Milford Asset Management has reached a $1.5 million settlement with the Financial Markets Authority. Photo / Getty Images
Milford Asset Management has reached a $1.5 million settlement with the Financial Markets Authority. Photo / Getty Images
Milford Asset Management director relieved FMA inquiry over as he takes on bigger role at fund manager.
Milford Asset Management executive director Brian Gaynor has spoken out on the market manipulation probe into the company he co-founded in 2003, describing it as a "wake up call".
Gaynor's role with the firm was expanded this week - after portfolio manager Mark Warminger had ceased to be involved with the firm's investment team - according to an amended prospectus issued on Thursday, the same day it announced a $1.5 million settlement with the Financial Markets Authority.
The updated prospectus for the company's fundraising arm, Milford Funds, shows Gaynor has taken over the New Zealand equity portion of its Trans-Tasman Fund and Milford NZ Equities Wholesale Fund.
An unnamed Milford portfolio manager at the centre of the investigation, who is still facing enforcement action from the regulator, was this week placed on extended leave.
The FMA said the trading conduct, which took place during 2013 and 2014, was likely to have created the false or misleading appearance of the extent of trading or the supply, demand, price or value of relevant stocks.
Milford managing director Anthony Quirk would not comment on whether Warminger was the individual still under investigation, citing privacy reasons.
Warminger, who hasn't returned calls, had been one of the stars of the fund manager's investment team. He accepted Milford's trophy when the firm was named top fund manager, for the fifth year in a row, at last year's Infinz finance industry awards.
Warminger joined Milford in 2011 and had previously been New Zealand head of investment strategy for Macquarie Private Wealth. Before that, he managed two New Zealand and Australasian investment funds for Goldman Sachs New Zealand. He owns a 1.7 per cent stake in Milford.
The FMA investigation into Milford, which has more than $3 billion under management, including KiwiSaver funds, is understood to have begun around the middle of last year.
Gaynor, a Business Herald columnist, has been a leading proponent of tougher regulation for New Zealand's capital markets. He can see the irony in the fact his firm ended up being on the receiving end of one of the most high-profile investigations the FMA has conducted since its establishment in 2011, when it replaced the Securities Commission.
"The FMA is incredibly tough," Gaynor said. "I've been in this industry for 40 years and I've lived under the Securities Commission and different kinds of regulations - the FMA is a completely new ball game."
He said it was a "huge relief" to have the company's involvement in the investigation completed.
"I'm not downcast and I'm not depressed," he said. "I'm actually feeling much better these days than I have in a long, long time ... we've had a wake up call and we've dealt with it."
Following the investigation, Milford appointed PwC to review its governance, risk and compliance capabilities.
That review led to a series of changes in its trading systems, including the introduction of centralised dealing, through which staff who are not involved in funds management execute trades, the company said.
Asked how difficult the investigation had been on a personal level, Gaynor said: "You've got to deal with things in life. I've had lots of ups and downs in my life and you deal with them."
Before taking over Warminger's portfolios, Gaynor managed only Milford's Active Growth Fund.
He said that while it may appear that he now had a heavier workload, a number of recent changes - including the appointment of David Lewis and Jonathan Windust as co-managers of the investment team - had reduced his responsibilities in other areas.
"I wanted to just focus on investment rather than the management side."
Portfolio Manager Mark Warminger has ceased to be involved with the firm's investment team. Photo / Supplied
The centralised dealing desk had also reduced the workload of portfolio managers, he said.
Gaynor, who directly owns 22 per cent of Milford, said he had taken over Warminger's portfolios because of his experience managing New Zealand equities.
Milford had only lost a "handful" of retail and wholesale clients as a result of the investigation, Quirk said on Thursday.
Gaynor said morale within the company remained strong, while he had been overwhelmed by the positive feedback the firm had received from many clients this week.
Other fund managers, however, have expressed dissatisfaction with the outcome of the investigation, saying many questions remain about the trading conduct that occurred.
One source said this week that market participants, who were potentially affected by the trading activity, were likely to seek compensation.
FMA investigation
• Understood to have begun around the middle of last year.
• Related to allegedly manipulative trading conducted by an unnamed employee in 2013 and 2014.
• Resulted in Milford reaching a $1.5 million settlement with the Financial Markets Authority.
