There are, in this writer s opinion, significant reasons to stay with the regime that relies on civil remedies, but to make access to those remedies more effective. The New Zealand Law Society in its submissions to the commission in 1995 urged that it would be incompatible with the commission s statutory functions for the commission itself to take on an enforcement role in this area, a view that the commission then accepted. This writer is not convinced by that argument. Examples are the commission s long-standing powers to prohibit advertisements and to suspend or prohibit prospectuses, and its more recent power to apply to the court for an injunction and for permanent orders such as forfeiture where the commission suspects that a substantial security holder has not disclosed its position. In all of those cases, the commission s powers to intervene have been to promote a more orderly market and the penalising of the party involved has been incidental to that.
Insider trading distorts the orderly operation of the market.
There is the same need for the regulator to be in the position to hold defaulters to account in that area, as there is in the case of a substantial security holder who fails to keep the market informed. Often the two breaches are closely related. One prominent example was the commission bringing successful proceedings in relation to substantial security holder disclosure against companies related to Sir Robert Jones in 1993. Those proceedings were followed by aggrieved shareholders obtaining a lawyer s opinion under s17 of the Securities Amendment Act. As with the case of substantial security holder disclosure, the commission should have a discretion whether or not to intervene, and take action before the court in cases of alleged insider trading in those cases where it considers the health of the market requires it.