Eroad insider trader sentenced and named

Former Eroad employee Jeffrey Peter Honey has been sentenced to six months' home detention for insider trading.

Name suppression for Honey, a former analytics manager at Eroad, was lifted at his sentencing in the Auckland District Court this afternoon.

The Financial Markets Authority charged Honey, who pleaded guilty in April, and another former employee of Eroad in March on insider trading charges under section 243 of the Financial Markets Conduct Act. The charges related to being an information insider advising or encouraging another person to trade.

This is the first criminal case for insider trading.

Eroad markets and develops technology for electronic monitoring of vehicle fleets.

In sentencing Honey, Judge Heemi Taumaumu noted he was a family man who had had a fall from grace.

But he said the offence was serious and deterrence was needed to uphold the integrity of New Zealand's capital markets.

While employed at Eroad, Honey sent text messages to another former employee that contained confidential material information relating to the listed company’s performance in the period to September 30, 2015. That individual then traded 15,000 Eroad shares. 

The other defendant faces one charge of insider trading under s241 of the Financial Markets Conduct Act – namely, an information insider must not trade.

That defendant, who has name suppression, is due to appear in court next week.

Text – ‘sell up’
Prosecuting lawyer Nick Williams said although Honey didn't profit from his actions, he was in a position of trust and his was a gross breach.

Honey had an otherwise a clean record but this is exactly why he was in a position of trust, Mr Williams said.

The text and email Honey sent to his former colleague was in relation to Eroad’s expansion into the US not going as well as expected. Knowing his fellow accused held shares in Eroad, he said it was time to “sell up,” Mr Williams said.

The former employee responded, “you're a bad boy but thanks” and later sold 15,000 shares for approximately $51,000, Mr Williams said.

This happened before Eroad disclosed its US performance to the market. Its share price fell 21% in one week after it informed the market, which meant the former Eroad employee avoided $6500 in lost share value by selling, Mr Williams said.

Eroad regularly reminds staff of their obligations not to disclose market sensitive information and Honey knew exactly what he was doing, Mr Williams said.

Insider trading adversely affects confidence in capital markets, he said, particularly in a small one like New Zealand.

Out of character
Honey’s lawyer, Paul Wicks, replied that his client's offending was at the lowest end of the spectrum, with other inside traders profiting significantly more.

It was out of character, he was remorseful and he didn't profit from his actions, Mr Wicks said.

He said Honey’s offending wasn't sophisticated and neither was it subterfuge. A contributing factor was that Honey had mental health issues at the time, Mr Wicks said.

Just because this was the first case of its kind didn't mean he should be made an example of, Mr Wicks said.

The lawyer added that a conviction would put an end to Honey’s 20-year career in customer insights.

He advocated for a discharge without conviction.

The FMA had previously agreed to withdraw two obstruction charges under section 61 of the FMA Act.

Eroad chairman Michael Bushby has previously said the company was considering civil claims against both individuals charged.

The investigation and charges followed a referral from the NZX in November 2015.