Milford Asset Management has been fined $1.5 million after agreeing to a settlement with the financial regulator in regards to alleged market manipulation charges relating to a trader employed by the firm.
In a just-released Financial Markets Authority (FMA) statement, the regulator said “the trading conduct breached the market manipulation prohibitions in s11B of the Securities Markets Act 1988”.
“The FMA also concluded that the Milford Board failed to ensure that there was the requisite degree of monitoring of the trading activity,” the release said.
“The FMA considers that the conduct had, or was likely to have had, the effect of causing the creation of a false or misleading appearance with respect to:
- the extent of active trading in the relevant securities; or
- the supply of, demand for, price for trading in, or value of those securities.”
The FMA said while the trader was the main source of market manipulation, Milford also fell short in its governance practices.
“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,” the FMA release says.
Under the agreement, Milford hired PwC to conduct a review of processes, now complete, with changes to be implemented.
In November 2014 Milford hired Mark Riggall as senior central dealer – a new role for the firm designed to channel all trades via a single point.
FMA investigations continue into the trader at the centre of the controversy.
Anthony Quirk, Milford managing director, confirmed the details of the agreement in a press release.
“The agreement 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.
News of the Milford investigation first broke this February, however, the manager had been under investigation for months prior.
The New Zealand Superannuation Fund (NZS) stripped Milford of its $281 million ‘bespoke’ NZ equities mandate in April pending the outcome of the FMA investigation.
The FMA investigation, first referred to the regulator by the NZX in 2014, centred around market manipulation.
Milford, formed in 2003 by a “highly experienced group of individuals” including executive director, Brian Gaynor, currently manages more than $3 billion across retail, KiwiSaver and wholesale clients.