This note is not part of the regulations, but is intended to indicate their general effect.
These regulations, which come into force on 22 November 2012, exempt certain conduct from being insider conduct for the purposes of sections 8C and 8E of the Securities Markets Act 1988 (the Act).
The Dairy Industry Restructuring Act 2001 was amended in 2012 to provide for (among other things) the establishment of a new share trading system: Trading Among Farmers (TAF). Key components of TAF are—
a new fund (the Fonterra fund) that will hold co-operative shares and issue securities (Fonterra fund securities) that may be traded on a registered market:
a new market for trading, by farmers, of shares in the Fonterra Co-operative Group Limited (co-operative shares).
The new market (the Fonterra Shareholders' Market) was granted market registration on 30 August 2012 under the Securities Markets Act (Fonterra Shareholders' Market) Notice of Market Registration 2012 (available at http://www.fma.govt.nz/laws-we-enforce/legislation/notices/). Farmers will be able to trade co-operative shares freely on the Fonterra Shareholders' Market. Farmers will also be able to sell the rights derived from their co-operative shares to the Fonterra fund but retain a voucher that may be treated as the equivalent of a co-operative share for the purposes of complying with a requirement of Fonterra's constitution.
If a farmer is a current or former director, officer, or employee of Fonterra, or a current or former member of the Fonterra shareholders' council (Fonterra insider), he or she may hold inside information obtained while he or she was an information insider. Despite having inside information, there are some circumstances in which it may be necessary or desirable for a person who is both a farmer and a Fonterra insider to trade co-operative shares or Fonterra fund securities—
the person may hold less than the minimum number, or more than the maximum number, of co-operative shares (or their equivalent) permitted by or under Fonterra's constitution:
the person may hold more co-operative shares (or their equivalent) than the minimum number required but less than the number that would be proportionate with the person's milk supply. Under Fonterra's constitution, the person would be entitled to, but unable to access, additional voting rights and a better price for milk supply.
Regulation 4 exempts trading undertaken in these circumstances from being insider conduct for the purposes of the Act, provided that the trading is not influenced by the inside information.
A Fonterra insider may also have a responsibility to advise or encourage another person to acquire or dispose of co-operative shares in the circumstances described above. Regulation 5 exempts this conduct from being insider conduct for the purposes of the Act, provided that the advice or encouragement is not influenced by the inside information.