FMA probe a transparency balancing act.

The probe into suspected dodgy trading at Milford Asset Management highlights the awkward situation the Financial Markets Authority faces when its investigations become common knowledge within the industry.

The regulatory inquiry hit the headlines on Monday after the company outed itself as the high-profile fund manager under investigation for alleged market manipulation. It was only after Milford released a statement confirming one of its traders was being investigated for "certain, specific trades" that the FMA confirmed the probe.

The investigation followed a referral from sharemarket operator NZX and the trades under question are rumoured to have taken place in the middle of last year, which if true raises the question of why the investigation remains ongoing more than six months later.

Speculation about the probe had been swirling within the funds management industry for some time. Inevitably, journalists got wind of the rumours and subsequent media coverage late last week probably prompted Milford, which has more than $3 billion under management, to release its statement on Monday.

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Whether or not to release information about investigations appears to be a complicated question for the FMA, as well as the frontline market regulator, NZX.

They have to balance public interest and transparency with the reputational damage an individual or company may face following confirmation of an investigation that may not result in any action.

During a January media briefing, FMA chief executive Rob Everett admitted the market watchdog struggled with these "judgment calls".

"I think the underlying principle for us is that where we can - in the interests of being open and transparent - we will make information publicly available and we will share information," he said.

The regulator's aggressive stance on issues like market manipulation and insider trading means it will likely come under increasing pressure to make such judgment calls.

Busy times

Confirmation of the investigation comes at a particularly hectic time for the industry.

Two major investment management contracts are up for grabs, while fund managers are also going through the process of gaining FMA licences under the Financial Markets Conduct Act, which came fully into force in December.

The New Zealand Superannuation Fund is on the hunt for an external manager to take over the roughly $260 million active equities mandate previously managed by AMP.

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At the same time, AMP is looking to outsource its New Zealand equities management business after announcing last month that it would disband its internal team.

Milford is not in the running for the Super Fund contract, however. The company already has a more than $250 million mandate with the Super Fund, which wants to appoint a third external New Zealand manager - alongside Milford and Devon Funds Management - to take over the mandate previously managed by AMP. And a source says Milford might not have the capacity to take over AMP's New Zealand equities management business, which is understood to be worth about $700 million and will likely go to a single manager.

Meanwhile, Wellington-based Harbour Asset Management became the first firm to gain a Managed Investment Scheme (MIS) licence from the FMA last week.

It's unclear whether the investigation will have any impact on Milford's licensing process.

An FMA spokesman says the regulator is yet to receive a MIS licence application from Milford.

"MIS managers with existing funds have a transition period through to 1 December 2016, and must be licensed by that date," the spokesman says.

Vista's stock surge

Strong gains in the share price of cinema software provider Vista Group have continued into the new year. The Auckland-based company - whose technology is used to manage cinema operations in more than 60 countries - listed in August following an initial public offering that raised $92 million, including $40 million in new capital.

Its shares hit a record close of $4.30 on Wednesday, a whopping 83 per cent gain on the $2.35 IPO price.

Vista shares closed down 4c at $4.26 last night.

On Wednesday Vista announced it had secured a conditional agreement to acquire US cinema software company Ticketsoft.

Naughty but nice

Tobacco and booze are no-go areas for so-called ethical investors. But they've been a source of stellar long-term shareholder returns, research published by the Financial Times shows.
A study by London Business School academics Elroy Dimson, Paul Marsh and Mike Staunton says US$1 invested in US tobacco firms in 1900, with dividends reinvested, would have turned into US$6.3 million ($8.5 million) by today.
The study, produced for Credit Suisse, also shows that brewers and distillers have been the best-performing British stocks since the turn of the 20th century.
A single £1 note invested then would have become £243,152 ($503,678) by today, including dividends.