ASX Fines Bell Potter Securities Limited 125,000
The ASX Disciplinary Tribunal (the ‘Tribunal’) has imposed a total fine of $125,000 (plus GST) on Bell Potter Securities Limited (‘Bell Potter’) for contravening the following ASX Market Rules in relation to trades made on behalf of a client without express client instructions, breaches of Bell Potter’s policy relating to trading on staff accounts and the unprofessional conduct of an advisor.
• 7.4.1(b) in that its Employee (the ‘Adviser’) entered into a Market Transaction for the sale of 3,700,000 fully paid ordinary shares in Quest Petroleum Limited (‘QPN’) at one cent (the ‘QPN Transaction’), on behalf of a client, (the ‘Client’), without the prior express instructions of the Client, or persons authorised in writing by the Client, to give such instructions as required by ASX Market Rule 7.4.1(b)
• 7.4.1(c) in that the Adviser allocated the QPN Transaction to the Client’s Account without the prior express instructions of the Client, or persons authorised in writing by the Client to give such instructions as required by ASX Market Rule 7.4.1(c)
• 7.8.2 between 1 December 2006 and about 19 February 2010, in that it failed to approve separately and in writing 432 Orders which gave rise to 713 Market Transactions initiated by the Adviser on behalf of two corporate clients (the ‘Companies’) when at all material times, the Adviser was the sole beneficial owner of those Companies, and as such both Companies were a “connected person” as described in ASX Market Rule 7.8.1 (Contravention 3); and
• 4.1.1(w) between 1 December 2006 and about 19 February 2010, in that:
• the Adviser engaged in conduct which amounted to impropriety affecting professional character and which is indicative of a failure either to understand or to practice the precepts of honesty and fair dealing in relation to other Market Participants, clients or the public; and/or
• the Adviser, engaged in conduct which was, or could reasonably be considered as likely to be, prejudicial to the interests of ASX or its Market Participants (Contravention 4).
Bell Potter did not contest the Contraventions.
For these four contraventions the Tribunal imposed a total fine of $125,000 (plus GST).
The Circumstances of the matter are detailed as follows:
On 27 April 2009, Bell Potter executed the following two crossings for QPN:
• at 10:20:51 the Adviser, pursuant to the instructions of the Client, executed the purchase of 3,700,000 QPN on behalf of the Client at 0.8 cents per share; and
• at 10:24:39 the Adviser, without the instructions of the Client, or persons authorised in writing by the Client, executed the sale of 3,700,000 QPN by the Client at 1.0 cent per share.
On 27 April 2009, the Adviser allocated, without the instructions of the Client, or persons authorised in writing by the Client, the sale of 3,700,000 QPN by the Client at 1.0 cent per share to the Client’s account.
Between 4 December 2006 and about 19 February 2010, Bell Potter was responsible for the execution of 432 Orders on behalf of the Companies, which resulted in 713 Market Transactions.
Bell Potter had opened and operated the Companies’ Accounts pursuant to the understanding that they were Clients of, but unrelated to, the Adviser. Following further investigation by Bell Potter’s Compliance department on 19 February 2010, the Adviser informed Bell Potter Compliance that he was the ultimate beneficial owner of the Companies. Bell Potter, on becoming aware that the accounts were staff accounts, self-reported this breach to ASX.
The Adviser had, in fact, initiated all of the 432 Orders that the Adviser had executed for the Companies without first receiving approval in writing from a Responsible Executive, director or partner of Bell Potter or a person with written delegation for that responsibility from a Responsible Executive, director or partner to do so.
ASX Market Rule 4.1.2 deems Bell Potter, as a Market Participant, to be responsible for all actions and omissions of its Employees. The Adviser, as an Employee of Bell Potter, engaged in Unprofessional Conduct as demonstrated by the misconduct the subject of Contraventions 1, 2, and 3.
Further, the Adviser:
• knowingly engaged in a breach of Bell Potter’s policy relating to discretionary trading;
• knowingly engaged in multiple ongoing breaches of Bell Potter’s policy relating to trading on staff accounts;
• concealed from the management of Bell Potter that he was the beneficial owner of the Companies. As such, the Adviser knowingly avoided the requirement to obtain Bell Potter’s authorisation prior to entering those 432 Orders;
• during an interview on 10 February 2010 with representatives of ASX, (the ‘ASX Interview’), made representations to ASX which were incomplete, inaccurate and misleading concerning his association with the Companies;
• during the ASX Interview admitted to the misconduct the subject of Contraventions 1 and 2, however the relevant Order record indicates that the Adviser had received instructions to sell QPN shares and to that extent it is false in a material particular, or was materially misleading;
• during the ASX Interview, admitted to not having received any instructions, to enter into two Crossings. The first transaction being one which was executed on 17 March 2009 for the purchase of 525,000 fully paid ordinary shares in Morning Star Holdings (Australia) Ltd and the second being the QPN Transaction executed on 27 April 2009. However, the relevant Order record indicates that the Adviser had received instructions to enter into the two Crossings on 17 March and 27 April 2009 referred to above, and to that extent is false in a material particular, or was materially
• as a result of the false Order records referred to above, had maintained records that incorrectly recorded and explained the transactions referred to.
In determining penalty, the Tribunal, took into account, among other things, the following matters:
1. The disciplinary history of Bell Potter – having had five previous but unrelated ASX Disciplinary Tribunal findings against it.
2. The misconduct was intentional on the part of the Adviser.
3. The misconduct the subject of Contraventions 3 and 4 occurred over an extended period of time.
4. The misconduct is indicative of a pattern of non-compliance by the Adviser with the ASX Market Rules.
5. The misconduct may have had the potential to result in loss to other parties, however no actual loss was incurred by other parties in these circumstances.
6. The Adviser remains employed at Bell Potter with strict conditions imposed on the Adviser by Bell Potter in order to prevent a recurrence of the misconduct.
7. The misconduct had the potential to damage the reputation and integrity of the ASX and the market and facilities it operates.
Annexure A – Disciplinary Tribunal Sanction Guidelines
As the contravening conduct occurred after 31 March 2008, the Tribunal has had regard to the Disciplinary Tribunal Sanction Guidelines which are Annexure A to the Disciplinary Appeals and Processes Rulebook.
The Tribunal has determined that these Contraventions are Level 2 Serious Contraventions, for which the applicable penalty range is $20,000 – $100,000 (plus GST). Given the aggravating and mitigating circumstances in this matter the Tribunal determined that the following fines represent an appropriate sanction:
Contraventions 1 and 2: $20,000
Contravention 3: $25,000
Contravention 4: $80,000
The Tribunal’s opinion is that this sanction will serve as a deterrent to this participant and other participants and their representatives from engaging in similar misconduct while at the same time appropriately serve the interests of ASX and market participants by supporting the integrity of the market it operates.