It was revealed on Thursday that the FMA had reached a settlement with Milford. The fund manager is to pay $1.5 million.

The FMA said trading by one of Milford’s staff had breached market manipulation provisions and the Milford board had insufficient monitoring of trading activity.

The FMA is still conducting enforcement activity with the person in question, who is on extended leave.

FMA chief executive Rob Everett said the FMA was looking to raise the bar on management oversight more generally. “The board and management needs to be on top of what’s in place and need to have checks in place to ensure visibility of the operation.”

He said the FMA would be vigilant in dealing with lapses in that area because it had the potential to affect investor behaviour, which could alter market liquidity and increase the cost of capital.

Hawkins said the FMA had sent a clear message to the industry that they needed to have sufficient systems set up to monitor trading activity.

"The company is paying a high price for insufficient oversight. It’s going to make the Milford directors’ eyes water and they should have done better. But the important thing is it says to the market that the FMA has teeth and will use them, you need to get your house in order.”

He said investors could not be protected from potential downturns in their investments but they deserved to know that fund managers had systems in place to stop unsatisfactory conduct occurring.

“That’s important and that’s what this is all about. I applaud the FMA.

Hawkins said the NZX also deserved credit for identifying the trades in question. “It’s like looking for a needle in a haystack.”