News release
29 March 2004
Securities Commission class exemptions for directors and officers
The Securities Commission will grant some class exemptions in respect of the directors’ and officers’ disclosure regime
under the Securities Markets Act 1988 and the Securities Markets (Disclosure of Relevant Interests by Directors and
Officers) Regulations 2003. This law is due to take effect on 3 May 2004.
The Commission has received a number of applications for exemptions from aspects of the new disclosure regime. Decisions
have been taken on some of these. The exemptions the Commission will grant are summarised below.
Interests in bank accounts and term deposits
An exemption will be granted from the requirement for directors and officers of public issuers which are registered
banks to disclose relevant interests in bank accounts and term deposits issued by those registered banks and related
bodies corporate.
Disclosure of details of bank accounts and term deposits, (which are interests in securities under the law) would raise
significant privacy and practical compliance issues for the directors and officers concerned. This disclosure would not
provide information that furthers the anti-insider trading purpose of the regime.
Individual life insurance and superannuation scheme interests
An exemption will be granted from the requirement for directors and officers of public issuers to disclose relevant
interests held in superannuation and life insurance products provided by the public issuer or a related body corporate.
Disclosure of details of these interests would, like disclosure of bank accounts, raise significant privacy issues for
the directors and officers concerned. This disclosure would not provide information that furthers the anti-insider
trading purpose of the regime.
Interests already disclosed to the New Zealand Stock Exchange
An exemptions will be granted from the requirement for directors and officers of public issuers to disclose their
relevant interests in securities of the public issuer or a related body corporate that have already been disclosed prior
to 3 May 2004 to the New Zealand Stock Exchange, where such disclosure is required under the listing rules.
Requiring the disclosures to be made again would result in unnecessary duplication of information already given to the
market.
Passive Funds
An exemption will be granted from the requirement for directors and officers of public issuers to disclose relevant
interests in passive index funds of the public issuer or a related body corporate.
The risk of insider trading in such funds is minimal, so that the burden of disclosure is not justified. The disclosure
of such interests would not further the anti-insider trading purpose of the regime.
Employee Share Purchase Schemes and Dividend Reinvestment Plans
An exemption will be granted for directors or officers who are beneficiaries of an employee share purchase scheme or who
participate in a dividend reinvestment scheme, from the obligation to disclose those interests within 5 trading days.
This exemption is subject to the condition that allotments made under the scheme are notified by the public issuer
concerned within 1 month of allotment. The disclosure must include the names of the directors and officers acquiring the
interests, along with the number of securities allotted to each person.
The timing of those allotments is not affected by contemporaneous market information, and the administrative burden on
individuals of disclosing such allotments within 5 working days outweighs the benefit of the information being released
at that time. The exemptions also recognise that in practice, the disclosure in these circumstances can more readily be
made by issuers, rather than the directors and officers themselves.
This exemption does not affect the timing exemption contained in the Regulations, which is intended for directors and
officers who are trustees of employee share purchase schemes.
Co-operative Companies
Section 19X of the Securities Markets Act 1988 contains an exemption from the disclosure requirements of the regime for
directors and officers of co-operative companies who hold, acquire, or dispose of a relevant interest in a non-listed
security of the co-operative company.
For the exemption to apply, the director or officer must be a transacting shareholder of the company and the interest
must be acquired or disposed of in the ordinary course of the director’s or officer’s business.
Many people who transact with co-operatives hold their co-operative shares through partnerships, family trusts, and
companies, such that the individual who is a director or officer is not, in fact, a transacting shareholder of the
company.
An exemption will be granted, to the same effect as the exemption in section 19X, for directors and officers of any
co-operative company who have relevant interests in shares of the company and who would themselves, if they held the
shareholding directly, qualify as transacting shareholders of the company. The exemption gives practical effect to the
intention of section 19X of the Act.
Other Issues
The Commission is working with officials on other matters, such as the way in which the regime affects overseas issuers,
and practical concerns relating to disclosure of interests on commencement of the regime.
This media release summarises the exemptions the Commission has decided to grant to date. The final form of the
exemptions will be settled as the exemption notices are drafted, and in consultation with the applicants for these
exemptions.
Further Exemption Applications Invited
Market participants may still apply for further exemptions. The Commission may grant exemptions to provide flexibility
to apply the law as intended. However, the Commission will only grant exemptions consistent with the policy of the law.
Any further exemption applications should be sent to the Commission as soon as possible, to allow time for them to be
considered before the regime commences.
ENDS