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UPDATE: Warminger 'disappointed' by finding he manipulated NZ stock market twice in 2014

Friday 3rd March 2017

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(updates to add comment from Warminger's lawyer, Milford Asset Management in lede paragraph, paragraphs 4-8)

Former Milford Asset Management portfolio manager Mark Warminger is "disappointed" the High Court found he manipulated the New Zealand stock market in two trades in 2014, however, the judge rejected the remaining eight instances argued by the Financial Markets Authority.

The trial was brought by the FMA, which claimed Warminger breached the Securities Markets Act by placing small trades on market in one direction, followed by large off-market trades in the opposite direction in order to set the price rather than for a genuine purpose.

Chief High Court Judge Geoffrey Venning said he was satisfied on the balance of probabilities that Warminger manipulated the market in relation to Fisher & Paykel Healthcare on May 27, 2014, and A2 Milk Co on July 9, 2014, but the FMA had failed to prove the remaining eight claims, which included two other trades of A2 in January and August 2014. The FMA also failed in its claims that Warminger manipulated the market in shares of Restaurant Brands, Sky Network Television, Xero, Wynyard Group and Skellerup Holdings over 2014.

Marc Corlett QC, one of Mark Warminger's lawyers, said in a statement that his client was "obviously disappointed" by the findings.

"However, it would be inappropriate to comment further until we have worked through the judgment and what it means for Mr Warminger," Corlett said. "Consequently, neither Mr Warminger nor counsel will be making further comment at this point in time."

Milford Asset Management's Bryan Gaynor said the company had no comment to make as it had just received the judgment. In a note to clients today, Milford said the decision had no impact on their funds and that the firm wasn't involved in the proceedings having reached a settlement with the FMA in 2015.

"This was a long and technical case for the industry and we note both parties have the right to appeal the decision," it said. "As a result of our growth Milford has had a programme of upgrading systems and processes since April 2013, including implementing in 2015 a world class system and a centralised dealing team which separates the purchase and sale of individual company securities from portfolio management responsibilities."

Justice Venning has asked the lawyers to file a joint memorandum about the financial penalty the court should impose. The maximum penalty for a breach of the law is the greater of the consideration for the transaction, three times the amount of gain made or loss avoided, or $1 million. 

"There is a common theme to the defence case on this and other transactions to the effect of 'why would Mr Warminger engage in such behaviour and place his career at risk for either a very limited or even nil financial benefit to himself?'," the judge said in his verdict. "The FMA does not have to prove a motive. But Mr Warminger’s evidence, both in what he said and also how he answered questions as well as the evidence of Mr Gaynor provides some insight. Mr Warminger is a goal-driven individual. He is motivated by personal performance, the performance of the funds under his management and the targets he has to meet."

"Mr Warminger has been very successful in a performance-driven industry. He was the INFINZ fund manager of the year for three years preceding 2014. He was used to success and took pride in being on the winning side of a deal. His personality provides some explanation why he would engage in such activity," Justice Venning said.

FMA chief executive Rob Everett said the watchdog is pleased with the outcome.

"Market manipulation threatens our core objective of promoting fair, efficient and transparent financial markets. For investors to participate confidently in our markets we need to target and respond to misconduct," Everett said. "That is what this case was about. In terms of the broader consequences for conduct within our markets, we need to review and fully consider the judgement before making further comment."

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