Getting clarity on market manipulation

Guidelines intended to provide brokers with more clarity on market manipulation are currently being worked on by the NZX, it has emerged at the Mark Warminger trial at the Auckland High Court.

Thursday, September 29th 2016, 8:30AM

by Miriam Bell

Warminger, who is a Milford Asset Management portfolio manager, is currently defending a case bought against him by the Financial Markets Authority (FMA)

The FMA alleges that Warminger carried out trading, between December 2013 and August 2014, which breached the Securities Markets Act 1988 and amounted to market manipulation.

His alleged misconduct involved cross-trading and making trades to set artificial prices.

Warminger’s trial might be New Zealand’s first for market manipulation, but it seems that the NZX is concerned about establishing clarity on what constitutes permissible trading conduct.

Under cross-examination on Wednesday, NZX market surveillance manager Fraser Wyeth said that the NZX is currently consulting in order to provide improved guidance on the issue.

However, when asked by Warminger’s defence lawyer, Marc Corlett QC, whether the FMA was involved in the exercise, Wyeth said it was not - to his knowledge.

Corlett focused much of his cross-examination of Wyeth on trying to establish what might, or might not, constitute normal, as opposed to unlawful, trading practices.

He also questioned Wyeth on why the NZX market surveillance team did not inform Warminger about its suspicions over his trading before it went to the FMA.

Wyeth said the NZX would contact brokers directly about any trading behaviour the NZX considered suspicious, but it would not contact institutional fund managers who trade through brokers directly.

This was because brokers fall under the NZX’s disciplinary scope, while fund managers come under the remit of the FMA.

The NZX conducted a seven week investigation into Warminger’s trades before referring them to the FMA, Wyeth said.

Warminger’s legal team had earlier applied for the release of more information relating to NZX participant enforcement to the court.

However, on Wednesday, Chief High Court Judge Geoffrey Venning ruled against the application, on the grounds that the requested information wasn’t relevant to the case.

The trial has been underway since Monday and is due to go on for four weeks.

If found guilty of market manipulation, Warminger, who has been on extended leave from Milford since last year, will face heavy penalties.

Tags: FMA Milford Asset Management NZX