The Financial Markets Authority has been ordered to provide more details of its market manipulation case against Mark Warminger.
Warminger, who is on extended leave from his position as a portfolio manager at Milford Asset Management, is fighting a FMA lawsuit due to go to trial in September.
The FMA alleges Warminger misused his privileged position with an institutional investor to trade shares not for a genuine commercial purpose but to increase their market price so that he could then transact significant off-market sales at a greater profit.
Its claim against him, for example, alleges certain trades of Fisher & Paykel Healthcare shares were likely to have created a false or misleading appearance of the extent of active trading and the supply, demand, price, and value of that stock.
However, Warminger went to the High Court at Auckland last month to ask for more details of the FMA's claim.
His Queen's Counsel Mike Heron argued the regulator's claim did not specify or plead the actual misleading appearance that was allegedly given.
The FMA opposed Warminger's bid and said it was plain what was being alleged.
Justice Raynor Asher, in his decision released this afternoon, said it was left for the reader of the FMA's statement of claim to infer how the allegedly false and misleading appearance was created.
"While it may well be that this could be assumed from the previous paragraphs, pleading is not about inferential assertions. Such assertions fall short of the certainty and clarity offered by express allegation. In my view, the way in which the trades had the effect of creating or causing the creation of a false or misleading appearance needed to be spelt out. It is too important to be left to inference. The statement of claim should tell the defendant the allegations that must be answered, so the defendant is not left to guess, and can affirm or deny with confidence," the judge said.
"The pleading currently is unduly conclusory, and there is no bridge between the facts given, and the conclusion of a misleading appearance. It needs to be explained," Justice Asher said.
While the judge ordered the FMA to provide more particulars, he did not do so in the way that Warminger requested.
That would make the claim too broad and cumbersome, he said.
Justice Asher ordered the FMA to identify in its statement of claim the misleading appearance created by the actions it alleged earlier.
"I envisage that the particulars to be provided, having referred back to the pleaded conduct, will assert that the defendant manipulated the market by appearing to purchase shares when the transactions were not driven by supply and demand, but instead were designed to artificially move the market upwards so that the defendant could achieve off-market sales at a higher price than would otherwise by the case," the judge said.