The New Zealand Financial Markets Authority (FMA) has published a report introducing the concept of “shadow insider trading” and setting out its view on how the insider trading prohibitions in Part 5 of the Financial Markets Conduct Act 2013 (FMC Act) may apply when a person uses non-public, price-sensitive information about one listed issuer to trade in the quoted financial products of another, economically related listed issuer. The report explains that information about a listed issuer, or about a particular sector or industry matter relating to a listed issuer, can be “material information” about another issuer where the connection is sufficiently specific and not so general that it relates to financial products or listed issuers generally. In that situation, a person who knows or ought reasonably to know the information is material and not generally available may be treated as an “information insider” of the second issuer, and trading, disclosure, or advising or encouraging trading could breach the FMC Act’s insider conduct prohibitions. Materiality is assessed at the time the information is held, from the perspective of a reasonable person who commonly invests in shares based on inherent value, and the report includes illustrative scenarios such as trading in peers ahead of a non-public capital raise announcement or a confidential merger or acquisition. The FMA reminds market participants to assess the implications of holding non-public material information across related quoted financial products, document and review trade rationales (especially for significant or unusual trades), and maintain robust governance and compliance controls, including clear policies for asset managers on handling and using non-public information. It also signals ongoing monitoring of conduct risks and encourages engagement on practical issues raised by its approach.

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