Tuesday, March 08, 2005

Foxes: Henhouse doesn't need guarding

The Institute of Directors (which represents company directors and business leaders) believes that a provision in the new Securities Legislation Bill which would ban anyone convicted of insider trading or market manipulating from acting as a company director or manager for five years is "unreasonable and draconian".

I think that that says everything that needs to be said about the honesty of New Zealand's business leadership...


When you can consider the five years is not a maximum but a minumum ban, no matter how minor the infringemnt perhaps the IOD has a point?

I would have thought you would favour flexibility in penalties to reflect the scale of offending.

Posted by David Farrar : 3/08/2005 05:36:00 PM

I agree with David...

The proposed plans involve preventing directors from trading at any point where they may have undisclosed information, rather than in a "close season" as at present (and in most other countries).

Apart from considerations of justice, the main effect is likely to be to encourage NZ companies to list overseas, which will, apart from anything else, destroy jobs in the NZ broking industry.

If the government is looking for problems with NZ markets to fix, they should look at the many second-tier debt issuers (the companies that offer 9%+ returns in TV advertising) - they are highly liable to go bust with no end of wailing from mon and pop investors losing their savings.

Posted by Rich : 3/08/2005 07:53:00 PM

I/S suports workers over investors so allowing employees to insider trade and screw up the capital market might well be somthing he is happy with.

Posted by Genius : 3/08/2005 09:59:00 PM

Actually, I'm more concerned with the way insider trading reduces faith in capital markets and prevents them from working properly. Internationally, we have a "wild west" stock exchange, and it needs to be cleaned up. Keeping insider traders off the market would seem to be a good way of doing this.

While the Institute of Directors was objecting to a more restrictive definition of insider trading, they were also objecting to real penalties being levied on something which is a serious crime - and in the process implying that they had a perfect right to abuse their positions to enrich themselves at the expense of other market players (and in particular, small shareholders, who somehow always end up holding the bag). And frankly, that sense of entitlement fucks me off.

If the proposed definition of insider trading is more severe than that used elsewhere, I am happy for it to be brought into line with international norms (and in particular, with that used in Australia). But I have no pity for people who act as if they have a right to rip people off; they have no place in our market, and should be driven out.

Posted by Idiot/Savant : 3/08/2005 11:09:00 PM