FMA: Settlement better than going to court

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A $1.5 million settlement with Milford Asset Management is designed to send a clear signal to the rest of the market that the FMA is watching and will take action, even if it requires a lengthy and expensive investigation, the FMA's chief executive says.

Thursday, June 18th 2015, 10:30AM 3 Comments

by Susan Edmunds

Rob Everett said the agreement with Milford was a sizeable settlement - not seen as a slap on the wrist by the fund manager or the regulator.

The FMA revealed this morning that it had finished its investigation into trading activity between December 2013 and August 2014 by a trader employed by Milford.

It said it considered the conduct had breached market manipulation prohibitions. It also said the Milford board failed to ensure there was enough monitoring of trading activity.

Everett refused to reveal further details about the trading while enforcement activity continues with the trader.

Milford will pay $1.1 million, which will go to the Crown, and $400,000 as a contribution to the FMA's costs.

Milford and its board accept responsibility for the inadequate oversight and control of the trading conduct which was under investigation, and the failure to identify and monitor this activity, or to assess whether the activity was appropriate.

Milford has carried out a thorough review of its systems and processes and has undertaken a programme of improvement for its trading systems and controls. Milford appointed PwC to review its governance, risk and compliance capability and to provide recommendations.

Everett said the FMA felt confident that significant improvements had been made since the time of the activity.

He said settlement was a better fit with the FMA's regulatory objectives than the potentially long and drawn-out process of going to court. "It's a wake-up call for Milford and the industry."

He said the FMA wanted to raise the bar in terms of market oversight generally and market conduct was a significant focus because it affected investor confidence, which would have flow-on effects to liquidity and cost of capital.

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,” 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."

Everett said losses to individual traders as a result of the activity were not visible, so the FMA had focused on the impact of the trading on market confidence.

Tags: Milford Asset Management

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