Dodgy sharetrader escapes with FMA warning

NZX stock ticker board above the Square Cafe in QEII Square. New Zealand Herald Photograph by Dean Purcell.

A person who traded shares with themselves in what regulators believe was market manipulation has escaped with a formal warning.

The inexperienced trader will not face any charges and has not been named by the Financial Markets Authority, which issued the warning today.

"The FMA has reached the view that the person engaged in trading that resulted in no change in beneficial ownership in the shares they traded.

This is presumed to be market manipulation under the Securities Markets Act," the market watchdog said this morning.

The unnamed trader is believed to have engaged in "bait-and-switch" trading.

"The FMA considers that the trades were likely to have the effect of creating a false or misleading appearance about the extent of active trading in, supply of, price for, or value of the shares traded. Such conduct may attract other traders into the market.

This type of conduct is also prohibited under the market manipulation prohibition provisions in the Securities Markets Act," the regulator said.

But after co-operating with the FMA's investigation the trader will escape with a formal warning.

The regulator noted that the trading occurred over a short period of time, provided no significant personal gain and was conducted on a online platform which did not offer guidance on prohibited activity.

FMA's director of enforcement and investigations Belinda Moffat said the warning was a "proportionate and effective response".

"Investigating and taking action against conduct such as insider trading and market manipulation that undermines the integrity and reputation of our markets is one of the FMA's key strategic priorities," she said.

The matter is the second instance in which the FMA has taken action over market manipulation.

The regulator in August concluded its first market manipulation case against Brian Henry, which resulted in the Diligent founder paying a $130,000 penalty.

Last September, the FMA said it was probing two possible instances of insider trading and market manipulation, after receiving 15 complaints about such behaviour in the 12 months to June 30.

Those accused of market manipulation can face either criminal or civil charges. In a criminal case, the maximum penalty is 5 years jail or a $300,000 fine.