Most Read Contributor in New Zealand, September 2016
As New Zealand's second stock market manipulation case - the
civil action by the Financial Markets Authority (FMA)
against Mark Warminger - heads to court in September, we provide a
detailed analysis of the applicable legislative and regulatory
regime and of relevant case law here and internationally.
The Warminger litigation
The FMA alleges that Mr Warminger misused his privileged
position as a portfolio manager for Milford Asset Management
Limited to manipulate the market by:
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 in order to set the price.
After an application by Mr Warminger, the High Court ruled in June that the FMA should make minor changes to its
statement of claim to identify how the ten trades in question had
the effect of creating or causing a false or misleading
Given that Milford was Mr Warminger's employer, the FMA also
considered that Milford was liable for the alleged breaches.
Milford denied any such liability but did accept that it had failed
to ensure that there was a sufficient degree of oversight and
monitoring of the trading activity, which resulted in a failure to
In June 2015, Milford entered into an agreement with the FMA in
full and final
settlement of all claims relating to the company (but not Mr
Warminger). Milford paid the FMA around $1.5 million, comprising $1
million in lieu of a pecuniary penalty pursuant to section 46A (1)
(b) of the Financial Markets Authority Act 2011 and $400,000 toward
the costs of the investigation.
The FMA chose to take a civil rather than a criminal action
against Mr Warminger.
The principal advantage to the FMA of civil proceedings is that
they require a lower standard of proof - on balance of
probabilities rather than beyond reasonable doubt. There is also no
requirement to prove that Mr Warminger knew that his actions might
mislead the market, only that he ought reasonably to have known
this. And a civil claim is open to settlement - whether an agreed
banning order or a compensation / penalty payment - whereas a
criminal prosecution would deliver a conviction or acquittal. In a
criminal proceeding, on conviction of an individual the Court could
impose a jail term or criminal fine.
If the FMA proves its case, it may open the way potentially for
third parties to sue Milford and/or Mr Warminger. But the fact that
the FMA has settled with Milford means that the claimants will be
on their own in taking action for compensation against Milford. The
FMA cannot join them.
The analysis of the market manipulation regime is available
The information in this article is for informative purposes
only and should not be relied on as legal advice. Please contact
Chapman Tripp for advice tailored to your situation.
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