Bell Potter Securities has entered into an enforceable undertaking (EU) with ASIC after the regulator found the stockbroker's head of institutional equities misused confidential client information.
An investigation by ASIC found that Bell Potter managing director of institutional equities Angus Aitken improperly handled and disclosed information about an institutional client's possible selling intentions in securities of Ten Network Holding (TEN).
ASIC found that on 21 May 2013, Mr Aitken sent an email to Regal Funds Management chief investment officer Philip King based on the information he had obtained about his client's possible selling intentions.
"Mr Aitken sent the email to Mr King without his client's knowledge or consent," said ASIC.
"ASIC was concerned that Mr Aitken knew, or ought reasonably to have known, that the information he provided to Mr King was, or was likely to have been, confidential client information," said the regulator.
Mr King and Regal Funds Management have also had enforceable undertakings accepted by ASIC.
"Mr King and Regal entered into the EUs as a result of Mr King's conduct in selling approximately four million TEN at $0.28 per share after receiving the email from Mr Aitken," said ASIC.
"ASIC was concerned that Mr King, by virtue of his position and experience, knew, or ought reasonably to have known, that the information he received was, or may have been, confidential and that its dissemination to him may have been contrary to the interests of Mr Aitken's client.
"In ASIC's view, Mr King was obliged to avoid using the information and, in particular, to refrain from selling TEN shares," said ASIC.
Mr King short-sold the TEN shares through a broker unrelated to Mr Aitken or Bell Potter.
"After this transaction, the price of TEN began to fall through trading unrelated to Regal or Bell Potter," said ASIC.
"At the same time, Mr King and Mr Aitken negotiated a crossing under which Regal bought 10 million TEN shares from Mr Aitken's client at $0.26 per share.
"In an approximate seven-minute period, Regal realised an approximate gross profit of $80,000 on the four million TEN that were short-sold by Mr King," said ASIC.
The Bell Potter EU requires Mr Aitken to undertake "various training and compliance measures", and for Bell Potter to implement various compliance measures in relation to Mr Aitken, including the recording of his business phone calls relating to client trades.
Mr King and Regal Funds Management have agreed to appoint an independent compliance expert to review Regal's policies and procedures.
Under both EUs, Mr Aitken and Mr King will each make a voluntary contribution of $80,000 to Financial Literacy Australia Limited to "advance financial literacy in Australia", said ASIC.
"These payments represent the approximate profits realised on Mr King's short-sale of TEN on behalf of Regal's funds," said ASIC.
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