The New Zealand Financial Markets Authority (FMA) has published a revised educational information sheet explaining how the insider trading prohibitions in the Financial Markets Conduct Act 2013 may apply where a person trades in one listed issuer’s securities while holding non-public information about another listed issuer. The update replaces the FMA’s August 2025 report and avoids using the term “shadow insider trading”. The information sheet sets out the FMA’s view that non-public information relating to issuer A can, in some cases, amount to “material information” about issuer B where the relationship, degree of connection or similarity between the issuers means a reasonable person would expect the information to have a material effect on issuer B’s price. It notes this application has not been tested in court, emphasises that materiality is assessed at the time the information is held, and anticipates cases will be rare and fact-specific, with heightened risk in concentrated sectors with closely correlated prices. A case study describes an institutional investor selling issuer B shortly after receiving non-public information about issuer A’s substantial capital raise and later repurchasing after the raise was announced, where the FMA identified shortcomings in risk management including a lack of contemporaneous documentation and inconsistent rationales, although it took an educative rather than intervention approach. The sheet also highlights controls the FMA expects to help manage risk, including pause-and-assess processes when trading strategy changes after receiving non-public information, information barriers that may support a defence under section 261, and robust contemporaneous record-keeping that the FMA will treat as a mitigating factor when considering regulatory response, which is guided by its published enforcement and prosecution policies.

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