Market Integrity Update - Issue 121 - November 2020
- Former financial consultant convicted and fined $30,000 for dishonest conduct
- $30,000 penalty for breaching client money rules
We’ve made a product intervention order imposing conditions on the issue and distribution of contracts for difference (CFDs) to retail clients, amid heightened market volatility during the COVID-19 pandemic.
From 29 March 2021, our product intervention order will:
- restrict CFD leverage offered to retail clients to a maximum ratio of:
- 30:1 for CFDs referencing an exchange rate for a major currency pair
- 20:1 for CFDs referencing an exchange rate for a minor currency pair, gold or a major stock market index
- 10:1 for CFDs referencing a commodity (other than gold) or a minor stock market index
- 2:1 for CFDs referencing crypto-assets
- 5:1 for CFDs referencing shares or other assets
- standardise CFD issuers’ margin close-out arrangements that act as a circuit breaker to close out one or more of a retail client’s CFD positions before all or most of the client’s investment is lost
- protect against negative account balances by limiting a retail client’s CFD losses to the funds in their CFD trading account, and
- prohibit giving or offering certain inducements to retail clients (e.g. trading credits and rebates and ‘free’ gifts like iPads).
The order will remain in force for 18 months, after which it may be extended or made permanent. Civil and criminal penalties apply to contraventions of the product intervention order.
Our consideration of feedback on our proposal in Consultation Paper 322 Product intervention: OTC binary options and CFDs to ban the issue and distribution of binary options to retail clients is ongoing.
- Read the media release
Mr Michael John Story, a general manager employed by Sigma Healthcare Limited (Sigma), has been charged with two counts of insider trading.
Sigma is a wholesale and distribution pharmaceutical business servicing pharmacies and hospitals throughout Australia and during 2018 was the main supplier to the Chemist Warehouse Group (CWG).
On 2 July 2018, Sigma publicly announced that the wholesale supply agreement between Sigma and CWG would cease on 30 June 2019. Following the announcement, Sigma shares closed 40% lower compared to the previous day. Mr Story disposed of 645,047 Sigma shares on 9 May 2018 and a further 250,000 Sigma shares on 21 June 2018.
We allege that, at the time he disposed of the two tranches of Sigma shares, Mr Story was in possession of inside information relating to the status of negotiations to renew the wholesale supply agreement between Sigma and CWG.
At the time of the alleged offences, each of the charges of insider trading contrary to section 1043A of the Corporations Act 2001 carried a maximum penalty of 10 years’ imprisonment.
In March 2019, the maximum penalty for insider trading was increased to 15 years’ imprisonment.
The matter has been adjourned to a committal mention hearing in the Melbourne Magistrates Court on 18 December 2020.
- Read the media release
Mark Damion Kawecki has been convicted and fined $30,000 for engaging in dishonest conduct related to attempts to artificially satisfy the minimum spread requirement for companies seeking to be admitted to the ASX. This is the first criminal prosecution for offending of this kind.
Under the ASX Listing Rules, the minimum spread requirement specifies a company must hold a minimum number of unrelated shareholders before its shares can be quoted and traded on the ASX, in order to demonstrate sufficient investor interest and ensure adequate liquidity at the time of listing.
We alleged that between 19 January 2015 and 23 December 2016, Mr Kawecki applied for shares in four companies that were undertaking initial public offerings or were in the process of relisting on the ASX, and that the applications for shares in these companies contained false information about the beneficial holder of those shares or false information about the applicant’s address. The Crown submitted that Mr Kawecki’s conduct was designed to artificially satisfy the minimum spread requirement in the ASX Listing Rules.
In March 2020, Mr Kawecki pleaded guilty to two counts of dishonest conduct in relation to a financial product in contravention of sections 1041G and 1311(1) of the Corporations Act 2001.
As a result of his conviction, Mr Kawecki is disqualified from managing corporations until 4 November 2025.
Societe Generale Securities Australia Pty Ltd (SGSAPL) must pay a total penalty of $30,000 after pleading guilty to four separate counts of breaching client money obligations.
SGSAPL was sentenced in relation to two counts of breaching section 993B(1) of the Corporations Act 2001 (the Act) by receiving client money in connection with financial services but failing to deposit that money into an Australian authorised deposit-taking institution (ADI) or an approved foreign bank, as required under the law.
During the period of both counts, the average end-of-month total value of client-money not held in an account satisfying the requirements of the Act totalled approximately $771 million.
SGSAPL was sentenced for a further two counts of breaching section 993C(1) of the Act, through making payments out of a client money account that were not permitted by regulations 7.8.02 of the Corporations Regulations 2001.
SGSAPL has also accepted additional conditions we’ve imposed on its Australian financial services licence.
- Read the media release