The $400,000 fine slapped on Milford portfolio manager, Mark Warminger, was aimed at “prevention, not punishment”, according to the penalty judgment handed down in the Auckland High Court last week.
While the $400,000 fine was a quarter of the figure argued by the Financial Markets Authority (FMA), Justice Venning concludes the penalty was a sufficient warning.
“…prevention is achieved as a flow on effect of sufficient specific deterrent penalties focussing on the individual to set an example to the wider industry through a concomitant ‘deterrence message’,” Venning says in the judgment, which took into account wider market views.
“… industry expectations are relevant in that the imposition of lower penalties than the industry expects lessens standards and leads the industry to think a lack of vigilance will not be taken seriously (albeit that excessive penalties reduce respect for disciplinary processes),” the finding says.
Despite accepting the more than $3.8 million maximum penalty argued by the FMA (compared to $2 million by Warminger’s counsel), Venning set the starting point for the fine at $500,000.
He knocked 20 per cent off after taking into consideration Milford’s 2015 $1.5 million payment to the FMA as well as Warminger’s career damage and ill-health.
Warminger, on extended leave from Milford since mid-2015, retains a 1.46 per cent shareholding in the firm, which could be worth north of $1 million based on a rule-of-thumb valuation of 2 per cent funds under management for the firm. Milford has about $4 billion under management, according to recent figures from Strategic Insight.
In a statement the FMA says it is “currently considering the penalty judgment”.