Junior bank employee's actions under investigation
Heartland Group Holdings Limited (HGH) has emphasised its separation from recent insider trading allegations brought forth by the Financial Markets Authority (FMA).
The FMA filed criminal proceedings against a former junior employee of Heartland Bank Limited (HBL) for allegedly trading HGH shares while possessing material, non-public information.
The FMA alleges the individual traded, and encouraged others to trade or hold, HGH shares on several occasions between July 2020 and February 2021, while holding information not generally available to the public.
The matter was first referred to the FMA by NZ RegCo – NZX’s frontline regulator – in December 2020.
Heartland and Heartland Bank distanced itself from the allegations and are not parties to the FMA proceedings.
Heartland chair Greg Tomlinson and Heartland CEO Jeff Greenslade said Heartland 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."
How much did the share price grow?
When the alleged insider trading started, Heartland’s share price was $1.20 on July 1, 2020.
The share price jumped significantly – over 5% in a day – when the company announced a strong full year result on Sept. 17, with a net profit of $72 million for FY20.
The company also received a bump when it reassessed its stake in personal lender Harmoney Group (HMY).
By February 1, 2021, Heartland Group Holdings’ share price had climbed to $1.74 – a 45.8% increase, according to NZX data.
According to the FMA, Both HGH and HBL have cooperated with the FMA throughout its investigation.
With the individual allegedly appearing in the Auckland District Court yesterday, Heartland announced it would be making no further comment on the FMA's proceedings.
About insider trading in New Zealand
The Financial Markets Conduct (FMC) Act (Sections 240-243) prohibits individuals from trading on, disclosing, or advising others to trade on the basis of confidential issuer information (inside information) that is not publicly available.
Insider trading undermines market integrity and investor confidence by creating an unfair advantage for those with access to privileged information.
Fair and open markets require all participants to operate under the assumption that trades are legitimate and based on publicly available information.
The FMA views upholding insider trading laws as critical to maintaining investor trust and ensuring a credible marketplace for compliant participants.
Penalties for insider trading convictions can include imprisonment for up to five years, fines up to $500,000, or both.
Proceedings about insider trading are relatively scarce in New Zealand. Since the FMA became responsible for enforcing the aforementioned rules in 2011, only three cases have been brought been brought before court.
How is Heartland Bank going now?
Despite the latest news, Heartland Group has enjoyed some positive developments in recent months.
In August, the Group announced a net profit after tax (NPAT) of $74.5 million for FY2024, with an underlying NPAT of $102.7m.
On April 30, Heartland Group’s New Zealand bank acquired Melbourne’s Challenger Bank, making it the first New Zealand registered bank to acquire an Australian authorised deposit-taking institution (ADI).
Heartland Group, which is listed on both the New Zealand and Australian stock exchanges, includes Heartland Bank New Zealand, and Australian livestock finance division StockCo Australia.
It also owns Australian reverse mortgages business Heartland Finance, which was rebranded to Heartland Bank yesterday.
