Dear Adam Irish 

Thank you for contacting the Financial Markets Authority (FMA).

Your enquiry has been referred to the appropriate department.

We aim to provide you with a response as soon as possible, however this
may take up to 20 working days once all the relevant information has been
received.

Yours sincerely

 Financial Markets Authority

 

Customer Service

T 0800 434 566      
E [Financial Markets Authority request email]
Level 5, Ernst & Young Building
2 Takutai Square, Britomart, Auckland, 1010
PO Box 106 672, Auckland 1143​, [1]www.fma.govt.nz [2][IMG]  [3][IMG] 
New Zealand [4][IMG]  [5][IMG]  

 

 

 

 

 

 

 

 

 

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References

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Kia ora Adam

 

The FMA has not completed any analysis on the ability of large funds to
move the market.

 

The FMA does not have a frontline surveillance role with respect to
trading on the NZX.  This role is undertaken by NZRegCo, a subsidiary of
NZX which provides regulatory oversight.  Where NZRegCo, through its
surveillance activity, identifies any trading that it considers may be
manipulative, NZRegCo refers that trading activity to the FMA for further
consideration, investigation, and, where appropriate, enforcement action.

 

We hope this clarifies our role, and in doing so answers your questions
put to us under the OIA.

Ngā mihi

Natalie Muir

Principal Adviser, Governance Team

 

From: [1][FOI #19365 email]
<[2][FOI #19365 email]>
Sent: Monday, 16 May 2022 5:02 pm
To: [3][Financial Markets Authority request email]; [4][Financial Markets Authority request email];
[5][Financial Markets Authority request email]
Subject: Official Information request - Kiwisaver funds that move the
market

 

Dear Financial Markets Authority,

I request under the Official Information Act what analysis of Kiwisaver
funds have been undertaken by the FMA on the large funds with respect to
their ability to move the market. What funds have been identified as
market movers and how does the FMA ensure market distortions causes by
these large funds aren't giving them or their firm manipulative gains.

Yours faithfully,

Adam

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Kia ora Adam
 
OIA - Large funds moving the market
 
We respond below to your OIA request, namely - Has the FMA received any
referrals from NZ RegCo regarding large funds moving the market and if so
how many each year over the last ten years?
 
We understand you seek information about numbers of referrals, each year
for the last 10 years, from NZ RegCo (and prior to the commencement of NZ
RegCo, NZX itself pursuant to its regulatory function), where a concern
has been raised that trading by a manager of a large managed fund has
moved the market, and that conduct has been considered potentially
manipulative.  You will appreciate that there are legitimate market
reasons why trading by a fund manager (or any investor) may move the
market price – for example typically if the purchase demand is higher than
sale demand for a particular share, the share price will rise, and if sale
demand is higher than purchase demand for a particular share, the share
price will move downwards.  We would not expect, and are not aware of,
receipt of any referrals from NZ RegCo about trading by large funds simply
moving the market, unless NZ RegCo had concerns about potential misconduct
associated with the trading, such that investigation may be warranted.
 
Relating to this 10 year period, we are aware of one relevant referral. 
It related to Mark Warminger, a fund manager at Milford Asset Management,
which also resulted in the FMA more generally considering the conduct of
Milford Asset Management.  It was investigated by the FMA and action
pursued.  You can read more about this matter, and access the judgment
relating to Mark Warminger on the FMA’s website here: [1]News and
Resources > Cases > Mark Warminger, and information in relation to Milford
Asset Management Limited here: [2]News and Resources > Cases > Milford
Asset Management Limited.
 
We are not aware of any other referrals from NZ RegCo of this nature.
 
To reach this view we have engaged with senior colleagues (who have
between them worked in relevant roles at the FMA for more than the
preceding 10 years) from the FMA’s Disclosure and Market Conduct Team. 
This Team takes the lead on matters relating to conduct of, or pertaining
to, New Zealand markets including the NZX’s markets.  One of these
colleagues I consulted is the current Head of Disclosure and Market
Conduct – who now leads the team, and has previously held a senior
position in the team for the last 8 years.  The nature of the roles held
by the staff consulted gives me good confidence they would have been aware
of any referrals that led to an investigation by the FMA.
 
It is possible that a referral has been made at some time in the last 10
years, that following review by FMA staff at the time of receipt of the
referral, did not raise significant concerns and accordingly did not
result in an investigation or other significant enquiry by the FMA.  If
there was a referral such as this, my colleagues acknowledge that it is
possible that despite their careful consideration of your question they
may have omitted to remember such a referral.  We note, consistently with
section 18(f) of the OIA, that although we are not aware of any such
referrals, it is possible one or more of these kinds of less significant
referrals may have been made, and if this is the case we cannot definitely
provide information on numbers, because the information cannot be made
available without substantial collation or research.  The reason is that
over the preceding 10 year period, a substantial number of emails have
been received from NZ RegCo/NZX.  Some will have been referrals relating
to the wide range of issues in respect of which NZ RegCo acts as frontline
regulator including market manipulation, insider trading, and continuous
disclosure.  To double check that no less significant matter referred by
NZ RegCo, in respect of which an investigation and enforcement action by
FMA did not result, has not been overlooked all the emails for this 10
year period would need to be located then reviewed.  For this reason, we
consider section 18(f) applies to the extent it is possible we have
unintentionally overlooked information received on any of these possible
less significant referrals.
 
Please let me know if you have any questions about our decision under the
OIA.  I also note that you have the right to complain to the Ombudsman
regarding our assessment of your OIA request in accordance with section 28
of the Official Information Act.  Information about how to make a
complaint is available at [3]www.ombudsman.parliament.nz or phone 0800 802
602.
 
Ngā mihi
Natalie Muir
Principal Adviser, Governance
 
 
 
 
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