Manipulation case sparks warning
Trader’s ‘potential misconduct’ earns growling from FMA
An investor has been formally warned for market manipulation over shares traded in an NZXlisted company during April — sparking the regulator to warn others new to the share market.
An investigation by the Financial Markets Authority found the individual, who has not been named, was likely to have created a false or misleading appearance for demand and price of the shares, which is a breach of the Financial Markets Conduct Act.
The investor traded on their own behalf via an online trading account, buying a small parcel of shares at a price materially higher than the last trade while attempting to sell a larger parcel of the same shares at the higher price.
The trading was picked up by the NZX’s regulatory arm and referred to the FMA.
Nick Kynoch, general counsel at the FMA, said market manipulation was a serious breach of the law, even if the volume and value traded was low.
“New Zealand’s market manipulation provisions seek to ensure our equity markets reflect genuine supply and demand, and play a critical role in preserving the integrity of the share market,” he said.
“We know there are many relatively new investors participating in New Zealand’s share market and we want to remind all investors that they are responsible for their own actions. Ignorance of the law is no excuse. All trades must be for legitimate purposes.”
Kynoch said it determined a formal warning was the appropriate and proportionate response “after taking into account the small size and low value of the trade, the individual’s personal circumstances and trading history, the public interest in issuing court proceedings, and that this was a single act of potential misconduct by the individual. The person will not be named.”
Kynoch said it did not believe the circumstances of this case warranted the use of significant costs, resources and the courts.
“A warning sends a strong message to this individual and reinforces the provisions set out in the law to investors and the industry.”
In some circumstances, market manipulation may amount to a criminal offence and the most serious instances can result in imprisonment of up to five years or a substantial fine of up to $500,000 for an individual or $2.5 million for a company.