FinClear has paid the $70,000 penalty to comply with the notice after the MDP had reasonable grounds to believe that the group had contravened market integrity rules.
The contravention related to a pre-arrange crossing in April 2018 for an on-market buy-back by a company listed on the ASX.
The crossing of 4.1 million shares represented 87 per cent of the remaining shares that the listed company was offering to buy back, and approximately 8 per cent of the company’s issued capital.
FinClear executed and reported the trade as a special crossing to Chi-X, the market operator, but a special crossing is not permitted for on-market buy-backs because it is not carried out in the ordinary course of trading.
FinClear was actually the body that realised the error and informed ASIC and cancelled the crossing, with the next day the shares commencing trading on an ex-dividend basis.
On request, ASX established a special cum-dividend market for the shares and ASIC indicated to FinClear that to allow for equal opportunity any proposed bid might need to be placed in the market for a prolonged period.
In that market, FinClear entered a bid for the same shares at the same price and seven seconds later entered an ask at the same volume and price with the orders matching on the trading platform.
The MDP considered these actions to not be fair and orderly and in contravention of market integrity rules.
“FinClear was also aware of ASIC’s expectations as conveyed in conversations between ASIC and FinClear in the lead up to the subsequent crossing that the offer be held in the market for a prolonged period of time,” said the MDP.
“This would not have cured the pre-arranged nature of the transaction but if the offer had been made for an extensive period of time, it would have dispelled the proposition that there was any unfairness. FinClear was not obliged to meet ASIC’s expectations, but it voluntarily assumed the risk of not doing so.”
The MDP found that the original execution of the trade as a special crossing lacked knowledge, however as it was an isolated mistake the MDP considered it fell short of demonstrating that FinClear itself lacked organisational competency.
The MDP also noted that FinClear had no previous adverse disciplinary history before this notice.
