1 This circular sets out guidance agreed to by Cabinet for Ministers and officials dealing with inside information relating to public issuers, including mixed ownership model companies and other companies in which the Crown has an ownership stake. Please note, this circular replaces Cabinet Office Circular CO (02) 14, Guidance for Dealing with Information Relating to Publicly Listed Companies.
2 The guidance in this circular sets out a recommended approach only. This circular summarises a number of provisions of the Securities Markets Act 1988 (the Act) that should be considered in detail when significant issues arise. Ministers and officials should obtain specific legal and communications advice on individual situations as they arise.
3 The key points are:
3.1announcements should be released as widely and evenly as possible;
3.2Ministers and officials must treat information about public issuers with caution;
3.3Ministers are still entitled, and may be obliged, to make statements in the House of Representatives in relation to public issuers without legal liability attaching – these statements will be generally available to the market for the purposes of the insider trading regime very soon after they are made;
3.4Ministers and officials are required to observe the insider trading and market manipulation regimes in the Act;
3.5where Ministers or officials hold inside information (and are therefore “information insiders”), they must not:
3.5.1buy or sell listed securities of the public issuer;
3.5.2disclose inside information to any person if they know (or ought reasonably to know) or believe that the person is likely to buy, sell or continue to hold securities in the public issuer, or encourage or advise someone else to trade or hold the securities;
3.5.3advise or encourage another person to buy, sell or hold securities, or advise or encourage another person to encourage others to trade or hold those securities;
3.6even if inside information is not actually held by Ministers or officials, caution is required when making statements relating to a public issuer because there may be a perception that the person making the statement (such as a Minister) holds inside information;
3.7where inside information is to be released by Ministers it should generally be provided to the affected public issuer under embargo in advance of a general release, to allow the public issuer to prepare information or guidelines for the market, and to arrange a trading halt, if required;
3.8unless compelling reasons exist to release the announcement or media release while the affected market is open, it should be made when the market is closed to give investors time to consider the information before the market opens;
3.9Ministers and officials must ensure that they do not make statements about public issuers that are inaccurate or could be perceived to be misleading or deceptive.
Why this circular is important
4Some policy decisions involve the release of information that may affect the value of listed securities of public issuers. There is no restriction on these decisions being made or announced. In making policy announcements, however, the Government should consider the impact on securities markets.
5A purpose of the Act is to promote fair, orderly and transparent listed securities markets. The insider trading and market manipulation regimes in the Act promote this purpose by ensuring that information provided to the market is accurate and provided in such a way that it does not give any one investor or group of investors an advantage.
6Government policy is to maintain confidence and inform participation in securities markets by supporting these objectives. Investor confidence in the integrity of the market encourages participation in markets, access to capital and brings wider benefits for the economy.
7Investor confidence may be reduced if information is not released in a fair, orderly and transparent manner that enables investors to have an equal opportunity to obtain and evaluate information relevant to their investment decisions.
The insider trading and market manipulation regimes in the Securities Markets Act
The insider trading regime
8.1A public issuer is an entity that has securities listed on a registered market. Listed securities are generally either equity securities (usually shares) or debt securities (e.g., bonds). NZX Limited is currently the only operator of registered securities markets in New Zealand. A number of state-owned enterprises have debt securities listed on an NZX market.1
8.2Material information in relation to a public issuer is information that:
8.2.1a reasonable person would expect, if it were generally available to the market, to have a material effect on the price of listed securities of a public issuer; and
8.2.2relates to particular securities or a particular public issuer or issuers (rather than securities or public issuers generally).
8.3Information is generally available to the market if:
8.3.1it has been notified to an exchange by a public issuer in accordance with its continuous disclosure obligation under the relevant listing rules; or
8.3.2it has been made known in a manner that is likely to bring it to the attention of people who commonly invest in those securities and a reasonable period for it to be disseminated has expired; or
8.3.3it is likely that people who commonly invest in those securities can readily obtain the information; or
8.3.4it consists of deductions, conclusions and inferences made from information already in the public domain.
8.4A person is an information insider of a public issuer if:
8.4.1that person has material information relating to the public issuer that is not generally available to the market; and
8.4.2knows or ought reasonably to know that that is the case.
8.5Inside information is information in respect of which a person is an information insider.
9Ministers and officials regularly hold, receive and disseminate inside information. This includes both information provided by the issuer and information generated during the policy process.
10A Minister or official who is an information insider must not:
10.1buy or sell listed securities of the public issuer;
10.2disclose inside information to any person if they know (or ought reasonably to know) or believe that the person is likely to buy, sell or continue to hold securities in the public issuer, or encourage or advise someone else to trade or hold the securities;
10.3advise or encourage another person to buy or sell or hold securities or advise or encourage another person to encourage others to trade or hold those securities.
The market manipulation regime
11A Minister or official must not:
11.1make a statement or give information where he/she knows or ought reasonably to know that a material aspect of the statement or information is false or misleading; and
11.1.1the statement or information is likely to induce trading or affect the price of listed securities; or
11.1.2the statement or information is likely to induce a person to vote for or against or abstain from voting on a particular transaction;
11.2create a false or misleading appearance of the extent of active trading in a listed security or other matters relevant to the value of the securities (such as supply of or demand for the securities).
12The market manipulation regime requires Ministers and officials to ensure that they do not make any statements about public issuers that are inaccurate, or could be perceived as misleading or deceptive.
13Contravention of the insider trading and market manipulation regimes are offences punishable by prison terms of up to five years or fines of up to $300,000, or both, for an individual. Contravening the regimes can also result in civil pecuniary penalties and a requirement to pay compensation.
Guidance for the policy development process
14The following process should be followed when dealing with inside information when developing policy:
Step 1: Identify whether a public issuer or group of public issuers is affected
14.1The insider trading and market manipulation regimes relate to a specific public issuer or group of public issuers (e.g. a group of issuers in a particular sector). The regimes do not relate to public issuers as a whole (e.g. tax changes that affect all public issuers would not be captured).
14.2It is important, therefore, to identify at an early stage any public issuers or groups of public issuers that may be affected by the policy, bearing in mind that the affected public issuers may change during the policy development process.
14.3The Act only applies to securities listed onNew Zealandregistered or authorised markets (including dual-listed issuers). However, it is good practice to apply the same process to an overseas listed issuer ifNew Zealandactivities are a significant part of the issuer’s overall business and there could be a risk of contravening equivalent overseas laws.
Step 2: Decide whether the process involves material information which is not generally available
14.4The insider trading regime only deals with inside information: information that a reasonable person would expect to have a material effect on the price of listed securities and that is not generally available to the market.
14.5In some situations, it can be difficult to determine whether information may have an impact on the price of listed securities, particularly at the beginning of a policy development process. In such cases, it is better to err on the side of caution.
Step 3: Put suitable precautions in place
14.6If Ministers or officials are information insiders, they should take suitable precautions to ensure they comply with their obligations under the Act. These precautions could include:
14.6.1handling and disseminating inside information on a “need to know” basis;
14.6.2ensuring that inside information carries an appropriate security classification, and that the information is handled in accordance with its classification;
14.6.3keeping a record of the people who have been given inside information;
14.6.4providing inside information only on the basis that recipients are aware of how they can use the information and their potential liabilities under the Act.
Official Information Act requests
15Any request under the Official Information Act 1982 for inside information must be dealt with in accordance with the requirements of that Act. The decision on a request should normally be made following consultation with the relevant public issuer.
Guidance for Ministers making announcements
16The following steps should be followed when Ministers make announcements:
Step 1: Determine whether a public issuer or group of public issuers is likely to be affected
16.1Officials must make a judgement on which public issuers will be, or are likely to be, affected by the announcement. This will depend on the content and purpose of the policy.
Step 2: Determine whether the content of the announcement is inside information (i.e. whether it is material information about the public issuer that is not generally available to the market)
16.2New announcements made by the Government, by their nature, contain information that is not generally available to the market. However, it is often difficult for officials to assess whether or not a reasonable person would expect particular information to have a material effect on the price of a security. That judgement needs to be made based on officials’ knowledge of the industry, the potentially affected public issuers and the likely effect of the policy decision being announced.
16.3If there is a real risk that the announcement contains material information, then it should be released when the market is closed, unless compelling reasons exist to release the announcement while the market is still open.
Step 3: If the content of the announcement is potentially inside information, decide whether a pre-release process is required
16.4The Government has no legal obligation to disclose information to an exchange that relates to, or affects, public issuers, or to the public issuer itself. There are, however, advantages for the Government in releasing information to the public issuer in advance under embargo so the issuer can consider whether or not to release the information in accordance with its continuous disclosure obligations or whether or not to request a halt in trading of its securities.
16.5The method of the disclosure will depend on the importance of the information and the likely effect of the announcement on the market.
17Releases should normally be made when the relevant markets are closed, either in the morning before the relevant markets open, or in the evening after the relevant markets closes (see paragraphs 21-23 for issuers listed on multiple markets). Releasing the information when the market is closed will reduce disruption to the market during trading hours, and will ensure that the material information is generally available to the market by the time the market reopens. This is the recommended approach.
18If a release must be made while the market is open, the content of the release should be provided to the issuer under embargo at least one hour prior to the announcement being made. This will enable the issuer to prepare its continuous disclosure release and decide whether to seek a trading halt prior to the announcement.
19If the Government is not prepared to risk prior disclosure of the content of the release under embargo, a media advisory can be released to the public issuer and news agencies. The media advisory should be sent at least one hour prior to the announcement being made, and should state only that an announcement is going to be made at a certain time and the sector or public issuer it relates to, but not the detailed content. This will allow the issuer a limited opportunity to decide whether to seek a trading halt prior to the announcement, but in the absence of hard information the stock exchange may refuse to grant a request for a halt.
21Some New Zealand issuers are listed on more than one exchange. Where an issuer is listed on multiple markets, the release should ideally be made when all the relevant markets are closed. This avoids an issuer’s securities being traded by investors in one market but not another.
22Dual listing in Australia and New Zealand is common and the trading periods are close. It is recommended that you check the current time difference before making a release, but it is generally preferable to pre-release the information on an embargoed basis to the issuer in the morning and then release the information before theNew Zealandmarket opens. A halt in trading can then be sought by the issuer in both markets if required. Trading can then resume on the basis of equal, complete and up to date information.
23If an issuer is listed on any international exchanges other thanAustralia’s, the media release should be sent out when all relevant markets are closed. This may be a very narrow window.
What to do where the Crown has an ownership interest in the issuer
24Where the Crown is a shareholder in a public issuer, additional care should be taken in the release of information:
24.1Where the Crown holds inside information that has been provided by a public issuer, any disclosure of this information should be made by the public issuer (under its obligation to disclose material information to the market) and not by Ministers.
24.2Where the Crown holds inside information that is information about its own intentions, there is an exception under the regime. This exception will allow a natural person or entity (including the Crown), its officers and agents, to trade or procure a deal while having knowledge of their own activities or intentions in relation to past or proposed transactions in the securities.
24.3Where the inside information the Crown holds is about a public issuer in which the Crown has a shareholding, the Crown should not trade in these securities until the information is released.
Guidance for Ministers making comments to the media
25It is common after an announcement has been made for media to question the Minister about the effects the announcement will have on a particular public issuer.
26While Ministers can make comments without breaching the insider trading regime, they should be very cautious when discussing matters relating to public issuers, especially where the topic or questions are unexpected and are outside the expected scope of the interview or discussion.
27Ministers should focus comments on government policy rather than commenting on the value of particular securities or the prospects of particular public issuers. A Minister should never directly or indirectly encourage or advise people to buy, sell or hold the securities of a public issuer and must take care to ensure that comments cannot be interpreted or perceived as false or misleading.
28A Minister should only answer a question relating to the impact of the Government’s decisions on a public issuer, or a class of public issuers, if the Minister is:
28.1sure the answer is based on information that is generally available to the market; and
28.2confident that it will not be construed as being based on inside information.
29Caution is necessary as public comments, especially if they are verbal, can be misinterpreted or quoted out of context, and disclaimers and qualifying statements may be overlooked or under-emphasised.
30It is each person’s responsibility to ensure compliance with the Act’s insider trading and market manipulation regimes. In case of doubt, you should consult your departmental legal adviser.
Acting Secretary of the Cabinet
1The Securities Markets Act adapts the insider trading and market manipulation regime for listed derivatives. This includes foreign exchange, electricity or dairy futures traded on futures markets operated by NZX Limited and ASX Limited. Seek advice from your departmental legal adviser if your information might be material to the price of a listed derivative.
This circular has been developed in conjunction with the Ministry of Business, Innovation and Employment. If you have any queries refer them first to your departmental legal adviser.
Cabinet Office contact
Andrew Townend, Legal and Constitutional Advisor, Cabinet Office
Ministry of Business, Innovation and Employment contact
Chief Legal Advisor, Ministry of Business, Innovation and Employment
Financial Markets Authority contacts
Head of Compliance Monitoring or Manager Market Infrastructure and Oversight Providers
Telephone: 04 4729830
Contact details for NZX and ASX
Customer Service Ph: 0061 2 9338 0000
Company Announcements Office Fax: 0800 449 707
Appendix 1: Approaches for releasing information
The following are approaches to releasing information by the Government to the market, consistent with the principles in this circular.
Release while the relevant markets are closed (recommended)
Morning release before the New Zealand markets open
This is the recommended approach for releases relating to issuers listed on the NZX and those listed on both the NZX and ASX (given that the Australian market opens two to three hours after the New Zealand markets).
-Government notifies the public issuer at or before 8:00am that there will be a release and its content and specifies an embargoed time for release. A media advisory may also be released at this time.
-The issuer will consider its position, prepare its own media information and request a halt in trading of the securities when the markets open, if required.
-At the specified time for release – the press release or statement is made and the information is provided to business media outlets (say 8.55am). At the same time, the issuer complies with its continuous disclosure obligations by disclosing the information to NZX, which then publicly releases it.
Evening release after the markets close
Evening releases give investors until the markets open the next day to decide how to react. Evening releases also enable information to be released close to the evening news at 6pm, provided the issuer is only listed on the NZX.
-At the specified time for release (say 5.30pm), the press release or statement is made and provided to business media outlets and the public issuer.
-The issuer may then prepare and issue its own media statement, release the information via the NZX and/or request a halt in trading before the markets open the next morning.
Government could inform the public issuer in advance (say 30 minutes), particularly if it issues a media advisory at the same time, but this step is not crucial.
If the public issuer is also listed on the ASX, the release times should be adjusted to avoid being released while the ASX is still open. Check the current time difference when planning the timing of release.
If an issuer is listed on any other international exchanges, the media release should be sent out when all relevant markets are closed. This may be a very narrow window.
Release when the relevant markets are open (only if necessary)
Release when the relevant markets are open should only be made where compelling reasons exist, for example where the Government’s objectives will be prejudiced if release is delayed until the markets are closed. Appendix 2 contains recommended text to be used in these circumstances.
Option 1: content of announcement is provided to the public issuer under embargo
Under this option, the public issuer is provided with the release under embargo in advance of the public release.
-During trading hours (at say 12pm) the Government informs the public issuer that there will be a release, provides its content and specifies an embargoed time for release. A media advisory can also be released at this time.
-The issuer may then prepare its own media statement and the information for release under its continuous disclosure obligation once the embargo is lifted, and request a halt in trading, if required.
-At say 1:00pm the press release or statement is made and the information is provided to business media outlets. At the same time, the issuer complies with its continuous disclosure obligations by disclosing the information to NZX, which then publicly releases it.
Option 2: Release of advance notice of announcement, but not contents of communication
Under this (less preferred) option the Government informs the public issuer in advance that there will be a release but not the content. This option would be used if the release is very sensitive and Government is not prepared to pre-release the information on an embargoed basis.
-During trading hours (at say 12pm) the Government informs the public issuer that there will be a release and specifies the time for release. A media advisory can also be released at this time.
-The issuer may consider requesting a halt in trading pending the release (but in the absence of hard information the stock exchange may refuse to grant a request for a halt).
-At say 1:00pm the press release or statement is issued and the information is provided to the public issuer and business media outlets.
-The issuer then complies with its continuous disclosure obligations and/or seeks a trading halt (but there may be trading in the meantime).
Appendix 2: Recommended text for instantaneous communication – letters and emails
Option 1: Content of announcement is provided to the public issuer
Chief Executive (or General Counsel)
[SUBJECT MATTER OF ANNOUNCEMENT]
On [date and time] the government will release [describe the information being released and how it is being released]. The release will contain information about [describe the policy or facts contained in the release].
Attached to this letter is a copy of the release. It is provided to [name of public issuer] on the basis that it may constitute material information for the purposes of the Securities Markets Act 1988. It is your responsibility to assess whether the release contains material information that will require disclosure in accordance with [public issuer’s name] continuous disclosure obligations.
The information in this letter and attachments is provided in confidence and is embargoed until [date and time of release].
The Securities Markets Act 1988 prohibits insider trading, and provides for fines and potential imprisonment for information insiders who trade, or advise other persons to trade or hold securities of a listed issuer. You may only act on or disclose inside information contained in this letter in accordance with the law.
Option 2: Content of announcement is not provided to the public issuer
Chief Executive (or General Counsel)
On [date and time] the Government will be releasing a press statement [or conducting a press conference at [venue]] in which it will be announcing its decisions in relation to [general reference only].
[Name of public issuer] will be provided with a copy of the statement once it has been released.
[Name of public issuer] is being notified in advance to enable [name of public issuer] to take any action as it sees fit. Such action could include seeking a halt in the trading of [public issuer’s name] listed securities.
Media agencies have also been advised that this announcement is to take place.
Template email to media agencies in both cases
This is advise that at [time/date] the [relevant Minister] will be issuing a press statement [or will be holding a press conference at venue] to announce the Government’s decision(s) on [subject matter].