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Regulator shows it means business.
The Financial Markets Authority is hammering home the message that it means business on issues such as market manipulation and insider trading.
The regulator this week issued fund managers with an information sheet, reminding them to be aware of “misconduct risks”.
It comes in the wake of market manipulation allegedly carried out by Mark Warminger, a Milford Asset Management employee against whom the FMA launched High Court action last month.
Warminger could face a penalty of up to $1 million per trade if they breached market manipulation rules.
He denies any breaches.
In the information sheet, the FMA says managers need to introduce suitable controls, especially in the case of firms with direct market access (DMA) systems through which staff can trade in securities directly.
“In some cases, segregation of portfolio management and trading functions may prove beneficial,” the regulator says.
Following the FMA investigation, Milford introduced centralised dealing.
Staff not involved in funds management now execute trades.
“Access to trading systems, including DMA systems, should be controlled so that the identity of anyone making a trade will be known and trading cannot occur without proper authorisation,” the regulator says.
“Directors and senior management are responsible for their internal governance arrangements and are accountable for all trading transacted in their firm’s name, including proprietary trading accounts.”
The FMA also warns fund managers, some of the most outspoken market participants, about providing comments to the media.
“The commentary itself, as well as trading activity shortly beforehand or afterwards, should be monitored and assessed within the risk and compliance framework,” it says.
More detail needed
Paul Glass, principal of Auckland’s Devon Funds Management, welcomed the FMA’s update on misconduct.
“Devon sees the release of these guidelines as a very positive development,” he said, adding that they provided clarity on where things stood following the $1.5 million settlement Milford reached with the FMA in June.
However, Glass said the industry still wanted more information about the market manipulation Warminger is alleged to have carried out between December 2013 and August last year.
“The industry really has a lot of question marks around exactly what happened and what specific trades were involved because market manipulation doesn’t happen in a vacuum,” he said.
“All fund managers would have been active in the market at the time that those alleged market manipulation trades occurred.
So we all want to make sure that our own clients haven’t been disadvantaged.”
With the outlook for equity markets shaky, Craigs Investment Partners is advising retail clients to batten down the hatches.
In its latest monthly report, “Storm Clouds Gathering”, the brokerage says it is increasingly concerned about the economic outlook and investors need to re-evaluate their portfolios.
“Investors must be able to sit through periods of volatility to avoid the mistake of selling at the bottom of a market decline,” the report says.
Craigs is suggesting clients reduce larger weightings to favoured New Zealand stocks and redeploy funds into other investments such as bonds or overseas shares.
Global stocks on Craigs’ recommendation list include Wells Fargo, Johnson & Johnson, Roche, Southern Company and Republic Services.
International transport investor Sir Brian Souter loves boats and buses but you won’t catch him near planes.
Souter – who is considering an IPO for his New Zealand bus and ferry operations – once owned an airline in Scotland, Scot Airways.
“I’ve been in the airline business and I’ve got the scars to prove it.
It won all the awards but lost all the money,” Souter said.
– NZ Herald