9 Mar 2017

Two charged with insider trading under new law

5:03 pm on 9 March 2017

Two people have been charged with insider trading of a listed company's shares.

The Financial Markets Authority has filed charges in the Auckland District Court against an employee and a former employee of the NZX-listed software company ERoad.

The criminal charges are the first under the Financial Markets Conduct Act 2013.

The authority alleges an ERoad employee disclosed information about the company's performance to a former employee, who then traded 15,000 shares.

The law prohibits people with inside or privileged knowledge about a company either trading on such information or passing it on. The charges carry a maximum penalty of five years in jail and a fine of up to $500,000.

The FMA said it was alerted by the stock exchange to suspicious trading in ERoad shares. It said ERoad's conduct was not part of the FMA's investigation and the company had not been charged with any offence.

One of the accused has also been charged with trying to obstruct the investigation.

They are due to appear in court on 11 April.

FMA general counsel Nick Kynoch said a strategic priority for the authority was to maintain the integrity of the country's capital markets.

"Trading misconduct, such as insider trading, negatively impacts the integrity and reputation of our markets, and the confidence of people investing in them."

ERoad said it had suspended a staff member and was considering taking civil court action against the two people.

"Irrespective of the FMA action, we are taking appropriate disciplinary action regarding the alleged sharing of confidential financial information for personal share trading," said ERoad chairman Michael Bushby.

He said the allegations centred on trading that took place in September last year. ERoad shares slumped more than 25 percent during the month although the company made no significant announcement to the market.

ERoad sells software used by trucking companies to keep track of drivers' hours.