MR No. 2015 – 25
18 June 2015
The Financial Markets Authority (FMA) has completed its investigation into certain trading activity between December 2013 and August 2014 by a trader employed by Milford Asset Management Limited (Milford). The FMA considers that the trading conduct breached the market manipulation prohibitions in s11B of the Securities Markets Act 1988. The FMA also concluded that the Milford Board failed to ensure that there was the requisite degree of monitoring of the trading activity.
The FMA considers that the conduct had, or was likely to have had, the effect of causing the creation of a false or misleading appearance with respect to:
As Milford is the relevant trader’s employer, the FMA considers that Milford is liable for the trader’s alleged breaches of the Act. Milford denies that it is liable for any alleged breaches. The FMA acknowledges that its conclusions have not been tested in court.
The FMA has reached an agreement with Milford to resolve the issues relating to Milford (but excluding the trader) arising from the investigation, under which Milford has agreed to make payments totalling $1.5m. Milford also undertakes to complete recommendations made by PwC regarding improvements to its trading systems and controls.
Milford will pay:
Milford and its board accept responsibility for the inadequate oversight and control of the trading conduct which was under investigation, and the failure to identify and monitor this activity, or to assess whether the activity was appropriate.
Milford has carried out a thorough review of its systems and processes and has undertaken a programme of improvement for its trading systems and controls. Milford appointed PwC to review its governance, risk and compliance capability and to provide recommendations. That review has now been completed and provided to the FMA. Milford undertakes to complete a further external review following implementation of PwC’s recommendations.
The investigation did not relate to the security of Milford’s client funds or assets.
This settlement does not include the trader. The FMA’s enforcement processes regarding the trader are continuing and the FMA is unable to comment further on these specific matters.
The settlement is published here.
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