Between the lines Insider laws again fall short

If ever a case spotlighted the deficiencies of New Zealand's securities laws, and their enforcement, it is this one: a man uses information, surreptitiously obtained, to manipulate the market in Fletcher Paper shares and clears a tidy profit, with impunity.

The affair is troubling at many levels.

Can it really be that there is nothing in the statute books that covers this behaviour? And even if there is not, could not the Securities Commission at least name the manipulator, EF?

One reason it cites for not doing so is that it would then have to name all the parties involved. It has decided it would be unfair to name AB, through whom the draft press release about Fletcher Challenge's intentions leaked.

The commission portrays her as an innocent victim, who acted in good faith but who could be liable under the tipping provisions.

AB told the commission that the release only confirmed what she had already heard from someone who had heard it in turn from a Fletcher employee.

But Fletcher Challenge has "reservations" about this version of events. A company spokeswoman says it investigated the matter, doubted that the employee concerned could have had the information and took no further action.

The commission did not, says its chairman, Euan Abernethy, investigate that matter itself.

Instead, it relied largely on information provided by the Serious Fraud Office and the company.

Mr Abernethy says AB did not profit from the information. Her husband bought a "relatively small" number of Fletcher Paper shares, after the leak, in their joint names, but she says she did not know he was going to and he did not know what was in the document.

The commission's reticence could be based on a gallantry towards AB that is misplaced.

It is also unfortunate that Fletcher Challenge itself is not willing to sue the manipulator under the Securities Amendment Act.

It may be that, as the law stands, the action would not succeed, but in the circumstances, and given that it was Fletcher's shareholders who were ripped off, it would seem to be worth a try.

Finally we are left, as in the case of Eric Watson and McCollam Print, with the commission recounting behaviour "which is not what you would expect to see in well-regulated markets" but which the present definition of insider trading does not catch.

Like it or not, difficult or not, the Government will have to grapple with the questions of definition in its present review of insider trading laws.