Milford portfolio manager in FMA lawsuit

Mark Warminger of Milford Asset Management at the 2013 Infinz awards. Photo / Supplied

Watchdog accuses investment team star of market manipulation.

Milford Asset Management portfolio manager Mark Warminger could face a penalty of up to $1 million a trade if any of them breached market manipulation rules.

Warminger, who denies any did and will defend a Financial Markets Authority lawsuit announced yesterday, remains on extended leave from Milford after he ceased to be involved in its investment team from June.

The FMA, which reached a $1.5 million settlement with Milford, alleges that trading undertaken by Warminger between December 2013 and August last year amounted to market manipulation.

"The FMA alleges the trading had, or was likely to have had, the effect of causing the creation of a false or misleading appearance relating to the extent of active trading in the relevant securities or the supply of, demand for, price for trading in, or value of those securities," said the market regulator, which is seeking financial penalties from Warminger.

The portfolio manager, through his lawyer, has denied the allegations.

"Mr Warminger denies that he manipulated any market and will defend the case," said defence lawyer Marc Corlett. "When the facts are traversed in court the public will be able to draw its own conclusions on both the FMA and this particular claim. The fact that the FMA asserts something does not of course make it so and we fully expect that fair-minded people will wait until the court process is complete before drawing any conclusions about Mr Warminger's trading."

The maximum penalty for a breach of market manipulation rules is the greater of:

• The consideration for the transaction that constituted the contravention.

• Three times the amount of the gain made, or the loss avoided, by the person in carrying out the conduct.

• Up to $1 million a trade.

Warminger was one of the stars of Milford's investment team. He accepted Milford's trophy when the firm was named top fund manager, for the fifth year in a row, at last year's Infinz finance industry awards. He joined Milford in 2011 and had previously been New Zealand head of investment strategy for Macquarie Private Wealth. Before that, he managed two investment funds for Goldman Sachs NZ. The same day the FMA announced it had settled with Milford over its allegations of market manipulation, executive director Brian Gaynor took over Warminger's responsibilities in its investment team.

The firm's managing director, Anthony Quirk, could not comment on the FMA's action against Warminger nor on his future with Milford but confirmed he was still on "extended leave".

The FMA alleges Mark Warminger's trading fell into three categories:

• Placing small trades directly on market in one direction, followed by large off-market trades in the opposite direction.

• Trading that manipulates the closing price.

• Trading conducted in order to set the price, rather than for a genuine commercial purpose.

• Warminger, through his lawyer, denied these allegations.