Key Points:

National leader John Key is belatedly establishing a blind trust to hold his personal investments, and is unlikely to let it hold New Zealand shares, even though he would have no knowledge of the purchases.

Mr Key, who may well be New Zealand's richest prime minister if National wins the election, talked about setting up a blind trust a couple of months ago after questions arose about his Tranz Rail shares.

Yesterday he told the Weekend Herald it was still being set up, but was not far away.

"I'm moving to ensure that all of my investments in totality are managed in a blind trust where it'll be totally blind. I'm establishing that at the moment."

Mr Key said he had not yet set the conditions for the blind trust, but would probably prevent it buying local shares.

In setting up a blind trust, a person hands full discretion over the assets within it to somebody else. The beneficiaries of the trust have no knowledge of what is in it.

It is often used when people want to avoid the perception of having a conflict of interest.

Prime Minister Helen Clark has a blind trust which she declares on the Register of Pecuniary Interests at Parliament.

Outside several properties, she has had her investments in this type of arrangement for several years.

Mr Key - despite his personal wealth being well known and estimated at about $50 million - has not until recently moved to set up a similar arrangement.

When he came back to live in New Zealand in 2001, he and his wife, Bronagh, decided to make some investments through their family trust - which is not a blind trust.

They did it through a broker named Richard Leggat who at the time held a senior role at UBS.

Eyebrows were raised around Parliament this week when Mr Key said Mr Leggat could buy shares with his money in the trust without first asking him.

But it is common practice for people who make share investments to sometimes hand discretion to a broker to buy and sell if they see fit, and to report regularly on transactions.

But Mr Key said his arrangement with Mr Leggat was "informal" and there was no written documentation regarding the arrangement.

Stock exchange rules of the time would appear to suggest there should have been - something Mr Key does not want to elaborate on.

Mr Leggat reported to the trust through a solicitor who was an independent trustee.

The relationship between Mr Key and Mr Leggat perhaps goes some way to explaining the informal nature of the set-up.

They have known each other since they both worked at Lane Walker Rudkin in their early to mid-20s. After successful careers in the financial world they live within a stone's throw of each other in Parnell.

They also kept in touch while Mr Key worked overseas.

Mr Leggat said he could not talk about the issue of discretion because of client confidentiality, but he was prepared to say Mr Key ordered him to sell all his New Zealand investments when he felt there could be conflicts of interest.