading activity and provide a body that would be able to take an action for the public benefit and not be dissuaded by the time or cost involved.

"Officials are working on the technical detail of all these proposals and are scheduled to report back to Cabinet by mid-2001. It is anticipated that legislation will be enacted by the middle of next year.

"In light of submitter’s comments that the current insider trading regime is impractical and unworkable the government also plans to undertake a broader review of insider trading law.

"This review will also consider the implementation of market manipulation law and the possibility of introducing criminal penalties for insider trading and continuous disclosure.

"Discussion papers on these issues will be released by the end of this year," Trevor Mallard said.

ENDS

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