Directors and Officers disclosure regulations
15 December 2003 Media Statement
Directors and Officers disclosure regulations approved
New Securities Markets (Disclosure of Relevant Interests by Directors and Officers) Regulations 2003 were approved today and will come into force on 1 March 2004, Commerce Minister Lianne Dalziel has announced.
"This is part of the government's on-going effort to promote transparency and good corporate governance in securities dealings,” Lianne Dalziel said.
Amendments to the Securities Markets Act 1988, enacted last year, introduced a requirement that directors and officers of public issuers disclose relevant interests and dealings in securities of that public issuer and any related body corporate within five trading days.
"The purpose of these provisions is to improve transparency, ensuring that information about directors’ and officers’ holdings is up-to-date and relevant to the market, which should reduce opportunities for insider trading and market manipulation.
"The regulations clarify who is considered to be an 'officer' for the purposes of the Act, as well as setting out the details of disclosure requirements. The regulations also include a set form for disclosure, which will minimise compliance requirements,” Lianne Dalziel said.
The regulations also provide exemptions for situations where disclosure is required, but would not convey any relevant information to the market. This includes exemptions for "technical" interests and employee share schemes.
The statutory obligations will replace those currently found in the NZX Listing Rules that were introduced by NZX following the amendments to the Securities Markets Act, in anticipation of these regulations.
Attached: Summary of disclosure requirements.
Appendix: Summary of Disclosure Requirements
Form of Disclosure
Under the Securities Markets Act 1988, a director or officer of a public issuer that has a relevant interest in the security of that public issuer or related body corporate must complete a prescribed disclosure notice, contained in the Securities Markets (Disclosure of Relevant Interests by Directors and Officers) Regulations 2003.
This disclosure notice must be filed within five trading days of 1 March 2004 (the commencement of the section), the listing of the public issuer, the person's appointment as a director or officer, or any subsequent trading in the securities of the public issuer.
Provision is also made for electronic filing of disclosure notices, and for aggregating certain transactions into one disclosure notice.
Content of Disclosure
The following information must be included in the prescribed disclosure notice:
- the nature of the relevant interest,
including the circumstances in which it arises;
- the number and class of securities to which the relevant interest relates or related;
- the date(s) of the disclosure obligation becoming applicable, or the date(s) of the acquisition or disposal;
- the consideration paid or received for the acquisition or disposal;
- details as to the circumstances in which the acquisition or disposal occurred; and
- the date of the last disclosure by the director or officer.
Exemptions from Disclosure
The Regulations also provide several exemptions in order to ensure that the disclosure requirements operate in a feasible manner. This includes an exemption for the definition of "officer," which is defined in section 2 of the Act as a person who "takes part in the management" of a public issuer's business. The exemption provides further certainty about who is not an officer for the purposes of the regime, that is:
a. Persons who do not directly report
to the board of directors of a public issuer;
b. Persons who do not directly report to anyone described in (a);
c. Persons who do not directly report to anyone described in (b); and
d. Persons who do not manage a principal business unit, division or function of a public issuer
Before a disclosure obligation can arise, however, persons must still be involved in "management" as per the section 2 officer definition.
The Regulations also provide exemptions for situations where disclosure is required on the face of the requirements, but in reality such disclosures would not convey any useful information to the market. This includes the following:
- A partial exemption
from the time requirements for ongoing offers such as bonus
issues, share splits or buy-backs that are made on an equal
basis to all security holders;
- An exemption for "technical" interests, where a person has a relevant interest, but the holder is subject to the over-riding control of others such as in the case of a bare trustee or a share broker acting on behalf of clients;
- A partial exemption for employee share schemes, where interests held on behalf of the members of the scheme can change frequently, even daily; and
- An exemption for directors and officers that file a notice under the substantial security holder disclosure provisions of the Securities Markets Act.