Aussie expert finds trades not misleading
Defence in case against Milford portfolio manager opens with professor’s opinion
An Australian expert in market manipulation will testify that none of the trades identified by the Financial Markets Authority in its case against Milford Asset Management portfolio manager Mark Warminger created a false or misleading appearance in the market.
Warminger’s lawyer Marc Corlett, QC, in opening the defence at the High Court at Auckland yesterday, said Professor Michael Atkin of Sydney’s Macquarie University and one of the world’s leading experts on market manipulation, would give evidence on behalf of Warminger.
After considering all 10 actions the FMA had alleged against Warminger, Atkin concluded there was not a single instance where his trading between December 2013 and August 2014 breached securities law by creating a false or misleading appearance.
Warminger, who has been on extended leave since last year, is accused of misusing his privileged position with an institutional investor by placing trades in stocks in one direction to move the price so he could later transact significant off-market sales, known as cross-trading, at a greater profit.
He is also accused of placing trades in companies to set artificial prices. The FMA alleges he contravened the Securities Markets Act 1988, which prohibits trading that is not for a genuine commercial purpose.
Corlett said Atkin’s evidence would compare with that of the FMA’s own experts, one an analyst and another a trader, “who think they can divine from the trade data, a handful of emails and the timing of some telephone calls a malevolent intention behind Warminger’s trading on 10 occasions”.
He argued that Warminger traded stock as part of his job looking after $669 million of funds under management rather than just buying the stock and holding until he wanted to divest.
The FMA’s lawyer Justin Smith, QC, said on Monday that Warminger was under a “certain amount of pressure” to improve the underperformance of the funds under his management.
But Corlett said motive for the alleged market manipulation remained a “real bewilderment” to Warminger.
If the FMA case was proved, the 10 trades would have increased the value of the fund by about $50,000, which represents an increase of just 0.007 per cent on the funds under his management, he said.
The theory that Warminger was under pressure over the funds’ performance was never put to him during the FMA’s interview process and the FMA had not called a single witness to talk to the document that it is based on, he said.
“Over a six-month period he was just over 1 per cent behind the benchmark,” Corlett said. “This FMA interpretation of personal appraisal documents is in there for no other reason than the need for the FMA to come up with something to explain the otherwise inexplicable — why a highly regarded and successful fund manager would put his career in jeopardy by engaging in criminal conduct for no obvious financial gain.”