FMA considers that the trading conduct breached the market manipulation prohibitions in s11B of the Securities Markets Act 1988.
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See also: Milford portfolio manager on extended leave
UPDATED: Fund manager Milford Asset Management will pay $1.5 million to settle claims by the Financial Markets Authority that it is liable for manipulating the sharemarket.
The finding follows an investigation by the FMA into share trading between December 2013 and August 2014 by a trader employed by Milford.
The trader was not named by the FMA.
In a statement, the FMA said it “considers that the trading conduct breached the market manipulation prohibitions in s11B of the Securities Markets Act 1988. The FMA also concluded that the Milford board failed to ensure that there was the requisite degree of monitoring of the trading activity.”
The trading created a false or misleading appearance in the extent of active trading in certain shares and in the supply and demand for those shares, the FMA said.
The conduct breached the market manipulation prohibitions in the Securities Markets Act 1988, the FMA said. (See settlement agreement document here)
Although Milford denied liability for its traders activities, it agreed to pay $1.1m in lieu of penalty and $400,000 as a contribution to the FMA’s legal costs.
In a statement, Milford managing director Anthony Quirk said the company was pleased the investigation had been concluded.
He said it was important to note that, as stated by the FMA, the investigation had not related to the security of client funds or assets.
“This rules a line under the investigation from Milford’s perspective and we are now looking forward to focusing completely on continuing to deliver returns to our investors,” Mr Quirk said.
“We understand the role that the regulator has in ensuring that monitoring systems are at the highest international standards. We acknowledge that ours needed improvement in specific areas and this has been done.”
He said Milford had reviewed and upgraded its trading systems, “including the introduction of centralised dealing and the imminent implementation of a globally recognised investment management system. We believe this will move Milford to international best practice. One feature of this is that all trades are now executed by a separate dedicated team not involved in the management of funds.”
“Meanwhile we are positively committed to the extra step of implementing the PwC recommendations. Based on the report by PwC Milford is consistent with or ahead of current New Zealand market practice in 14 of the 17 areas assessed. We certainly intend to build on that position – we are currently enhancing the three areas where PwC found we were below the norm. This will place the company at or above New Zealand market practice in all 17 areas reviewed by PwC, which is a very strong position for the future.
“We believe that the business has already built on the experience, and has emerged even stronger and will continue to provide great service and returns for our clients.”
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