Takeover adviser ABN Amro Craigs chided over leak

Takeover adviser ABN Amro Craigs should not have given non-public and potentially sensitive information to its client advisers ahead of the sharemarket being informed, the Securities Commission says.

The firm behaved in an "inappropriate" way in a takeover bid by Craig Norgate's Rural Portfolio Investments (RPI) for Wrightson in June last year, the commission said yesterday.

But the source of the information, British funds manager Marathon Asset Management, was technically not an "insider" under the Securities Markets Act, and so recipients of the information could not be treated as insiders.

"Selective disclosure of information in this way, while not unlawful, is not acceptable practice on the part of a market participant," said commission chairwoman Jane Diplock.

ABN Amro Craigs should have maintained better "Chinese walls" between its investment bankers and client advisers.

The commission referred to the New Zealand Exchange (NZX) report highlighting "an example of poor market practice" after probing allegations of insider trading of Wrightson shares on June 18, 2004.

Wrightson asked the commission to investigate the apparent leaking of price-sensitive information and its use in sharetrading during RPI's takeover bid.

The commission said although there was possibly "inside information" in the case, there was no "insider" as defined in the Securities Markets Act. It said RPI behaved appropriately.

But ABN Amro Craigs, with privileged access to non-public information, appeared to have communicated this to others likely to trade, it said. Marathon told ABN Amro Craigs on the night of June 17 that it would accept the RPI offer of $1.65 each for its 11 million shares, equivalent to 7.9 per cent of Wrightson.

Up to that point the shares had been trading at $1.51 or $1.52, but the next morning trading started at $1.53 and rose to $1.55 before trading was halted by the exchange at 11.17am.

In just 77 minutes, 632,000 shares had been traded, compared with an average daily volume of 390,000 on the first four days of the week. When trading was allowed to resume in the afternoon, the stock jumped to $1.57 and reached a high of $1.59.

ABN Amro Craigs said four of its clients traded during the morning. One bought 60,000 shares and another sold 5000, but two others bought 237,500 and 400,000 shares respectively. Two of those clients had been told of Marathon's acceptance.

Neil Craig, of ABN Amro Craigs, notified RPI's adviser, Stephen Walker, on the night of June 17. RPI said it tried to advise the NZX of the acceptance at 9.50am the next day but did not communicate with stock exchange staff until after 10am.

RPI's public relations staff told news media about 10.50am on June 18 that an overseas party had accepted the offer.

At 11.16am, Dow Jones reported that an unnamed funds manager had decided to accept the offer, and NZX halted trading at 11.17am because of concerns that some parts of the market did not have equal access to the information.

- NZPA