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15-406MR ASIC accepts EUs from Institutional Stockbroker and Hedge Fund Trader for concerns about misuse of confidential client information
Mr Aitken and Bell Potter
Following an investigation, ASIC has accepted enforceable undertakings (EUs) from Sydney institutional stockbroker Mr Angus Aitken and his employer Bell Potter Securities Limited (Bell Potter).
ASIC's investigation identified concerns in the way Mr Aitken handled and disclosed information about an institutional client's possible selling intentions in securities of Ten Network Holdings Ltd (TEN).
ASIC's investigation found that on 21 May 2013, Mr Aitken sent an email to Mr Philip King of Regal Funds Management Pty Ltd (Regal) based on the information he had obtained about his client's possible selling intentions. Mr Aitken sent the email to Mr King without his client's knowledge or consent.
ASIC was concerned that Mr Aitken knew, or ought reasonably to have known, that the information he provided to Mr King was, or was likely to have been, confidential client information.
Mr King and Regal
ASIC has also accepted EUs from Mr King and Regal. Regal is an Australian fund manager and manages a variety of long-short equity funds, sometimes referred to as hedge funds. Mr King is a director of Regal and its Chief Investment Officer.
Mr King and Regal entered into the EUs as a result of Mr King's conduct in selling approximately 4 million TEN at $0.28 per share after receiving the email from Mr Aitken. ASIC was concerned that Mr King, by virtue of his position and experience, knew, or ought reasonably to have known, that the information he received was, or may have been, confidential and that its dissemination to him may have been contrary to the interests of Mr Aitken's client. In ASIC's view, Mr King was obliged to avoid using the information and, in particular, to refrain from selling TEN shares.
Mr King short-sold the TEN shares through a broker unrelated to Mr Aitken and Bell Potter. After this transaction, the price of TEN began to fall through trading unrelated to Regal or Bell Potter. At the same time, Mr King and Mr Aitken negotiated a crossing under which Regal bought 10 million TEN shares from Mr Aitken's client at $0.26 per share. In an approximate 7 minute period, Regal realised an approximate gross profit of $80,000 on the 4 million TEN that were short-sold by Mr King.
The enforceable undertakings
ASIC accepted the EUs as an alternative to taking administrative action against Mr Aitken and Bell Potter, and Mr King and Regal.
The EUs require Mr Aitken to undertake various training and compliance measures, and Bell Potter to implement various compliance measures in relation to Mr Aitken, including the recording of telephone calls made to and from Mr Aitken's business phone and conducting reviews of client trades executed by Mr Aitken.
Mr King and Regal have also agreed under the EUs to implement training and compliance measures, including the appointment of an independent compliance expert to review Regal's policies and procedures and for the review of trades conducted by Mr King and other Regal staff.
Under the EUs, Mr Aitken and Mr King will each make a voluntary contribution of $80,000 to Financial Literacy Australia Limited to advance financial literacy in Australia. These payments represent the approximate profits realised on Mr King's short-sale of TEN on behalf of Regal's funds.