In a statement to the NZX this morning, Heartland said it had co-operated with the FMA during its investigation and is supportive of the FMA’s commitment to fair and transparent capital markets.
“We take our responsibilities as a listed company very seriously. That includes having policies and procedures in place to ensure directors and employees at all levels understand their obligations under insider trading laws,” Heartland said.
Heartland’s share price was $1.20 on July 1, 2020, and the stock didn’t move much until the company announced its full-year result on September 17, showing a net profit of $72 million for the 2020 financial year.
Net operating income was $235.3m, up 13.2%. Heartland forecast continued growth in motor, business and reverse mortgages and said it expected full-year 2021 profit of between $83m to $85m.
The shares climbed 5.88% that day, according to NZX data, and then rose higher over the coming months, hitting a high of $1.95 in mid February 2021, for a 62.5% gain during the period of the alleged insider trading.
The biggest trading days during that period in 2020 were August 11 (3.23 million shares traded), September 7 (3.27 million) and November 5 (4.25 million).
On November 19, Heartland told the NZX it was reassessing the valuation of its investment in Harmoney Group (HMY), which had just launched an initial public offer (IPO).
“Heartland’s equity investment in HMY is not significant in the context of Heartland’s total assets. However, any increase in the fair value of that investment would result in one-off increase to Heartland’s net profit after tax (NPAT) for the financial year ended 30 June 2021 (FY21).”
The individual allegedly involved appeared in the Auckland District Court today.
Heartland Group Holdings’ share price was trading at $1.05 by late morning.
The Financial Markets Conduct Act prohibits people who hold material information not generally available to the market from trading with that information, disclosing it in certain circumstances, and advising or encouraging other individuals to trade the issuer’s shares.
“Unethical trading activity can undermine market integrity and erode investor confidence at a fundamental level. Participants in financial markets must operate on the basis that all trades are legitimate and based on equally available information,” the FMA said.
“The FMA considers it critical to uphold the law in this area to maintain investor confidence, but also to maintain credibility for those market participants who are willing compliers.”
Criminal insider trading is punishable with a prison term of up to five years, a fine not exceeding $500,000, or both for individuals.
Insider trading cases are rare in New Zealand. Last year a person was found guilty of insider conduct in relation to the sale of shares in Pushpay Holdings. The person was sentenced to six months’ community detention and fined $100,000.
