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15-398MR ASIC bans former financial adviser for market manipulation
ASIC has banned Tony Davidof, a former financial adviser, from providing financial services for three years.
An ASIC investigation found that Mr Davidof engaged in manipulation of the price of MINI warrants issued by Credit Suisse, commonly called “MINIs”. MINIs are a type of derivative product traded on the ASX.
ASIC found that on 21 February and 3 June 2013, Mr Davidof took part in back-to-back buy and sell trades in MINIs on ASX with a former employee of Credit Suisse after the pair had pre-arranged the price, volume and approximate timing of the trade. On each occasion, in the preceding days, the former employee had traded SPI Futures on behalf of Mr Davidof resulting in a loss (in February) and a profit (in June) for Mr Davidof.
ASIC found that the prices at which Mr Davidof and the former employee arranged to trade MINIs were designed to transfer the profit/loss from all the preceding trading, without reflecting the SPI Futures that were actually traded. This was likely to have the effect of creating an artificial price for trading in the affected MINIs on ASX.
Mr Davidof has the right to appeal to the Administrative Appeals Tribunal for a review of ASIC's decision.
A MINI is a type of 'derivative' in that it derives its value from another 'thing' which is commonly referred to as the 'underlying instrument' or 'reference asset'. The underlying instrument of a MINI may be, among other things, a share, a share price index (including the S&P/ASX 200 Share Price Index), a pair of currencies or a commodity.
ASX SPI 200 Index Futures (SPI Futures)are a derivative product which tracks the value of the S&P/ASX 200 Index.
Credit Suisse ceased issuing MINIs on ASX in October 2013.
Editor's note 1:
On 20 January 2017, the Administrative Appeals Tribunal handed down a decision upholding an appeal by Mr Davidof against ASIC's banning (refer: 17-012MR).
Editor's note 2:
On 16 February 2017, ASIC filed a notice of appeal from the decision of the Administrative Appeals Tribunal (AAT) to the Federal Court of Australia. ASIC contends that the AAT erred in concluding that MINIs were not a derivative under the Corporations Act and therefore not financial products.
Editor's note 3:
ASIC's appeal was heard in the Federal Court this morning before Justice Lee. His Honour upheld the appeal and found that a 'Mini Warrant' was a derivative and therefore a financial product under the Corporations Act. The matter will be reverted back to the AAT for further determination.