MR no. 2014 – 26
7 August 2014
Brian Peter Henry has admitted all of the Financial Markets Authority’s (FMA) allegations that he breached the market manipulation prohibitions in the Securities Markets Act 1988. FMA’s claims followed a referral from NZX and arose out of Mr Henry’s trading in shares in the NZX-listed Diligent Board Member Services (Diligent).
At the Auckland High Court Mr Henry admitted his trading contravened section 11B of the Securities Markets Act 1988, and a pecuniary penalty of $130,000 has been imposed by the Court today.
Justice Venning said in his judgment, “The conduct that Mr Henry engaged in undermines the development of a fair, efficient, and transparent financial market. Such market manipulation is likely to undermine the integrity of the NZX and jeopardise the confidence of both overseas and domestic investors in the NZ security markets. A pecuniary penalty is appropriate.”
Mr Henry admitted six breaches of the Securities Markets Act 1988. On two occasions he executed ‘wash trades’, namely trading in Diligent shares with himself, which moved the Diligent share price without any change in the ownership of the shares. He admitted to creating a false or misleading appearance of trading in Diligent shares on four other occasions, by:
Belinda Moffat, FMA Director of Enforcement, said “misconduct like Mr Henry’s undermines the integrity and trust in the fair and orderly operation of the equities market. The public want and deserve to invest in the markets with confidence that any trading activity reflects genuine supply and demand for shares in the market.”
This is the first case of market manipulation brought in New Zealand. Investigating and responding to misconduct in New Zealand’s secondary markets, whether it be insider trading, market manipulation or disclosure breaches is a priority area of focus for the FMA.
“There is a strong public interest in deterring share trading that is false and misleading. Where there is a case that meets the standard of evidence required and where court action satisfies the public interest, then FMA will take proceedings to ensure confidence in the development of fair, efficient and transparent markets,” said Ms Moffat.
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Section 11B of Securities Markets Act 1988
11B False or misleading appearance of trading, etc
A person must not do, or omit to do, anything if—
(a) the act or omission will have, or is likely to have, the effect of creating, or causing the creation of, a false or misleading appearance—
(i) with respect to the extent of active trading in the securities of a public issuer; or
(ii) with respect to the supply of, demand for, price for trading in, or value of those securities; and
(b) the person knows or ought reasonably to know that the person's act or omission will, or is likely to have, that effect.