An unnamed adviser at a registered NZX participant firm will pay a $10,000 settlement with the market watchdog after getting found out on a backroom deal to get Trade Me shares when the online auction site was floated last year.
The adviser used a client to get their hands on 1,500 Trade Me shares in the initial public offering, when the stock was sold at $2.70 apiece. The partial float’s structure was unusual because the bookbuild was run before the offer document was registered. Under NZX rules, employees in a trading participant need sign-off from their boss to buy or sell any listed securities, and aren’t allowed to take part in a public offer.
The NZ Markets Disciplinary Tribunal agreed to settle with the adviser, provided they paid $10,000 into the discipline fund, and cover costs incurred by the regulator.
The adviser transferred cash to a client who then bought 1,500 shares in the float worth $4,050, which was then handed back to the adviser in an off-market transfer.
If the adviser had held on to the share parcel, they would have made a paper profit of $2,295 based on Trade Me’s current trading price of $4.23, and have received $117 from a first-half dividend. The person could also have looked forward to some $207 in dividends from the next two halves if the auction site meets its forecasts.
Trade Me first listed in December 2011 on the NZX and ASX after Fairfax Media sold down its stake to first 66 percent. It subsequently sold down to 51 percent as it reaped available funds to help shore up its publishing empire. UBS New Zealand was the sole lead manager and underwriter of the float.
The watchdog said the mitigating circumstances for the adviser were that no clients suffered, the breach was a one-off offence, and the adviser owned up early and had already been disciplined by the firm.
The settlement comes as public confidence the country’s capital markets has been dented by the investigation into David Ross’s Ross Asset Management – a group of funds that have been described as bearing the hallmarks of a Ponzi scheme and putting almost $450 million of investors’ cash at risk.
That has put financial advisers back under the microscope, with the Financial Markets Authority taking a look at advisers who recommended their clients join the fund.
The sector has gone through a complete overhaul through the introduction of minimum education and professional standards as policymakers sought to stamp out incompetence and unethical behaviour after several billion dollars of investor wealth was destroyed in the collapse of the country’s finance sector.