Insider-trading prosecution at end of the road
The Financial Markets Authority (FMA) has lost its first insidertrading case after a jury found Hamish Marc Sansom not guilty of selling Eroad shares as a result of a tip from a fellow company employee.
On Friday, the High Court jury in Auckland accepted Sansom’s defence that the tip was a coincidence of timing and he had already planned to sell the shares to pay a debt to his builder.
Commenting after the verdict, Sansom’s lawyer, David Jones, QC, questioned whether the FMA was pursuing difficult cases.
During his summing up Jones had said it was a case of using a sledgehammer to crack a walnut.
Samson was an executive at Eroad until March 2015 when he was made redundant.
In September 2015 he sold 15,000 shares worth $51,0000 after the fellow employee warned of poor sales in the United States and advised Samson to sell his shares, the jury heard. The share price of Eroad fell soon after.
Samson told the court the poor US sales were not a surprise and he had already been concerned about Eroad’s performance.
At an earlier trial in March a jury had been unable to come to a verdict and the court had ordered a retrial for Samson.
The FMA said it acknowledged the not guilty verdict and ‘‘will fully consider the outcome of this case’’.
‘‘Insider trading, market manipulation and other unethical trading activity undermines market integrity and erodes investor confidence in New Zealand’s financial markets,’’ it said.
‘‘The FMA will continue to investigate cases involving potential insider trading and, based on the evidence obtained, refer these matters to the courts.’’
The other Eroad employee, Jeffrey Peter Honey, who had given the tip to sell the shares, pleaded guilty earlier this year and was sentenced on Friday to six months’ home detention.
He acknowledged guilt at the Auckland District Court, under sections 243(1)(a) and 244 of the Financial Markets Conduct Act.
Honey admitted to being an information insider encouraging another person to trade.
Since 2015 Eroad’s share price has been volatile and has traded as low as $1.70 a share near the end of 2016, but has slowly recovered since then to trade last week at $3.34.
Ironically, the company’s history of poor trading in the US may have passed. In its 2018 financial year, Eroad grew sales in the US by 191 per cent and posted a $200,000 after-tax profit after previously posting losses.
Eroad sells compliance and fleet-tracking services to road transport fleets in the US from its base in Portland, Oregon. The company also manufactures and exports electronic hubodometers.