Share Investing Limited (“Share Investing”) has paid a penalty of $130,000 to comply with an infringement notice given to it by the Markets Disciplinary Panel (“MDP”).
The MDP had reasonable grounds to believe that Share Investing had contravened subsection 798H(1) of the Corporations Act 2001 (Cth) by failing to comply with Rule 5.7.1(b)(iii) of the ASIC Market Integrity Rules (ASX Market) 2010. This Rule prohibits market participants from entering orders on the market on the account of a client where, taking into account the circumstances of the orders, the market participant ought reasonably suspect that the client placed the orders with the intention of creating a false or misleading appearance of active trading in any product or with respect to the market for, or price of, any product.
Throughout April to May 2013, a client of Share Investing, using its automated order processing system, was trading in the shares of a small energy company. The orders appeared to be inconsistent with the client’s prior trading, but consistent with the client’s interest in maintaining the value of the client’s holding by supporting the price of the shares. The client orders materially altered the price of the shares, including trading at the highest price on each day and/or setting the closing price. They also appeared to have been timed to create a price impact at minimal cost.
The MDP found that Share Investing ought to have identified these circumstances and to have suspected that the client placed the orders with the intention of supporting or maintaining the price of the shares and creating a false and misleading appearance of active trading or with respect to the market for, or price of, the shares.
The MDP was satisfied that Share Investing had a corporate culture that was conducive to compliance with the Rules, and had in place post-trade surveillance software alerts and procedures in relation to small orders and which displayed aspects possibly attributable to market manipulation by a client. The conduct giving rise to the alleged contravention was primarily the result of misjudgements by some employees, including designated trading representatives who, both before and after the management decision to closely monitor the trading of the client, failed properly to follow those procedures for preventing intended market manipulation by the client.
Share Investing was previously known as ETRADE Australia Securities Limited.
The compliance with the infringement notice is not an admission of guilt or liability, and Share Investing is not taken to have contravened subsection 798H(1) of the Corporations Act.