This report introduces the concept of 'shadow insider trading' and outlines the view of the Financial Markets Authority - Te Mana Tātai Hokohoko (FMA) on how the statutory prohibitions against insider trading under the Financial Markets Conduct Act 2013 may apply to this concept.
Shadow insider trading broadly refers to using material information about one listed issuer to inform trading in the quoted financial products of another listed issuer, where the two listed issuers are connected in some way that means information about one may have a material effect on the other's share price.
We understand from market participants that shadow insider trading is common industry practice. As such, this report is intended to educate market participants about the behaviour and standards we expect from those we regulate. We are publishing this report in line with our statutory functions, which include promoting confident and informed participation in New Zealand's financial markets by businesses, investors and consumers.
