08 May 2025

Insider Trading: Huljich v. R.

 

Court of Appeal doubled Peter Huljich’s Pushpay Holdings insider trading fine to $200,000, expressing concern the trial judge was unduly lenient when sentencing business executive Huljich for insider conduct in relation to a 2018 sale of Pushpay shares; unduly lenient both to the level of the fine imposed and Huljich’s further sentence of six months curfew when home detention was a possible alternative.

Huljich’s conviction followed sale of a family trust shareholding in Pushpay Holdings Ltd, ahead of public notice being released of an expected retirement by co-founder Eliot Crowther and with it Crowther’s likely sale of some nine per cent of the company, a stake valued then at about $100 million.

At the time, Pushpay was listed on both NZX and ASX.  Pushpay sold mobile payment software, primarily used to process donations.  It was delisted in 2023, following a takeover.

Part of Huljich’s lengthy High Court trial was taken up with evidence of a family trust having amongst its assets a stake in Pushpay valued in tens of millions of dollars.  All details of the Trust, its beneficiaries, and the size of its Pushpay stake, were supressed.

There was evidence of Huljich personally seeking to distance himself from Trust operations before the Trust’s disputed selldown of Pushpay shares together with evidence he received a benefit of some four million dollars following sale of its shares.

Financial Markets Conduct Act prosecution followed a May 2018 email sent by Huljich to Trust trustees and to the Trust’s principal beneficiary advising an immediate sale of Trust’s Pushpay holdings, telling them to set up a brokerage account with Craigs Investment Partners to process the sale.

This email followed Mr Crowther’s discussions with Huljich, disclosing his intention to resign from Pushpay.  Huljich was then Pushpay’s New Zealand general manager.

When Craigs was asked to open this new account, an internal email advised that the Trust was ‘keen to trade as soon as possible.’

The High Court was told the Trust sold its Pushpay shares over a three week period ending 7 June 2018 at an average price of $4.21.

NZX and ASX trading halts were called on June 18.  Pushpay executives were concerned notice had leaked of Mr Crowther’s proposed retirement.

Trading re-opened after Mr Crowther’s nine per cent stake was sold off-market at a price of $4.04.

At the time trading was halted, Pushpay was priced at $4.18.  When trading resumed, the price closed that day at $4.27.

Financial Markets Conduct Act liability for improper insider conduct requires proof ‘material information’ was used to encourage trading in listed securities at a time when that information was not generally available to the market.

The legal test for materiality looks at the likely or hypothetical movement in share prices had the non-public information been released at the time the insider acted.

Expert evidence was given of securities market behaviour: departure of a company founder with sale of a substantial shareholding depresses market prices; requiring sale at a discount to clear the increased volume of shares offered for sale.

General movements in market prices subsequent to improper use of inside information are of no direct relevance in determining ‘materiality’ at time the insider trades.

The High Court jury’s verdict that Huljich knew the fact of Mr Crowther’s proposed retirement was ‘material information’ was upheld by the Court of Appeal.  Huljich was acting on non-public material information when advising the family trust to sell.

Huljich was fined $200,000 for improper inside conduct.

The High Court sentence that he serve six months’ community detention with a 9.00 pm to 6.00 am curfew at a specified address seven days a week was grudgingly accepted by the Court of Appeal.

Insider misconduct is a form of fraud, the Court of Appeal said.  It undermines public confidence in the integrity of the stock market.  Sentences should act as a deterrent.

The High Court imposed a curfew in place of home detention on compassionate grounds.  Reasons were supressed.

Huljich v. R – Court of Appeal (8.05.25)

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