GOLDMAN SACHS NZ TRADING UNDER SCRUTINY IN MARKET MANIPULATION TRIAL
BusinessDesk, 26 September 2016
Trading by Goldman Sachs has come under the scrutiny of lawyers representing Milford Asset Management portfolio fund manager Mark Warminger in a High Court trial on market manipulation.
Duncan Rutherford, who headed Goldman’s securities team in New Zealand until it was restructured earlier this year, was giving evidence today as part of the first week of the Auckland trial brought by the market regulator, the Financial Markets Authority.
Warminger is accused of making trades on 10 occasions that breached securities law prohibiting trading that is not for a genuine commercial purpose and creates an artificial appearance in the market.
The first cause of action brought by the FMA relates to trading in Fisher & Paykel Healthcare shares on May 27, 2014, where Warminger is said to have bought shares to push up the price of the stock from its opening price of $4.32 to $4.35 through five small buy trades and then later selling 500,000 shares at an allegedly manipulated higher price off-market.
Warminger’s counsel Marc Corlett QC questioned why Goldman Sachs also sold shares in F&P Healthcare in the market’s opening auction that day – 15,000 shares at $4.32 and then 10,000 at $4.33 even though it was “short” in its own facilitation account of 463,000 shares. The firm made a loss on the trades. The stock price had been volatile closing at $4.35 the previous day and in the “4.20s” the day before that.
Rutherford said it wasn’t unusual for the firm to do that given the “bigger picture” of its trading strategy for that day and the commissions it received on trading activity. It also did so in the belief Warminger would be a potential seller that day, he said.
The idea of the facilitation account is not simply to make profits on the shares it trades, he said, but it was part of a suite of services it offered clients and acted like a “bucket” that facilitated trades between clients and increased liquidity on the often volatile New Zealand market.
