Insider trade regime sought

By FIONA ROTHERHAM

The Securities Commission hopes to formalise New Zealand Stock Exchange referrals of possible insider trading and sharemarket manipulation within the next year.

Referrals, usually triggered by large share price or volume movements ahead of a market announcement by a listed company, already occur on an informal basis. About eight referrals are made each year.

"We've had preliminary discussions with the exchange, and agreed in principle on a broad outline of what things may be included," said John Farrell of the Securities Commission.

However, stock exchange chief executive Bill Foster said the exchange did not see the need for a formal arrangement.

The commission has no power, nor the desire, to force a formal arrangement on the exchange.

The memorandum of understanding would cover under what circumstances references were made to the commission, and what information was provided by exchange members.

In the past, the commission said, some broking firms had had problems meeting its requests for information.

The commission's desire to formalise the existing arrangement was outlined in its recommendations this year to the Government for improving enforcement of insider trading and other market rules. The report, obtained under the Official Information Act, also recommended setting up a computerised market surveillance system similar to those in Australia and Hong Kong.

The stock exchange has said it does not believe an electronic surveillance system is worth the expense, at least until trading volumes increase.

Mr Foster said a formal arrangement on insider trading and market manipulation referrals could make an electronic system unnecessary.

"We only want this if the commission is willing to fund it. We don't want to impose more costs on market participants."

The commission completed six insider trading inquiries last financial year. It named former Fletcher Challenge chairman Kerry Hoggard as an insider trader last month.

Five other possible cases are still under investigation, including trading in shares of property developer and cinema company Force Corporation during since-failed merger talks in February.

The Government is to release a discussion document on detection and enforcement of insider trading in August, with decisions by the end of the year.