NZ regulator emboldened by ‘market manipulation’ victory


Victory in its two-year legal battle against Mark Warminger last week has freed-up New Zealand’s Financial Markets Authority (FMA) to pursue other related matters, according to chief executive, Rob Everett.

Everett said the FMA is “less fettered” now the market manipulation case against former Milford Asset Management portfolio manager, Warminger, has been settled.

“There were a couple of specific follow-up actions that have been somewhat delayed while we were waiting for the judgment,” he said.

Everett said the regulator planned both further investigation of individuals directly involved in the Warminger trades and a “broader conversation” with the stock-broking industry on market practices.

The original finding by Justice Venning in March this year featured guest appearances by several named brokers and broking firms.

“With the broader follow-up we’re not looking to catch anyone out,” he said, but to engage with stock-broking firms to better-define acceptable market behaviours.

The Warminger decision would help “narrow down the grey area” between legal and illegal practice within the NZ broking market, Everett said.

However, he said the FMA acknowledged some of the “particular features” of the NZ stock market – such as its small size and liquidity constraints – presented challenges for regulators.

Last week Warminger dropped his appeal against the March Auckland High Court finding that he breached market manipulation rules in two out of the 10 charges brought by the FMA. The FMA subsequently abandoned its cross-appeal that was due to be heard in October.

In a statement last week, Everett said the FMA was “satisfied that our regulatory objectives have been achieved in taking these proceedings”.

He said the regulator deemed “it was not in the public interest” to continue the cross-appeal after Warminger ceded the case.

“We dealt with the conduct and sent a much wider message of deterrence,” Everett said. “It woke a few people up.”

He said the Warminger case demonstrated to local and global investors that the FMA was willing to devote considerable resources to protect “market integrity”.

“We wouldn’t have taken the action just to make that point,” Everett said. “But investors want to see regulators put in an effort [to defend market integrity].”

Warminger was fined $400,000 and incurred a five-year management ban. It is understood the award-winning portfolio manager, on ‘extended leave’ since June 2015, formally resigned from Milford within the last four months.

– David Chaplin, Investment News NZ