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Watchdog probes Tranz Rail 'discretionary' share trading

By Rob Hosking

Friday 4th July 2003

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The Securities Commission is keeping its latest investigation into possible insider trading of Tranz Rail shares low-key ­ so low key ministers were unaware it was happening.

Finance Minister Michael Cullen's office expressed surprise yesterday that the commission was looking at the sale of shares that took place around the time of the June 6 announcement that the government would buy a 35% stake in the bleeding rail company.

Commission head of enforcement Norman Miller said the Stock Exchange automatically referred such matters to the commission if there was an increase in price or volume of trading of stock ­ or both ­- around the time of such announcements. That was what had happened in this case.

"It's a routine matter," he said yesterday.

The memorandum of understanding between the commission and the Stock Exchange, finalised earlier this year, requires the exchange to automatically refer some trading activity to the commission. Other referrals it leaves as "discretionary" and this one falls into that category.

The exact degree of change in price or sale volume is not defined in the agreement: it simply states that where there are "unusual movements in share price or trading volume" the exchange may conduct a preliminary screening of the issue and may refer it to the commission.

There is a belief that the exchange is now operating a lower threshold for those "unusual movements."

An earlier investigation into large sales of stock by Sir Michael Fay, David Richwhite and Wisconsin Central was still under way but Mr Miller would not comment any further on that issue.

That investigation was far less routine ­ it was triggered by a complaint from the Shareholders' Association.

The association has expressed frustration that the investigation is taking so long.

The Market Surveillance Panel completed its report into those transactions in February and that report is being used by the commission in its inquiry.

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