20 Mar 2018

NZ's first insider trading trial begins in Auckland

8:03 pm on 20 March 2018

The first person to go on trial in New Zealand for insider trading sold his shares in a company after getting a tip-off from an employee, the High Court has heard.

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Photo: 123RF

Hamish Sansom is on trial at the High Court in Auckland, accused of insider trading.

Crown prosecutor Nick Williams told the court in his opening address today that Mr Sansom once worked for technology company Eroad.

Eroad allows trucking companies to buy road user charges electronically and had recently expanded into the United States market.

Four days before Eroad publicly announced a drop in its forecast profit in September 2015, Mr Sansom sold 15,000 shares.

But Mr Williams said Mr Sansom only did that after getting inside information from Eroad analyst Jeffrey Honey, who he had worked with at Vodafone and later at Eroad.

The information from Mr Honey came in a text message.

"US sales not doing too well - time to sell up? Confidential obviously."

Mr Sansom also received a photograph of a confidential internal Eroad report on the company's performance in the US.

"And you'll see the reply," said Mr Williams, "which the Crown says is the reply from Mr Sansom: 'You're a bad boy ... but thanks!'."

A minute later Mr Sansom sent another message, saying he was going to sell his shares anyway.

In the next two days, Mr Sansom transferred the shares from his family trust into his personal name in order to sell the 15,000 shares online.

Four days later Eroad told the market that its profit forecast was down.

"In the announcement, Eroad said that net profit was forecast to be half a million for the year ending 31 March, 2016 - compared to a previous forecast of $5.3 million, so in fact more than 10 times lower than forecast in the offer documents."

The market reacted badly and the company's share price plummeted.

"And it continued to fall over the remainder of the trading week, closing Friday 2 October, 2015 at $2.60, which was a 21.7 percent decrease since the announcement on 28 September."

Mr Sansom's sale of his shares was picked up by the NZX investigations team and forwarded to the Financial Markets Authority.

But Mr Sansom's lawyer, David Jones QC, said the Crown was trying to paint Mr Sansom as a bad man.

"The defence says that is rubbish. That this man looked at the reality of publicly available material and he worked out for himself, well before September of 2015, that US sales were not doing very well at all."

Mr Jones said there were documents on the public record that Mr Sansom was able to access to show the true picture.

"This is a case of numbers versus words, of reality versus rhetoric, that the wonderful words being spoken by the people at Eroad about how well things were doing, were not bourne out by the numbers. This man looked at the numbers and he worked it out for himself."

Mr Jones said Mr Sansom had planned to sell his shares for months and the text messages from Mr Honey came out of the blue.

The trial has been set down for two weeks.