Report 277 ASIC supervision of markets and participants: July to December 2011 (REP 277) identified that during the reporting period:
There were 20,029 trading alerts with 131 matters requiring further consideration during the reporting period. Alert numbers can depend on trading conditions. We continue our calibration of alert parameters to generate more targeted alerts and eliminate ‘false positives’. This has resulted in a drop of more than 3,000 alerts.
Some 23 matters were referred for investigation. These matters involved potential insider trading (6), market manipulation (5), possible breaches of the market integrity rules (9) and of the continuous disclosure obligations (3).
A further four matters referred for investigation were identified during ASIC’s participant surveillance visits. These related to possible breaches of market integrity rules (2), misleading and deceptive conduct (1), and inappropriate advice (1).
In the reporting period one case of insider trading and one case of market manipulation were successfully prosecuted, a further three people agreed to plead guilty to insider trading and two companies paid penalties after ASIC issued infringement notices under the Market Integrity Rule regime.
ASIC’s Deputy Chairman Belinda Gibson said: ‘ASIC’s comprehensive and tailored surveillance of financial markets continues to build investor confidence in the integrity of our markets. Our approach is to take preemptive action where possible to prevent market misconduct. Our insider trading prosecutions are evidence of our ability to respond where breaches are identified.
‘Since ASIC has taken on responsibility for market supervision, there has been a significant reduction in the time taken to commence investigations into suspicious market conduct. Of the 75 market matters referred for investigations since ASIC assumed responsibility for market supervision in August 2010, 26 of the 75 were made to ASIC within 30 days of identifying the possible misconduct, making a total of 54 out of 75 referrals that were made in less than 60 days,’ said Ms Gibson.
ASIC’s Senior Executive Leader Market and Participant Supervision, Greg Yanco said: ‘During the reporting period, ASIC focused on detecting market integrity rule breaches, including issues relating to trading which has the potential to create false and misleading appearances, and the appropriateness of controls relating to automated order processing.
‘ASIC is continuing to work closely with market participants on matters relating to order management including problematic algorithms and orders for some exchange-traded funds.
‘We are seeing a drop in the number of problematic algorithms which, we believe, is a result of the industry responding to our initiatives. However we will continue to focus on electronic trading and technology due to the potential for market disruption when things go wrong,’ said Mr Yanco.
For the six month period 1 July 2011 to 31 December 2011, the following enforcement outcomes were reached:
Mr Justin O’Brien, a former Director of Business Development of the strategic shareholder consulting services company, Georgeson, was found guilty of engaging in insider trading, and was sentenced to two years imprisonment by way of an intensive correction order (refer: 11-299MR)
Ms Elisa Rietbergen, formerly a Relationship Services Associate with JP Morgan Chase Bank N.A and Mr Joseph Levi, of Surry Hills, NSW, each pleaded guilty to an insider trading charge (refer: 11-309AD)
Mr Nicholas Glynatsis, a former senior consultant PricewaterhouseCoopers, pleaded guilty to nine charges of insider trading (refer: 11-302AD)
Mr Hoong Kee Tang, a former director of Wintech Group Limited, was convicted on four counts of market manipulation and one count of making false or misleading statements to ASIC, and was fined a total of $10,000 (refer: 11-286MR)
Austock Securities Limited paid a penalty of $30,000 in order to comply with an infringement notice for contravening market integrity rule 5.9.1 of the ASIC Market Integrity Rules (ASX Market) 2010 (refer: 11-291AD)
Paterson Securities Limited paid a penalty of $25,000 in order to comply with an infringement notice for contravening market integrity rule 6.6.1 of the ASIC Market Integrity Rules (ASX Market) 2010 (refer: 11-216AD), and
Nexbis Limited paid a $33,000 penalty after ASIC issued an infringement notice for its contravention of continuous disclosure obligations in section 674(2) of the Corporations Act (refer: 11-168AD).