Directors wanting to sell shares on notice

Company directors take note.

The high-profile insider trading action the Securities Commission is taking in Tranz Rail's name has huge ramifications for directors and executives who want to sell shares in the companies they are associated with.

That is the contention of Auckland barrister Anthony Grant, QC, who is representing former Tranz Rail chief financial officer Mark Bloomer.

The commission alleges that the consents given by the company's compensation committee to Bloomer's applications to sell shares were "invalid". It says at all material times Tranz Rail "could not have been reasonably satisfied" as to the truth of his statement that "he had not made his decision to dispose of the shares on the basis of inside information".

Says Grant: If the commission establishes the precedent to overturn directors' approvals it will be difficult for either directors or executives to buy and sell shares in their own companies, as they usually have some information others don't.