Manager sentenced for insider text tipoff

A former company manager has been sentenced to six months’ home detention for New Zealand’s first prosecution of insider trading.

The Financial Markets Authority alleged in the Auckland District Court that Eroad analytics manager Jeffrey Peter Honey sent a text message in September 2015 to a former employee and Eroad shareholder, encouraging them to sell 15,000 shares.

In the text Honey revealed confidential information about the company’s financial performance.

The shares would have been worth about $51,000. Eroad is a listed company that provides fleet management systems. Honey pleaded guilty in April. He had sent a text message to the shareholder containing a photo of confidential information that showed Eroad’s US sales had been lower than expected following an aggressive North American expansion. The message also said ‘‘time to sell up’’.

Two days later, Eroad notified the NZX of a drop in US sales.

Honey later text-messaged the former employee, saying: ‘‘hope you sold’’.

Prosecutor Nick Williams said Honey’s actions had been a ‘‘gross breach of trust’’.

Judge Heemi Taumaunu said insider trading seriously affected the trust in New Zealand’s financial markets.

Since this was the country’s first insider trading prosecution, Judge Taumaunu considered similar cases from Australia and United Kingdom.

The maximum penalty for this charge is five years’ imprisonment or $500,000 fine, or both. The judge said discharge without conviction would be inappropriate.

The other accused faces one charge of insider trading and is expected to appear at the Auckland District Court for a hearing next week.