One of the most unloved securities law requirements is being simplified - and about time, says Chapman Tripp corporate and securities law partner Roger Wallis.
"The current directors and officers regime is unnecessarily broad in scope, and requires completion of a confusing form by directors and officers personally. Simplifying and better targeting the rules should be widely applauded."
Currently all directors, and those officers who "take part" in management of a listed company's business generally need to make disclosures of their securities trading to NZX within 5 trading days.
Many listed companies have dozens of managers within the scope of the regime. The compliance cost has been assessed by the Listed Companies Association in thousands of dollars per annum.
In practice, disclosures are often overlooked, or late. And the New Zealand regime extends significantly further than in most other securities markets. For example, in Australia, the equivalent regime is currently limited to directors.
The proposed amendments will limit the scope of required disclosure to directors, the CEO and officers who report directly to the CEO. Simpler forms will be prescribed, and an authorised person (e.g. company secretary) will be permitted to lodge the disclosures with NZX on behalf of directors and officers.
The Ministry of Economic Development has sought drafting comments on the amendments by 15 August, and the changes are expected to become effective near the end of September.
In May 2006 Minister Lianne Dalziel announced a review of the directors’ and officers’ disclosure obligations in the Securities Markets Act.
Roger Wallis, said "It is disappointing that these changes have taken over two years, but they should result in much clearer disclosure and give better effect to the objectives of the regime".
The current rules are contained in Part 2 of the Securities Markets Act 1988 and the Securities Markets (Disclosure of Relevant Interests by Directors and Officers) Regulations 2003.Section 19SA of the Securities Markets Act says:
The purpose of [the regime] is to promote good corporate governance, and to deter and assist in the monitoring of insider conduct and market manipulation, by:
ensuring that information about directors' and officers' trading activities in public issuers is available to participants in New Zealand's securities markets, and
enabling the dates of trades to be checked against the dates at which material information became generally available to the market.