Cunliffe lucky stricter insider trading law not in place

Communications Minister David Cunliffe would have faced even more embarrassment over his Telecom comments if a new insider trading law had been in place.

The stricter law, put forward in 2004 by then Commerce Minister Margaret Wilson, widens the definition of an insider - and appears more likely to have captured Mr Cunliffe's gaffe.

The Securities Commission is investigating Mr Cunliffe's comments to Bloomberg news agency last week, that Telecom may have to cut its dividend payout to fund increased investment. His statement was said to be instrumental in wiping $157 million off Telecom's market capitalisation.

Prime Minister Helen Clark strongly defended Mr Cunliffe yesterday but the National Party continued to demand he stand down while the Securities Commission conducts its investigation.

National's deputy finance spokesman, Bill English, said it was likely that Mr Cunliffe's comments would have fallen foul of a new insider trading law, which is passing through Parliament.

"If these rules were in place, Mr Cunliffe would be skating on very thin ice indeed," Mr English said.

Commercial lawyers spoken to by the Herald yesterday agreed that Mr Cunliffe could have been in more trouble if his own party's crackdown on insider trading had become law.

The proposed new law has been through a select committee but has not yet been passed.

One securities law specialist, who asked not to be named, said the new rules made it much easier to be deemed to have inside information.

"He's not an insider under the current law, but he might be an insider by virtue of the new law," the lawyer said.

Another lawyer said the key test under the new law would be whether Mr Cunliffe passed the information to somebody who would trade shares on it.

"I suppose if he's passing it on to Bloomberg, then he is passing it on to people who might then pass it on to institutional investors - so it's arguable."

Most lawyers the Herald spoke to felt it was unlikely the Securities Commission would find that Mr Cunliffe had breached the existing law. But he was likely to be told his comments were inappropriate.

The commission might also point out what effect the proposed new law would have had on the investigation, they said.

Helen Clark yesterday said Mr Cunliffe had done nothing more than state what many other people had already said about Telecom.

"I didn't hear him say anything that numerous commentators on the New Zealand sharemarket and companies haven't said for years and years and years," she told Newstalk ZB.

The National Party said the Prime Minister's comments were evidence she didn't "know the realities of the market". "Investors will see any comment from David Cunliffe as a signal of the Government's future intentions for Telecom," Mr English said.

"Helen Clark's claim that there is no difference between Mr Cunliffe's comments and those made by market commentators is ridiculous."