The FMA last week declined to comment on market speculation about the investigation.
Today, the FMA confirmed an ongoing investigation into trading activity at Milford, based on a referral from sharemarket operator NZX.
"The matters of the investigation remain confidential," an FMA spokesman said. "We will not be commenting further at this stage."
Milford was co-founded in 2003 by Brian Gaynor, who is a Business Herald columnist and an executive director of the fund manager.
It has more than $3 billion under management and has won numerous industry awards, including equities fund manager of the year for the past five years at the Institute of Finance Professionals NZ (Infinz) Awards.
Market manipulation involves deliberate attempts to interfere with the market to create artificial, false or misleading appearances in supply, demand or the price of securities.
It has been a key focus of the FMA since it was set up in 2011, when it replaced the Securities Commission, which was widely viewed as ineffective.
Its case against Diligent Board Member Services founder Brian Henry, launched in 2013, was the first brought in NZ.
Henry last year admitted to manipulation involving orders and trades in Diligent shares and was ordered to pay a $130,000 penalty after settling with the FMA.
And last month the watchdog warned an "inexperienced" online trader, who wasn't named, over suspected manipulative trading.
Under the Financial Markets Conduct Act, an individual convicted of market manipulation can be jailed or fined up to $500,000, while a company can face a fine of up to $2.5 million.
