New Zealand’s financial regulator has launched civil proceedings against Milford Asset Management (MAM) portfolio manager, Mark Warminger, on alleged market manipulation charges.
In a statement issued last week, the Financial Markets Authority said it would be seeking “pecuniary penalties” from Warminger in relation to trading carried out at Milford between December 2013 and August 2014.
Milford is one of New Zealand’s largest funds managers with about NZ$3 billion in funds under management. It also has a small Sydney office. In February the firm revealed it was under investigation for alleged market manipulation charges before agreeing to a NZ$1.5 million settlement with the regulator in June, despite denying any wrong-doing.
However, Milford did agree to modify its governance and trading practices in the agreement. Following the FMA agreement, Milford lost several wholesale mandates amounting to NZ$130 million, including almost NZ$120 million held by Mercer in its NZ equities multi-manager product. The manager is still awaiting final word on the fate of its NZ$281 million New Zealand Superannuation Fund (NZS) mandate, which was suspended in April. Industry sources say NZS is unlikely to return the money to Milford.
While the FMA indemnified Milford against further legal action in the agreement, it said it would continue to investigate the individual ‘trader’ at the centre of the allegations – since identified as portfolio manager, Warminger.
Warminger would defend the charges, his legal counsel, Marc Corlett, said in a release following the FMA announcement.
“Mr Warminger denies that he manipulated any market and will defend the case,” Corlett said. “When the facts are traversed in court the public will be able to draw its own conclusions on both the FMA and this particular claim. The fact that the FMA asserts something does not of course make it so and we fully expect that fair-minded people will wait until the court process is complete before drawing any conclusions about Mr Warminger’s trading.”
The FMA alleged Warminger breached section 11B of the Securities Markets Act with the trades in question, covering activities that included:
> placing small trades directly on market in one direction, followed by large off-market trades in the opposite direction;
> trading that manipulates the closing price; and
> trading conducted in order to set the price, rather than for a genuine commercial purpose.
Belinda Moffat, FMA director of enforcement and investigations, said in the statement: “the issues raised in this case are of significant importance to New Zealand’s secondary markets and the FMA’s focus on ensuring that our markets are seen as fair and transparent places to do business. We are committed to raising confidence in financial markets and where we see conduct of concern we will take appropriate action.”
Anthony Quirk, Milford managing director, said Warminger remained an employee of the Auckland-based funds management firm.
“He is on extended leave,” Quirk said. “Milford is not a party to the FMA proceedings. We signed a full and final settlement with the FMA in June.”
The FMA’s investigation commenced after a referral from NZX in August 2014. The case will be heard in the High Court with a date yet to be set.
– David Chaplin, Investment News NZ