09 March 2017

FMA files charges for insider trading

Media release
MR No. 2017 – 08
9 March 2017

The FMA has filed charges in the Auckland District Court alleging breaches of the insider trading prohibitions contained in the Financial Markets Conduct Act 2013 (FMCA). The charges were filed in relation to trading in shares of Eroad (NZX:ERD).  The individuals charged are a current and a former Eroad employee.

FMA alleges that the current Eroad employee sent text messages to the former employee containing confidential material information relating to Eroad’s performance in the period to 30 September 2015.  The former employee then traded 15,000 Eroad shares. 

The charges are:

  • Section 241 FMCA – information insider must not trade;
  • Section 242 FMCA – information insider must not disclose inside information; or, in the alternative, section 243 FMCA – information insider must not advise or encourage trading;

The FMA has also filed charges against one of the individuals charged with insider trading, alleging obstruction of the FMA’s information gathering powers under the Financial Markets Authority Act 2011 (FMA Act).  These charges relate to the FMA’s investigation into the matter. 

The charges are:

  • Section 61(1)(e) FMA Act – deceives, attempt to deceive, or knowingly misleads the FMA in providing evidence; and
  • Section 61(1)(f) FMA Act – wilfully acts in contravention of any order made by the FMA under section 44.

The FMCA prohibits insider trading on licensed financial product markets. This prohibition is one of the key mechanisms for ensuring that markets remain fair and transparent. The FMCA prevents people who hold material information that has not been made generally available to the market (inside information) from disclosing that information or trading on it. Material information is information that a reasonable person would expect, if it were generally available to the market, to have a material effect on the price of shares in the listed issuer.

Nick Kynoch, FMA General Counsel, said, “The integrity of NZ capital markets is a strategic priority for the FMA. Trading misconduct, such as insider trading, negatively impacts the integrity and reputation of our markets, and the confidence of people investing in them.”

Eroad’s conduct is not part of the FMA’s investigation and Eroad has not been charged with any offence.  Eroad has fully cooperated with and assisted the FMA throughout its investigation into these matters.

NZX and the FMA work closely together to detect and respond to insider trading on their markets.  NZX referred the suspicious trading to the FMA in November 2015.

Andrew Park
Ph: 021 220 6770
[email protected]