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Wild West Goes Mickey Mouse

Wild West Goes Mickey Mouse

Wednesday, September 26 2001 Stephen Franks Press Releases -- Commerce

The Prime Minister's 'don't sell' advice on Air New Zealand last night takes the Government's handling of Air New Zealand beyond disgrace into farce, ACT Commerce Spokesman Stephen Franks said today.

"While appearing as a 'don't sell', it was really advice that the shares were worth more than the market was expecting.

"Her tip on national television may have squeezed through a little-known loophole of insider trading law. None of the offences cover using inside information to tip people not to buy or sell.

"Unavoidably, the Government is an insider through what they have been told in confidence. But whether getting through the loophole was good luck, or on the advice of a cunning lawyer, the Mickey Mouse effect is the same. Insider trading regimes regard an insider who gives a 'hold tip' as unethical, even though enforcement problems mean that it is not punishable here.

"Commerce Minister Swain came to power on an election promise to toughen up insider trading law. He and Ms Clark have delighted in reviving the false claim that New Zealand is a wild west securities market. Now the Great Helmswoman has made it really a Mickey Mouse country.

"In the midst of delicate negotiations, while possessing price sensitive information the Prime Minister went and tipped the whole market.

"Among the effects:

If it was in effect thinly disguised 'buy' advice (which is how an information-starved market naturally saw it), the Prime Minister may yet be made culpable under insider trading law. She will remain exposed until all the price sensitive information the Government has given has been released publicly.

Under disclosure rules, the directors must stop any further supply of confidential information to the Government. Due diligence is already a clear breach of insider trading law. The regime the Exchange developed to regulate it turns a blind eye to the breaches, provided the directors can be sure the information will be kept confidential, and those getting the benefit of due diligence do not trade or tip. The directors have now lost that defence.

BIL's bargaining position is strengthened enormously. They can now calculate that the Government can't pull out - because the Prime Minister has stacked both political credibility, and maybe even personal liability exposure (for negligent advice), on the rescue succeeding. "And still they have not done the obvious, lawful thing - assuring ticket buyers that the services will keep operating, and that tickets will be honoured. Instead, they are rescuing BIL and Singapore Airlines," Stephen Franks said.

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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