18 Jun 2015

Milford to pay $1.5m over trading breach

1:26 pm on 18 June 2015

Fund manager Milford Asset Management will pay $1.5 million following an investigation by the capital markets regulator over claims of market manipulation.

The Financial Markets Authority (FMA) considers one of Milford's traders breached the Securities Markets Act by trading in securities, such as shares, which created a false or misleading appearance.

While Milford has agreed to pay $1.5 million, including $400,000 in costs of the investigation, the fund manager denies it is liable for the alleged breaches.

But the fund manager does accept responsibility for inadequate oversight and monitoring of the trading activity.

The Authority's chief executive Rob Everett said the fine was significant and demonstrated that the type of behaviour would not be tolerated.

"I believe this is a wake-up call for Milford and for the industry."

"Milford has agreed to pay a substantial amount and make other significant commitments as a result of this action," he said.

Milford has reviewed its systems and processes, and has agreed to complete recommendations made by PWC to improve its trading systems and controls.

The settlement does not include the unnamed trader involved, and the Authority said that investigation was continuing.

Milford's managing director Anthony Quirk said it was pleased the investigation was over.

"We're certainly deny liability and that's the basis of the settlement," he said.

Mr Quirk said he was confident that trading cannot happen again.

He said the employee under investigation remains on extended leave.

Separately, the stock market operator, NZX, and the Financial Markets Authority are establishing a working group that would talk with the securities industry on setting expectations and providing further guidance on broking practices and conduct.