December 2007
22
ISSN 1175-5040
ISSN 1178-2722
(online)
IN THIS ISSUE
The new rule 64 of the Takeovers Code prohibits misleading or deceptive conduct in relation to Code-regulated transactions. Market participants need to be aware that when this conduct occurs the Panel will respond in an appropriate manner to protect the interests of the market.
The prohibition in rule 64 of the Code against misleading or deceptive conduct during Code-regulated transactions comes into force on 29 February 2008. New sections 44B to 44E of the Takeovers Act (which also relate to misleading conduct) will come into force at the same time.
Rule 64 provides:
Rule 64 enables the Panel to exercise its enforcement powers for any misleading or deceptive conduct relating to Code-regulated transactions or events. Misleading or deceptive conduct that is incidental or preliminary to transactions or events that are, or are likely to be, regulated by the Code, will also be subject to the Panel's enforcement powers.
Rule 64 applies to any person - not just to bidders or target companies or major shareholders. Any person who engages in misleading or deceptive conduct relating to a Coderegulated transaction or event is caught by the prohibition.
As well as the rule 64 prohibition, it will also be a criminal offence, under new section 44C of the Takeovers Act, to make or disseminate materially false or misleading statements or information relating to Code-regulated transactions or events. The penalties for this offence are, for an individual, imprisonment for up to five years or a fine of up to $300,000, or both. For a body corporate, a fine of up to $1 million can be imposed.
Rule 64 has broad application. It is based on section 9 of the Fair Trading Act 1986 which prohibits misleading and deceptive conduct in trade.
The term 'misleading or deceptive' has been subject to wide judicial consideration over many years in many cases in New Zealand and Australia. It appears frequently in consumer protection legislation (such as the Fair Trading Act and the Australian Trade Practices Act 1974). The term also occurs in the market manipulation provisions of the Australian Corporations Act 2001.