Ord Minnett has paid $888k to comply with an infringement notice from the Markets Disciplinary Panel (MDP).
On 1 September 2021, Ord Minnett received instructions to commence a buy-back on behalf of AWN Holdings Ltd (AWN). The MDP had reasonable grounds to consider that Ord Minnett twice contravened market integrity rules when conducting the buy-back.
The MDP considered that Ord Minnett did not intend to breach the rules but failed to adequately investigate the question of crossings in a buy-back. The MDP considered that Ord Minnett failed to recognise the contraventions or implement any changes to its systems to prevent or mitigate the risks of further breaches.
On 15 September 2021, Ord Minnett received instructions from a substantial shareholder of AWN (selling client) to sell its shares at $1.00. On that day, AWN shares traded between 89.5 and 87.5 cents.
On 27 September 2021, Ord Minnett executed crossings between the selling client and AWN under the buy-back for a total of 2,073,561 AWN shares at 99.5 cents. This was the maximum price that AWN was allowed to buy its shares under the buy-back on this day and represented 52.4 per cent of the total shares to be purchased under the buy-back.
The MDP considered that the crossings were pre-arranged, not done with indifference as to the identity of the buyer and seller and did not comply with ASX crossing rules. MDP also considered that the crossings were facilitated by Ord Minnett not charging brokerage so the selling client received the same outcome as if its shares were sold at $1.00.
The MDP had reasonable grounds to consider that Ord Minnett breached the market integrity rules as the crossings resulted in the market for AWN shares not being fair and orderly.
Ord Minnett:
• Conducted the trades knowing them to be pre-arranged;
• Did not undertake the trades in the ‘ordinary course of trading’ as required by the by the on-market buy-back provisions in the Corporations Act;
• Created a misleading impression that the trades were executed as an ordinary crossing when they were pre-arranged;
• Gave information to AWN that the selling client would sell at $1.00;
• Gave information to the selling client that AWN would buy at $1.00 if market conditions allowed. This information was not available to others in the market;
• Gave preferential treatment to the selling client to participate in the buy-back; and
• Acted to the detriment of other AWN shareholders who did not get the same opportunity to sell their shares into AWN’s buy-back.
The MDP considered the conduct was serious given the nature of the prohibition.
The penalty for this alleged contravention was $777,000 (3,500 penalty units) taking into account Ord Minnett’s good compliance history.
On 1 September 2021, Ord Minnett purchased AWN shares under the buy-back at prices above the maximum limit allowable for a buy-back under the ASX Listing Rules.
The MDP had reasonable grounds to consider that this was a breach of the market integrity rules as it was contrary to the client’s instructions and the ASX Listing Rules.
While the MDP considered that the contravention was a genuine error and inadvertent, Ord Minnett lacked adequate internal controls to prevent or detect the contravention and on being alerted to the contravention, did not take remedial steps in response.
The penalty for this alleged contravention was $111,000 (500 penalty units).
