Commission settles Provenco insider trading case The Securities Commission has reached a settlement of its proceedings alleging insider trading which it brought against Provenco Group Limited (formerly Advantage Group Limited), directors David Wolfenden and Nicholas Gordon, and former director Anthony Bradley. Following Advantage's announcement of its half year result on 28 February 2003, David Wolfenden bought 100,000 shares for $18,000, Nicholas Gordon bought 300,000 shares for $52,800 and Anthony Bradley bought 440,000 shares for $90,700. The Securities Commission considers that the defendants were in possession of inside information about the future earnings and business prospects when they made the share purchases. The Commission brought proceedings under the Securities Markets Act 1988, alleging breach of the insider trading laws. The defendants contend that they have good defences to the claims made against them. The company and the named directors have agreed to pay the Commission the following sums: Provenco $300,000, Anthony Bradley $150,000, Nicholas Gordon $130,000 and David Wolfenden $42,000. These sums represent in each case an amount for compensation, a component for penalties, and a contribution to the Commission's costs. In May 2003, Provenco (having changed its name from Advantage) conducted an on-market buy-back of 4,262,517 of its own ordinary shares, paying $1,470,000. This media statement is part of the terms of settlement approved by the High Court. No judgment will be entered against the company or Messrs Wolfenden, Gordon and Bradley.
		International regulators to meet in Wellington Some 80 securities regulators from around the world will meet in Wellington in February 2006. Meetings of IOSCO´s Executive and Technical Committees, and of the Emerging Markets Advisory Board, will take place here for two days. The meetings will carry forward the strategic direction of IOSCO which was agreed earlier this year. "They will progress IOSCO´s work to raise standards of securities regulation worldwide, and increase the number of jurisdictions that can exchange information to combat international fraud," said Jane Diplock, Chairman of the Executive Committee. "This is a great opportunity for New Zealand to host representatives from agencies that regulate over 90% of the world securities markets." A good outcome in Provenco case The Commission is pleased with the Provenco settlement. In relation to the settlement of any insider trading case the public interest, the interests of shareholders, litigation risk, and cost are all taken into account. "We will not take legal action unless we consider it to be in the public interest and it is clear that the defendants have a case to answer," Chairman Jane Diplock said. It is always open to defendants to attempt to strike an action out if they consider there is no case to answer. The Commission will only settle a matter when it considers it is in the interests of the shareholders to do so. What happens next Money from the settlement will be held in trust by Provenco´s solicitors until the Court decides how it is to be distributed. The Commission´s goal is to ensure investors get appropriate compensation for their losses. Why we sued the company The Commission´s court action related to three different phases of trading in Provenco´s shares. One of these was on 2 May 2003 when Provenco itself bought 4,262,517 shares, or 4.97% of the total shareholding. A company is allowed to buy its own shares under the law. However, because the law recognises a company as a separate "person" from its directors or shareholders, a company is also responsible for its own actions under the law. The Commission alleged the company´s purchases were made with inside information. When anyone buys shares with inside information the seller can suffer a loss. (continued page 3) ALSO IN THIS ISSUE: Internet investment scams Financial reports under scrutiny Joint meeting with ASIC IOSCO´s new challenge

THE BULLETIN October 2005

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