The New Zealand Financial Markets Authority has published a revised educational information sheet setting out how the insider trading prohibitions in the Financial Markets Conduct Act 2013 may apply where a person trades in a listed issuer while in possession of non-public information relating to a different listed issuer whose information could materially affect the price of the traded issuer’s quoted financial products. The publication replaces the FMA’s August 2025 report and no longer uses the term “shadow insider trading”, following industry feedback. The guidance outlines the FMA’s view that, in some cases, non-public information about issuer A can constitute “material information” about issuer B because of the relationship, degree of connection or similarity between the issuers, while noting this application has not yet been tested in court and remains subject to the “reasonable person” materiality test. It emphasises that materiality is assessed at the time the information is held, distinguishes the knowledge requirements for civil and criminal liability, and notes scenarios of cross-issuer materiality are expected to be rare but may be more likely in sectors with few issuers and closely correlated prices. A case study drawn from the FMA’s inquiries into two institutional investors illustrates the risk, including concerns about the absence of contemporaneous records and inconsistent trading rationales even where the FMA chose an educative rather than intervention approach. The information sheet also sets out risk mitigation strategies, including processes to pause and reassess materiality when trading strategies change after receiving non-public information, the use of information barriers which may support a defence under section 261 of the Act, sector-wide trading approaches to minimise price impact, and maintaining robust contemporaneous documentation of strategy and materiality assessments, which the FMA indicates it will treat as mitigating factors when considering regulatory responses.
New Zealand Financial Markets Authority 2025-11-19
New Zealand Financial Markets Authority issues revised insider trading information sheet on trading one issuer while holding non-public information about another
The New Zealand Financial Markets Authority issued a revised educational sheet on insider trading prohibitions under the Financial Markets Conduct Act 2013. It clarifies how non-public information about one issuer may affect another's financial products. Replacing the August 2025 report, it emphasizes the "reasonable person" materiality test, outlines risk mitigation strategies, and highlights the rarity of cross-issuer materiality scenarios, especially in sectors with few issuers and correlated prices.