Tranz Rail insider trading settlement

The High Court will decide which shareholders will receive payment from the settlements reached in the Tranz Rail insider trading case.

The Commission is preparing to seek advice from the High Court on classes of shareholders entitled to payment from the compensation. When the Court’s guidance has been received the Commission will follow the Court’s directions to identify eligible shareholders.

In June the Commission reached a settlement of the insider trading proceeding against Midavia Rail Investments Ltd BVBA (previously Pacific Rail Limited NV) a former Tranz Rail shareholder, and David Richwhite a former director of Tranz Rail. Midavia and Mr Richwhite agreed to pay $20 million. This represents a payment towards the compensatory amount sought by the Commission and includes contributions for interest and the Commission’s costs of the proceeding.

Midavia and Mr Richwhite agreed to make this payment without any admission of liability. They consider they have defences to the Commission’s claims against them. The settlement was approved by the High Court. No judgment was entered against Midavia and Mr Richwhite.

Four other defendants to the Commission’s insider trading proceeding had already settled. They are a former Tranz Rail shareholder Berkshire Fund III, former director Carl Ferenbach, former managing director and chief executive officer Michael Beard, and former chief financial officer Mark Bloomer.

The total amount from the six defendants is over NZ$27.5 million. The money, paid to Toll Holdings, is held in trust. After the Commission’s costs the balance of the money will be distributed to shareholders determined by the Court.

Bridgecorp - suspension may help recent investors

Kathryn Rogers, Director, Primary Markets

The Commission suspended the prospectuses of Bridgecorp Limited and Bridgecorp Investments Limited (BIL) on 29 June 2007 after it was told by the trustee that Bridgecorp had failed to repay investors on the due date. The Commission understands that Bridgecorp had been in default since 20 June 2007 but did not tell the trustee.

The suspension obliged Bridgecorp and BIL to hold on trust any money subscribed by investors since 29 June. The Commission cancelled the prospectuses on 11 July.

"This means investors who subscribed during the suspension are now entitled to be immediately repaid by the companies," Director, Primary Markets, Kathryn Rogers said.

"However, we understand from the receivers and liquidators that this will apply only to a very small number of investors."

The prospectuses, dated 21 December 2006, had become false or misleading because the companies did not disclose that they could not meet their obligations to investors. In particular the prospectuses did not contain material information about Bridgecorp’s failure since 20 June 2007 to repay investors on the due date. This affected BIL because BIL depended on Bridgecorp to repay BIL, so that BIL could repay its own investors.

The Commission can suspend a prospectus for up to 14 days without notice, but is prohibited from publicly disclosing a suspension unless the prospectus is subsequently cancelled. This allows the issuer of the prospectus an opportunity to make submissions to the Commission.

The Commission can either revoke a suspension if the breach is rectified, or it can go on to cancel the prospectus.