News
Directors & Officers disclosure - simplification at last
Last month Cabinet agreed to amend the Securities Markets (Disclosure of Relevant Interests by Directors and Officers) Regulations 2003 (D & O Regulations) to reduce compliance costs. Key to those amendments are the problems associated with the very wide definition of "officer". A number of operational improvements are also to be made to the D & O Regulations.
The D & O Regulations were made under Part 2 of the Securities Markets Act 1988, and require directors and officers of public issuers to disclose relevant interests and dealings in securities of the public issuer (and any related body corporate). Disclosures made under the D & O Regulations are designed to help with the monitoring of possible insider trading activities and market manipulation. Those disclosures are also designed to encourage transparency and good corporate governance in securities dealings.
The D & O Regulations have been in force since 2004 and have brought a significant number of employees, who are caught by wording that requires disclosure of officers who "take part" in the management of a listed company's business, within the disclosure regime. By casting the net so widely, the D & O Regulations have imposed a significant additional compliance cost on listed companies for arguably little incremental improvement in the quality of disclosures about significant changes in the trading patterns in the securities of listed issuers. By contrast, similar disclosures in Australia are only required to be made by directors.
Simplification
The amendment approved by Cabinet will reduce the number of people included in the definition of "officer" to those people who are within two tiers of direct reporting to the board of directors. That is, D & O disclosure will now only be required to be made by:
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directors;
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persons who report directly to the board (typically the CEO and perhaps the CFO); and
- persons who report directly to the CEO.
The Ministry of Economic Development suggests that this amendment will target the area where insider trading risk is perceived to be the most acute. The Ministry further suggests that the need for the D & O disclosure regime to retain its current form has been reduced by the changes to the insider trading regime which came into force earlier this year.
A number of additional changes are also proposed to:
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separate out the D & O Disclosure forms into two separate forms (one for initial disclosure and one for ongoing disclosure);
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remove the current prohibition on disclosing multiple acquisitions or disposals on the same form – as long as the transactions took place within five trading days; and
- allow authorised persons to lodge D & O Disclosure forms on behalf of the relevant director or officer (noting that the director or officer remains liable for the D & O Disclosure obligation, including that disclosure is made correctly).
Timeline
Submissions on the draft of the proposed amendments to the D & O Regulations circulated by the Ministry of Economic Development closed on 15 August. It is expected that the amendments to the D & O Disclosure Regulations will come into effect at the end of September.
We will provide a further update when the new regulations are enacted. In the meantime, to view the proposed amendments to the regulations click here.
For further information contact:
Stephen Layburn
Senior Associate
