Stern words for PM, Terry over Air NZ comments

By Phil Boeyen, ShareChat Business News Editor

Friday 26th April 2002

The Securities Commission says comments made by Prime Minister Helen Clark and Greg Terry of BIL Investments (NZSE: BRY) in relation to last year's rescue of Air New Zealand (NZSE: AIR) were inappropriate but did not constitute 'tipping' under the Securities Amendment Act.

The Commission has released a report of its inquiry into statements in the media that led to the trading halts in Air NZ shares in September last year.

At the time the airline was on the verge of financial collapse and ended up being bailed out by an $865 million tax payer funded rescue package.

Although the inquiry found that neither the Prime Minister's statements about shareholders on 25 September nor Mr Terry's comments about the share price on 27 September could be legally deemed to be tipping, they have been called inappropriate.

"The statements did not breach the law, however they were not appropriate given the status of the people involved and the intense public interest in Air NZ at the time," says commission chairman Jane Diplock.

"The Prime Minister was at the time an insider of the company. She is an influential figure whose statements are accorded significant weight by the New Zealand public.

"The Prime Minister's responses should have distinguished questions about shareholding from issues of confidence in the viability of the airline's business. A statement referring to shareholders should not have been made in advance of orderly disclosure to the market, through the proper channels, of information about the possible recapitalisation by the government."

Ms Diplock says that Mr Terry was also an insider at the time of his comments regarding the airline's share price.

"The proper functioning of an orderly, informed market is jeopardised when an insider of a public issuer with inside information publicly makes a statement about possible movements in the level of the share price at a time when the market is already subject to extensive rumour and media speculation."

Prime Minister Helen Clark's waded into dangerous territory last September after she commented to a television reporter that Air NZ shareholders should hold onto their shares. This was interpreted as a 'don't sell' notice by some media, and the market.

The controversy was compounded a few days later when the then CEO of Brierley Investments, Greg Terry, reportedly put a conditional value of 60 cents on the airline's shares.

Following the inquiry the Securities Commission is recommending guidelines be drawn up for Ministers and their advisers regarding public statements about listed companies where the government may have or be perceived to have inside information.

"We understand that such guidelines are being developed," Ms Diplock says.

"The commission notes government's intention to review insider trading law, and recommends that the definition of tipping generally, and "encouragement" in particular, be included in this review."

The inquiry did not find any evidence that the Prime Minister's Office approached broking houses about possible steps to be taken by the government in relation to Air NZ, nor evidence of insider trading by any person in the shares of Air NZ during the period of this inquiry.

Ms Diplock describes the inquiry as "exhaustive and painstaking" and says the second part of the Commission's review will consider questions arising from the New Zealand Stock Exchange's decisions to impose and subsequently lift trading halts in Air NZ in September 2001.

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