Warminger wants FMA's 'catch-all pleading' refined

The Financial Markets Authority's market manipulation case against Mark Warminger is "very confusing" and needs to be better pleaded, his lawyer Mike Heron, QC, says.

But the market watchdog says its case, the second of its kind in New Zealand, is "abundantly clear" and is wary further particularising of an already very long statement of claim could be subject to misuse at trial.

Further details of the allegations against Mr Warminger, who is on extended leave from Milford Asset Management, were revealed in the High Court at Auckland before Justice Raynor Asher today.

Milford last year agreed to pay $1.5 million to settle FMA allegations relating to its role in the alleged market manipulation.

NBR has previously been denied access to the court file.

But today, trading in Fisher & Paykel Healthcare shares were specified as part of 10 causes of action against Mr Warminger, as well as details of the use of a Direct Market Access platform provided by Macquarie Bank, and communications with Forsyth Barr and Goldman Sachs.

The claim against Mr Warminger is set to go to trial in September but his lawyer, Mr Heron,  today applied for proper particulars in the FMA's pleadings.

The FMA alleges Mr Warminger's offending trades took place between December 2013 and August 2014, and involved placing small trades directly on market in one direction, followed by large off-market trades in the opposite direction, trading that manipulated the closing price, and trading conducted to set the price, rather than for a genuine commercial purpose.

Mr Heron said today two of the three key elements needed are missing in any detail from the pleadings, and so while the conduct, which is mostly admitted, is clear, the effect, and knowledge of this, is not.

There are five categories of the effect of creating a false or misleading appearance, including active trading, supply, demand, price, and value, but Mr Heron says the FMA is currently using a "catch-all pleading."

He used the example of alleged trading in Fisher & Paykel Healthcare on May 27, 2014.

The company had recently announced its annual result, and Mr Warminger went on market to buy shares, which were trading at $4.31, before going off-market to later sell at $4.35.

He said this was "entirely legitimate," and in New Zealand, any significant trade will move markets.

"The FMA has articulated clearly what the conduct was," he said.

"But there isn't an obvious purpose or motive behind this, no statement about what's the appearance that's created."

However, the FMA's lawyer, Justin Smith, QC, then detailed why this was "unquestionably market manipulation."

Abundantly clear
As a fund manager, Mr Warminger had access to the market through Direct Market Access provided by Macquarie.

Mr Smith, QC, says Mr Warminger learned through two contacts at Forsyth Barr and Goldman Sachs there was interest in acquiring two big share parcels in Fisher & Paykel Healthcare.

He indicated he may be willing to sell at $4.35, four cents higher than they were trading, and in the meantime made a series of small trades.

It was alleged he used Direct Market Access trades to move the bids from $4.31 to $4.34.

"In essence, what he is accused of doing is undertaking the small, on-market trades, for the effect of increasing the price."

"It clearly shows that he knew he could offload a significant number of FPH shares off-market."

Mr Smith, QC, said he does not want to be difficult but the five categories are all aspects of the same thing, and it is "abundantly clear" what the case is about.

Mr Heron, QC, responded by asking it to be set out if it is as clear as the FMA said.

"What's the case? It's very confusing.

"Is it price or value?

"How can it be supply when he's a buyer, for example."

Justice Asher reserved his decision.

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