A
five-year ban from securities trading and a $400,000 fine followed Mark
Warminger’s market manipulation of shares in Fisher & Paykel Healthcare and
a2 Milk. He could not claim any
reduction in his fine for the $1.1 million penalty paid earlier by Milford
Asset Management when accepting responsibility for failing to properly
supervise Warminger’s trading.
Before Warminger’s
trial, Milford Asset Management Ltd pleaded mea
culpa negotiating a settlement with the Financial Markets Authority. Warminger was found liable following a High
Court trial for creating a false market in both a2 and Fisher & Paykel
shares in mid-2014.
Warminger said he
should get credit for Milford Asset’s payment against any fine imposed on him
personally. The Securities Act imposes
fines totalling either three times the benefit gained/loss avoided or the value
of the transaction itself. Justice
Venning ruled the maximum fine Warminger faced was $3,845,900; the value of the
impugned transactions. Warminger said the
Fisher & Paykel transaction generated a gross profit of no more than
$16,000. The a2 transactions were in
effect a loss; shares were bought unnecessarily on-market at a higher price
than off-market offers in attempts to force up the price.
Justice Venning ruled
Warminger could not claim the benefit of Milford Asset’s payment. When trading, Warminger was acting “for”
Milford on behalf of its clients. He was
not then acting “as” Milford in executing trades. Milford Asset’s payment was not in mitigation
of Warminger’s market manipulation; it was punishment for the lack of internal
controls which left Warminger inadequately supervised.
Justice Venning ruled
the appropriate starting point was a $500,000 fine. This was reduced by $100,000 for the fact
Warminger was now effectively barred for life from securities trading and was
presently unable to undertake meaningful employment because of medical
conditions disclosed to the court. A
criminal conviction, rather than Securities Act liability, would have exposed
Warminger to a potential maximum fine of $300,000.
Justice Venning pointed
out that Milford Asset negotiated its $1.1 million penalty at a time when
Warminger faced significantly more extensive market manipulation charges than
were later found proved. The Financial
Markets Authority has first claim on Warminger’s $400,000 fine to meet its costs.
Financial
Markets Authority v. Warminger – High Court (29.06.17)
17.075