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Henry dismisses FMA claim over Diligent share trades as having 'no merit'

Wednesday 24th July 2013

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Brian Henry, a venture capitalist who helped found Diligent Board Member Services, says a Financial Markets Authority suit alleging he manipulated the company's shares in early 2010 "has no merit" and has already been considered by the FMA's predecessor.

The FMA's suit contains "six claims alleging certain orders and trades made by Mr Henry in 2010 breached the market manipulation provisions of the Securities Markets Act," the market regulator said in a statement today. Its investigation followed a referral from NZX, whose former chief executive Mark Weldon is now a Diligent director.

Henry said he "would be responding vigorously" to the civil proceedings through his New Zealand lawyer.

US-based Henry confirmed in a statement that he had made "errors" in trading the shares in early 2010 though he himself had brought it to the attention of the FMA's predecessor, the Securities Commission, "back in 2010 when he realised he had made the errors."

"The Securities Commission discussed the matter thoroughly with Mr. Henry and took no action," Henry said in a statement emailed to BusinessDesk.

"The trading I brought to the attention of the Securities Commission in 2010 had a minimal effect on the market, inadvertently lowering and then raising the price of the stock by a matter of cents," he said. "The net effect of these trades at the time was about $1,500."

Henry was a former chief executive of Diligent, leaving the company in 2009. In more recent times, Diligent has stumbled with a series of administrative missteps over disclosures, recognition of sales and executive options.

Shares of Diligent almost tripled in 2010, rising from 25 cents to about 67 cents. The biggest trade during the year was current chief executive's Spring Street Partners, which acquired 2.5 million shares in February. The B. Henry and K. Borg Living Trust sold 543,157 shares, reducing its stake to 5.4 percent, according to a filing in May. Those shares were later distributed to the trust beneficiaries, a later notice that month shows.

FMA Head of Enforcement, Belinda Moffat, said it was the first market manipulation case to be taken in New Zealand.

"Market manipulation interferes with the integrity of New Zealand's financial markets and harms the function of open, transparent and efficient capital markets," she said in the statement.

Shares of Diligent dropped 1.5 percent to $6.40, reversing an earlier gain.

BusinessDesk.co.nz



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