Financial Markets Authority ‘considering’ complaints over Government bond sales

The Financial Markets Authority, headed by Samantha Barrass, won't reveal why it chose not to investigate four complaints about Government bond sales. Photo / Dean Purcell

The Financial Markets Authority has received six complaints about possible market manipulation in New Zealand wholesale interest rate and Government bond markets, two of which are still being considered.

However, the financial watchdog is refusing to disclose why decisions were made not to investigate four of the complaints, including allegations against a major bank revealed by the Herald last month.

The FMA disclosed the additional complaints in response to the Herald’s Official Information Act request seeking details and any action taken by the regulator.

“After considering the complaints and all information available to the FMA, we have decided to take no action in relation to four of the complaints including the complaint that was at the centre of your recent article,” the FMA said. “Our consideration of two complaints is ongoing.”

The agency then outlined its reasons for withholding further information regarding the complaints and its decisions.

They included the likelihood releasing such information would “prejudice the maintenance of the law, specifically our ability to make effective inquiries relating to complaints”.

“The FMA is concerned that its ability to obtain quality information in the future will be prejudiced if information provided to us in confidence is released.”

The regulator was also concerned releasing the information could compromise the supply of similar details, or information from the same source.

This comes as Australia’s financial regulator investigates a bond trading scandal across the Tasman that has already seen the ANZ Bank suspend two traders who worked on a A$14 billion Government bond sale last year.

ANZ chief executive Shayne Elliott reportedly admitted to staff last week the alleged wrongdoing was “not new” and “those involved will be held accountable and action will be taken”, according to an email obtained by the Australian Financial Review.

The bank has appointed two law firms to investigate while the Australian Securities & Investments Commission continues to probe ANZ’s Government bond trading practices.

The regulator is examining potential market manipulation by ANZ’s traders of the 10-year futures rate in favour of the bank and against the Government, moments before the pricing terms were set.

The issue appears similar to the complaint made to the FMA, reported in the Herald last month, that traders at a local bank had allegedly potentially manipulated a $3.5b New Zealand Government bond sale in 2022.

The Herald understands the complaint to the FMA identified unusual price action occurring between the allocation release and the deal pricing of the 2035 bonds with a swing of about 10 basis points.

The upshot was an effective repricing that cost the taxpayer $33 million in extra borrowing costs, it was claimed.

ANZ denied it was the bank at the centre of that specific complaint.

The Herald understands the other complaints laid with the FMA involve more recent activity, including in February, August and December 2023.

Last month the FMA said it was aware of the news across the Tasman.

When asked if the FMA had the resources to monitor and investigate this sort of trading activity in New Zealand, a spokesman said the agency allocates resources on a needs basis.

“We believe we are well-positioned to manage complaints/investigations with the resources we have. The FMA does have the power to investigate and, where appropriate, use its regulatory tools or take enforcement action in relation to this type of conduct, and we again refer you to our 2017 guidance which outlines the legal framework that applies.”

Duncan Bridgeman is managing editor of NZME Business, which includes the Business Herald and BusinessDesk.