The Financial Markets Authority has rebuked Goldman Sachs New Zealand after an investigation into market manipulation by a client, disgraced Milford fund manager Mark Warminger.

However, the FMA stopped short of taking the investment bank to court, saying it fell more in the realm of NZX's disciplinary tribunal.

The regulator today published a report outlining its concerns about Goldman's conduct in relation to two trades. Warminger was ultimately deemed by the courts to have manipulated the market and the FMA said it was releasing further information to educate traders and investors about its expectations for trading by brokers.

The watchdog was concerned the trading may have been in breach of the Securities Market Act by creating a false of misleading appearance to the price and supply of securities, and felt a proportionate response to the potential misconduct was a referral to NZX's market disciplinary tribunal.

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The FMA said it made that recommendation to NZX staff several times, but that the stock market operator chose not to take that action.

Among the regulator's plans following the release of the report is to consult with the Ministry for Business, Innovation and Employment on considering legislative change empowering the watchdog to refer matters directly to the stock market's disciplinary tribunal.

"Even though the power of a direct referral to the NZDMT would raise some difficulties, we are disappointed with NZX's lack of use of the NZDMT given the extensive market expertise of its panel members," the report said.

"We do feel that there's potentially a piece missing because court's very slow, it's very expensive, it can be a process, particularly for something like this, that significantly delays your ability to educate and put out your deterrent message," chief executive Rob Everett said.

Fianncial Markets Authority CEO Rob Everett. Photo / File
Fianncial Markets Authority CEO Rob Everett. Photo / File

"We do hope that by publishing the report it both educates the market as to what is and is not acceptable and also enables us to go out and talk to it more openly."

The 18-page report ends the FMA's investigation into the issue, which was the country's first contested market manipulation case and featured former Milford Asset Management portfolio manager Mark Warminger.

The FMA said Warminger differed from Goldman Sachs in that because he was a fund manager and not a market participant he couldn't have been hauled in front of the stock market tribunal.

Among other reasons cited for not pursuing litigation, FMA said Goldman Sachs as a broker had an extra defence not available to Warminger, and that litigation attracts significant costs especially when there isn't any further advancement of regulatory goals.

"In this case, we consider any wider educative benefit to be gained from this investigation, beyond that already provided by the Warminger decision, can equally be obtained through this written report outlining our concerns and through the further non-enforcement actions we propose to take," it said.

Since the end of the Warminger case, the FMA has been engaging with fund managers to explain its concerns and Everett said the release of this report means it can have similar talks with brokers.

It's also going to work with NZX to review the facilitation practices of trading participants, and is lobbying for the use of voice recording by traders.

Goldman Sachs explained the conduct as facilitating traders for a client, and the report notes its disagreement with the FMA's views where they don't match the explanation provided.

The investment bank has also stopped operating as a trading participant in the New Zealand market.

A spokeswoman for Goldman Sachs said that the firm takes its regulatory obligations very seriously and it has cooperated with the FMA throughout.

"While we acknowledge the FMA's guidance to the market, we disagree with their views in relation to these trades," she said.