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Thursday 16 November 2017

17-387MR Bell Potter Securities Limited pays $358,000 in infringement notice penalty

Bell Potter Securities Limited ('Bell Potter') has paid a penalty of $358,000 to comply with an infringement notice given to it by the Markets Disciplinary Panel ('the MDP').

The ASIC Market Integrity Rules (ASX Market) 2010:

  1. prohibit a market participant from making bids on its own behalf with the intention,  or having the effect, of creating a false or misleading appearance with respect to the price of shares; and
  2. require a market participant to notify ASIC, as soon as practicable, if the market participant has reasonable grounds to suspect that bids have been made that have, or are likely to have, that effect.     

The MDP found that Bell Potter in July 2015, acting on its own behalf, made bids for shares in DirectMoney Limited, an ASX-listed company, for which Bell Potter had been the Lead Manager and Underwriter to a public capital raising, with the intention and having the effect of supporting the price of the shares in the company during the first two weeks of its backdoor listing on ASX.

Following DirectMoney's shares' first day of trading (ASX:DM1), which did not meet expectations, Bell Potter’s senior management decided to invest $200,000 in DirectMoney. The investment was to be implemented by an on-market acquisition of shares in DirectMoney in a way so as to not acquire more than 20% of the total volume traded  in DirectMoney on any one given day. An employee trader was to carry out the trading.

The MDP found that the employee trader was put in a position of conflict because the trader was under an instruction from senior management to fill the buy-order subject to the daily volume limit, but was being influenced by the Equity Capital Markets area and Hong Kong Division of Bell Potter to support the share price of DirectMoney.

The MDP was satisfied that, even accepting that the initial decision to invest in DirectMoney may have been a genuine commercial decision, the manner of implementation of the decision by the employee trader, acting under the instructions or influence of the Equity Capital Markets Division and the Hong Kong Division, involved market manipulation.

The MDP found that the conduct was co-ordinated between the Equity Capital Markets area and the Hong Kong Division, and carried out by an experienced trader who, despite being put in a position of conflict, was a willing participant. The conduct was motivated by self-interest or the interests of related parties. The Hong Kong Division were pressured by a significant investor in DirectMoney, and the Hong Kong Division were endeavouring to protect that and a number of other business relationships of value to the Bell Potter group. The Equity Capital Markets area were pressured by the Hong Kong Division, having regard to the fact that DirectMoney was a client of the Equity Capital Markets area.

In May 2016, Bell Potter notified ASIC of the suspicious trading following their identification of additional recordings of telephone conversations of the Hong Kong Division. The MDP considered that notification to have been too late. The MDP considered that Bell Potter had formed reasonable suspicions earlier in July 2015 when concerns were raised by their internal Compliance area.

The compliance with the infringement notice is not an admission of guilt or liability, and Bell Potter is not taken to have contravened subsection 798H(1) of the Corporations Act.