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8 April 2004

News Release

Directors and officers disclosure

Securities Commission Practice Note and class exemptions

The Securities Commission has released a Practice Note as a guide for market participants affected by the directors' and officers' disclosure regime due to take effect on 3 May 2004.

The law relating to the new regime is the Securities Markets Act 1988 and the Securities Markets (Disclosure of Relevant Interests by Directors and Officers) Regulations 2003.

Practice Note
The Practice Note is available on the Securities Commission website: www.seccom.govt.nz.

Practice Note 2004/1 explains the Securities Commission's intended approach to:

the definition of "officer" in its enforcement of the new law;
how the new law applies to former directors and officers; and
the scope of the exemption relating to employee share purchase schemes in Regulation 20 of the new Regulations.

Further Exemptions
The Commission gave notice of several exemptions it intends to grant for directors and officers in its news release of 29 March 2004.

See http://www.seccom.govt.nz/new/releases/2004/290304.shtml

The Commission will also grant the following exemptions from the regime:

Interests in bank accounts and term deposits
An exemption from the requirement for directors and officers of registered banks to disclose relevant interests in bank accounts and term deposits issued by those banks was announced on 29 March 2004.

The exemption covers all related bodies corporate of registered banks, but it does not currently extend to registered banks related to issuers that are not banks.

The Commission will extend this exemption to include them.

Unlisted Unit Trusts
Some listed issuers have directors and officers who hold units in unlisted unit trusts offered by related bodies corporate. An exemption will be granted from the disclosure requirements for directors and officers who have relevant interests in unlisted unit trusts offered by related bodies corporate.

Given the nature of unit trusts it is unlikely that information held by directors and officers of the public issuer can be used for insider trading in the unlisted trusts. Neither will disclosing that information provide useful information to the market. The disclosure would not further the purposes of the regime which are to deter insider trading and provide market information.

Passive Funds
An exemption for directors and officers with relevant interests in passive index funds was announced on 29 March. The risk of insider trading in such funds is minimal, and the disclosure is not useful. Neither would this disclosure further the anti-insider trading purpose of the regime.

This exemption will apply to relevant interests in both listed and unlisted passive index funds. Some managers of listed passive index funds have a significant number of related bodies corporate that are not public issuers, and which offer unlisted products in which the directors and officers of the public issuers have relevant interests.

The Commission will exempt directors and officers of any passive index fund manager from disclosing relevant interests in unlisted securities of a related body corporate if they would only have to disclose the interest in the related body corporate because they are directors or officers of the passive index fund manager.

Exemption notices
These are summaries of exemptions the Commission intends to grant. The final form of the exemptions will be settled as these are drafted, and in consultation with the applicants.

The Commission expects the exemptions to be gazetted later this month.

Changes to the Regulations
Yesterday, Commerce Minister Margaret Wilson announced changes to the Securities Markets (Disclosure of Relevant Interests by Directors and Officers) Regulations 2003. These changes:

explain the differences between initial and ongoing disclosures; and
exempt directors and officers of overseas companies listed on the NZX from the regime.

The Minister's announcement can be seen at www.seccom.govt.nz.

Contact: Catherine Chapman, phone 04 471 7659

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