The Financial Markets Authority (FMA) has filed civil High Court proceedings against NZX-listed New Talisman Gold Mines chief executive Matthew Hill for alleged information-based market manipulation and making false and misleading representations.
The case relates to anonymous posts Hill allegedly made about the company on the Sharetrader website's online investor forum.
The FMA claims that between February 2013 and July 2020, Hill made dozens of posts on Sharetrader in a thread about New Talisman under two usernames, "bullish" and "Epithermal".
Hill, who is also a director and shareholder of New Talisman, did not, at any point, disclose his involvement in the company, the FMA said in its claim.
Hill's conduct was first revealed by the Herald in July 2020 after Sharetrader publicly identified him as the person behind the usernames.
New Talisman Gold - the company - is not party to the proceedings.
Karen Chang, the FMA's head of enforcement, said market manipulation undermines confidence in financial markets, especially if it is by a senior executive at a listed company.
"We considered Mr Hill's conduct warranted a strong response to demonstrate that such actions will not be tolerated, and to maintain confidence in New Zealand's markets," she said in a statement.
"This case is an important reminder that information-based market manipulation can occur on social media and forums, where investors are increasingly gathering to discuss stocks. Investors should be careful when using forums to inform their investing decisions as they can be exploited by vested interests," she said.
Chang acknowledged Sharetrader's efforts to moderate its forum and for bringing this issue to light.
The proceedings have been filed in the Auckland High Court and the claim is yet to be served.
The FMA claim is based on two causes of action for alleged market manipulation under the Financial Markets Conduct Act 2013 and the Securities Markets Act 1988 and an alternative cause of action for alleged false or misleading representations.
The FMA is seeking from Hill a declaration of contraventions, a financial penalty and costs.
New Talisman Gold Mines is developing the historic Talisman Mine in the Karangahake Gorge near Waihi.
Its shares last traded on the NZX at 0.3 of a cent.
Sharetrader has been going for 20 years and can attract up to 30,000 visitors a day.
The NZ Shareholders Association (NZSA) said it had been working with concerned shareholders of New Talisman for some time in relation to Hill's conduct, the current governance of the company "and ongoing performance issues".
"This has included a representation to New Talisman Mines that NZSA does not support Matthew Hill remaining on the board of the company," it said in a statement.
"As always, NZSA has been supporting retail shareholders to ensure that their concerns are heard by the New Talisman board and to advocate for board changes to support governance improvement," the association said.
"Today's announcement by the FMA vindicates the position taken by NZSA and the group of concerned shareholders.
"NZSA will continue to be instrumental in driving change at NTL, by continuing to work with New Talisman Mines and concerned New Talisman shareholders," it said.
"This is an ongoing process, and we look forward to the upcoming annual shareholders meeting of the company to be held on September 22.
"We intend to communicate more fully with all New Talisman shareholders prior to the meeting, to highlight governance concerns and the position supported by NZSA."
In a statement to the NZX, New Talisman said it was not aware of any further details about the claim.
As the matter was before the courts, it would be "premature for us to prejudge the outcome".
"We have previously complained to FMA and Tarawera Publishing Limited, operator of the Sharetrader website, about lack of moderation on the Sharetrader website, contrary to Sharetrader's own terms and conditions," New Talisman said.
"We remain hopeful that FMA will take appropriate action in respect of our complaints," it said.
"We continue to call for online publishers to be regulated, and proactive regulatory guidance to be issued, on the use of social media by investors, issuers, intermediaries, and other market participants and their employees," the company said.