NZ regulator launches legal action over insider trading in Pushpay shares

New Zealand’s Financial Markets Authority (FMA) has filed proceedings against two individuals for alleged insider trading in relation to the sale of shares in Pushpay Holdings Limited (NZX:PPH).

One individual faces a criminal charge, filed in the Auckland District Court, and both individuals face civil proceedings, filed in the Auckland High Court.

In June 2018, Pushpay announced co-founder and Director Eliot Crowther had resigned and sold down his shareholding in the firm. The FMA is alleging one individual used this material inside information to advise or encourage another person to trade in the lead up to the market announcement, while the other person was involved in the conduct. Mr Crowther’s trading was legitimate and he is not party to the proceedings.

The matter was referred to the FMA by NZX Regulation (the frontline regulator of NZX, now called NZ RegCo) in July 2018. NZ RegCo and the FMA work closely together to detect and respond to insider trading on licensed markets.

Pushpay has not been the subject of the FMA’s investigation and it is not a party to any FMA proceeding. Pushpay has cooperated with the FMA during its investigation.

Sections 240 – 243 of the Financial Markets Conduct (FMC) Act prohibit people who hold material information about an issuer that is not generally available to the market (inside information) from trading with that information, disclosing it in certain circumstances, and advising or encouraging other individuals to trade the issuer’s shares.

Criminal insider trading can be punishable with up a term of imprisonment not exceeding five years, a fine not exceeding $500,000, or both for individuals. Civil penalties can 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, and $1 million in the case of an individual or $5 million in any other case.

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