The wheels of corporate justice turn slowly, and in the case of failed stockbroking, corporate advisory and wealth management firm BBY, it has taken 10 years for its former executive chairman to face charges.
On Tuesday, Glenn Rosewall appeared in Downing Centre Local Court charged with two offences to sections 1041G and 1311 of the Corporations Act 2001 (Cth) and section 11.2(1) of the Criminal Code (Cth), following an ASIC investigation.
Rosewall – who is the son of tennis legend Ken Rosewall, himself a BBY director – faces hefty penalties if convicted, with each charge carrying a maximum sentence of 10 years’ imprisonment, or a fine of 4,500 penalty units ($765,000) or three times the total value of benefits obtained (or both).
The corporate regulator alleges that between about 1 March 2015 and about 17 May 2015, Rosewall “aided, abetted, counselled or procured BBY’s use of $1.95 million of client money to facilitate payment of an unrelated corporate invoice”.
This period immediately preceded the firm entering voluntary administration on 17 May 2015 and liquidation a month later.
ASIC also suspended BBY’s Australian Financial Services Licence in May 2015, eventually cancelling it in June 2021.
Rosewall filed for bankruptcy in 2019 with around $1.75 million in assets and $13 million in liabilities.
At the time of its collapse, BBY was the largest independent stockbroker in Australia and New Zealand; however, it made an ill-fated contracted acquisition of 12 per cent of shares in Aquila Resources on behalf of a client, Mineral Resources.
The shares held a market value of $192 million and the transaction broke a record for the largest single on-market order ever executed on the Chi-X and, as a 2022 KPMG liquidator’s report noted, was “apparently beyond [BBY’s] financial means to complete]”.
After Aquila’s share price fell, BBY was hit with around $40 million in margin calls – payable immediately.
As the firm scrambled to remain solvent, it misused client trust account funds to meet its operating expenses.
Things got so dire that, a month after the Aquila trade, Rosewall sought counsel from “professional intuitive and energy healer” Nevine Rottinger.
The KPMG report had identified that Rosewall had regularly obtained advice from Rottinger since 2010, including “extensive meetings, telephone calls and text messages”.
“Ms Rottinger was privy to confidential and sensitive information and provided advice in relation to such matters as revenue and cash forecasting, cost cutting, staffing, major transactions and dealings with regulators,” the report said.
The impact on clients was immense, with BBY facing $65.5 million in claims from 6,000 clients – but only $44.9 million in assets.
When the final distributions to creditors were made in April 2022, they were left with just $30.7 million – representing between 30 cents and 76 cents on the dollar depending on the product line.
Enforcement fallout
While it has taken a decade for Rosewall to face court, the first enforcement action was against a financial adviser.
In November 2017, ASIC banned Sergio Nicolo Belardo, who was an authorised representative of BBY from September 2013 to May 2015, from providing financial services for 10 years.
During ASIC’s investigations, it found clients had implemented, on Belardo’s recommendation, an investment strategy that involved entering an equity position and generating income by selling “call” options, while simultaneously buying a “put” option acting as downside protection.
Six years later in June 2023, former head of operations Fiona Mae Bilton pleaded guilty to three counts of dishonestly obtaining a financial advantage and was sentenced to 20 months’ imprisonment, which was suspended for three years on the first charge.
The court also imposed a community correction order for three-and-a-half years on the second and third charges, including 380 hours of unpaid community work.
In August 2024, former strategy manager Yat Nam was sentenced for aiding and abetting dishonest conduct. Nam was convicted and received an aggregate sentence of two years and six months’ imprisonment to be served as an intensive correction order, including 100 hours of community service.
In June, former chief executive Arunesh Narain Maharaj was also charged with aiding, abetting, counselling or procuring the alleged dishonest conduct of BBY.
BBY was also called out by former financial services minister Kelly O’Dwyer when she introduced the bill that would eventually become Treasury Laws Amendment (2016 Measures No. 1) Act 2017, which tightened the rules around over-the-counter derivatives trading for retail investors.
“These reforms will ensure that retail clients are better protected when a licensee such as BBY becomes insolvent and stand as further evidence of the government’s ongoing commitment to focus on implementing measures that make a real difference to consumers,” O’Dwyer said in December 2016.
Rosewall will return to court on 9 September, with the matter adjourned for further mention on that date.
