The Financial Markets Authority (FMA) is bringing high court action against two people for alleged insider trading relating to the sale of Pushpay shares.
(File image) Photo: 123RF
The proceedings centre on the resignation and subsequent sale of $100 million worth of shares by Pushpay Holdings director and co-founder Eliot Crowther in 2018.
The financial watchdog alleged that an individual who was aware of Crowther's impending departure encouraged another person to trade the mobile payment company's shares in the lead up to the public announcement.
The other person was also involved in the conduct, the FMA alleged.
Crowther's trades were legitimate and Pushpay was not the subject of the investigation, the FMA said.
The matter was referred to FMA by stock market regulator NZ RegCo (formerly known as NZX Regulation) in July 2018.
One individual faces a criminal charge, which had been filed in the Auckland District Court, and both individuals would face civil proceedings in the Auckland High Court.
The individuals have been granted interim name suppression until their first court appearance.
It was just the fourth insider trading case the FMA had encountered.
Insider trading involves the buying and selling of shares in a listed company by someone with access to material information about the firm that has not been made public.
"Unethical trading activity can undermine market integrity and erode investor confidence at a fundamental level," the FMA said.
Criminal insider trading carries a punishment of up to five years in prison or a maximum fine of $500,000.
Civil penalties could include a pecuniary penalty not exceeding the greatest of the consideration for the relevant transaction, three times the amount of the gain made or the loss avoided, as $1m in the case of an individual or $5m in any other case.
Pushpay chair Graham Shaw said it had co-operated with the FMA's investigation and supported its commitment to the integrity of the capital markets.
Shaw said the company had robust policies in place at all relevant times.
"We take seriously our responsibilities as a listed company, and our values, ethics and integrity as a company are at the heart of our business practices."
Shareholders Association concerned by delay
Shareholders' Association (NZSA) chief executive Oliver Mander said allegations of this nature knocked investor confidence, as it undermined faith in financial markets.
"It's really important New Zealand does what it can to avoid going to the bad old days where conduct was unregulated and uncontrolled in the market."
Mander said the NZSA was "very pleased" the FMA was taking action but said it was an issue that this was happening nearly four years since the alleged incident.
"If this alleged behaviour occurred in 2018, the question this brings to mind for most investors is what else has happened since 2018 that has not yet come to light?"
Mander said the delay could possibly reflect the resources the regulator had available to it.
The FMA declined to go into any details of the case, but said a lot of work had been needed before court action followed.
"It came with varying complexities and the FMA follows a robust investigation process to ensure it gathers the necessary evidence before bringing a case before the courts, particularly with the high threshold of criminal proceedings."
It said the length of time taken was not out of line with similar types of cases taken overseas.