Government To Block Shareholders' Access To Justice
Efforts to bring insider traders to justice will be a great deal harder in future if the Securities Markets and
Institutions Bill becomes law.
Commerce Minister Paul Swain's bill specifically sets out to block anyone else taking the same route as Roger Kerr and
my wife Catharine in their successful action against Kerry Hoggard for insider trading while chairman of Fletcher
Challenge.
The key to victory in that case was our ability to obtain a court order requiring the Securities Commission to pass
over information collected in the course of its investigation. Neither the Government nor the commission gave us any
assistance or has even asked whether our experience suggests any ways in which enforcement might be streamlined.
Instead, the bill reverses the precedent that cost us so much to get in Franks and Kerr v Hoggard. The commission lost
in court. Now the minister is taking his revenge.
His sneaky new clause will stop future shareholders getting information they need. We know, because in the Hoggard case
we have done it.
So why does Swain want to block anyone else from going to the courts for help?
It seems the Government does not want to risk being shown up again by citizens determined to make the law apply. Rather
than ensuring that people can do the boring, hard work of actually enforcing the law we have, they would rather claim
political credit for ever-expanding new law.
Reversal of the principle laid down by the High Court only last year is not the only step in the bill to nobble the
ordinary shareholder.
Existing insider-trading law recognises that people in control may want to block any close investigation of suspicions.
It assists shareholders who suspect connivance, or tacit acquiescence in insider trading.
Section 17 means an ordinary shareholder can get an independent legal opinion whether there has been insider trading,
at the expense of the company, even if the directors want to keep it all under the carpet.
I recently made just such an application, on behalf of my wife. It asks the commission to require Air New Zealand to
seek a legal opinion on whether there is cause for bringing an action against the Prime Minister and others associated
with putting together the rescue package for the airline. At issue is whether they passed on inside information which
would encourage people to trade in the company's shares.
We have done that to demonstrate how the present law provides a way that shareholders who have reasonable grounds for
concern can, at no cost to themselves, clarify whether there are grounds for taking action.
The bill repeals that section without explanation. Yet that section has driven disclosure in most of the
insider-trading complaints since the law came in 13 years ago.
Is this sinister, or just a reflection of the Labour ideology that takes the remedies for every ill into state hands?
We cannot tell.
I hope it is not as sinister as it seems. I hope it is just a combination of ignorance of what is needed to uphold
integrity and cynical politics.
During the election campaign, they wanted to look and sound tough on securities market regulation as well as crime. Now
their slogans are tangling them up in both areas.
It need not be confusing. Both areas need less law, more ruthlessly enforced. Whether the law works and what it costs
is what really decides whether a market has integrity.
Ends