Owning shares
The New Zealand Stock Exchange’s rules for market participants, such as trading or advisory firms, is a lengthy 203-page document.
Employees of such firms are considered a prescribed person - as are any of their immediate family, including children, a spouse or even de facto partner.
This typically means they can only trade via their employer, and there are limits on what shares they can buy and when.
For example, if you work in a share brokerage’s IT department, you must use the fund’s brokerage for your share investments - you can’t have a Sharesies account on the side.
You are allowed to have your KiwiSaver elsewhere, though.
Any share trades may need to be approved by either an employee’s manager or a compliance division.
Trades also can’t be done quickly - there’s an enforced 10-day window to hold a stock, delaying the selling of shares after they’ve been bought.
Employees are required to sign a form every year saying they’ve abided by these trading rules.
If you work for the New Zealand Stock Exchange, the rules are even more stringent. Any employee needs approval from the NZX’s general counsel to trade NZX Limited securities at any time of the year.
Investment banks have a blacklist of public companies that they may be involved with behind closed doors, disallowing anyone at the firm to trade the stock, or participate in an IPO or bookbuild - whether they’re personally involved in any potential deal or not.
Yes, that means the same IT worker would not be able to participate in a new listing if their employer worked on it.
This blacklist also may prohibit analysts at a firm from releasing any research on the companies in question, because of the firm’s perceived conflict of interest.
Some analysts are not allowed to own the stocks they cover at all, because of the influence their work may have over its price.
Firms are required to have a compliance manager and provide all employees with compliance manuals, ensuring they stick to all the rules.
Listed companies, aka ‘issuers’
The crux of the NZX’s listing rules relates to the disclosure of information to investors.
For example, any material information to do with a company is required to be released on the NZX’s market announcements platform “promptly and without delay”.
There are limited exceptions to this rule, including if releasing the information would be a breach of law, or if it is to do with an ongoing, incomplete negotiation.
Companies listed on the NZX are required to prepare and release their financial results to the market within two months of the end of the financial year, and an annual report within three months.
Market convention is that there’s a black-out period of about one month prior to the release of a listed company’s financial results, where executives and directors of the company cannot speak publicly about the financial state of the business.
Many avoid talking to media entirely within that period so they don’t accidentally flirt with the rule.
The policy may also mean they are not allowed to trade their company’s stock within that period.
Other employee rules
All financial advisers must be licensed and approved by the NZX in writing.
Any employee who trades stocks in their day job must be a registered dealer - this is why some firms have a separate ‘deal room’.
They’re all required to observe ‘good broking practice’ and act with honesty, integrity and fairness.
Madison Reidy is the host of New Zealand’s only financial markets show Markets with Madison. She joined the Herald in 2022 after working in investment, and has covered business and economics for television and radio broadcasters.
