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Wealth management group Ord Minnett has paid an $888,000 fine after receiving an infringement notice from the corporate watchdog's Markets Disciplinary Panel (MDP) over its handling of a share buy-back for then ASX-listed entity AWN Holdings in 2021.
AWN appeared on the ASX in 2013 following a reverse merger aimed at giving Australian investors access to private companies held by London-based Arowana, a B Corporation with holdings in sustainable solar energy, education, critical power, asset management and venture capital.
Just two months prior to its eventual delisting from the ASX, on 1 September 2021 AWN gave Ord Minnett instructions to conduct a buy-back, but what followed according to the panel was an allegedly pre-arranged series of trades for more than two million shares at 99.5cps on behalf of a selling client who was a substantial shareholder in AWN.
This is higher than the 87.5-89.5cps range that AWN shares were trading at on the same day, but it was also short of the $1 per share price requested by the selling client.
The shares traded for the client concerned represented more than half the volume to be purchased under the buy-back.
Whilst compliance with the infringement notice is not an admission of guilt or liability, the Australian Securities and Investment Commission's (ASIC) MDP alleged that Ord Minnett conducted these trades knowing them to be pre-arranged and did not undertake the ‘ordinary course of trading’ as required by the on-market buy-back provisions in the Corporations Act.
A further allegation is that the group gave a misleading impression that the trades were executed as an ordinary crossing when they were pre-arranged.
The MDP also alleged Ord Minnett gave information to both the buyer and seller that the other was willing to make the transaction at $1 per share - information that was not available to others in the market, and was therefore allegedly giving preferential treatment to one particular seller to the detriment of other AWN shareholders.
Nonetheless, ASIC clarifies that Ord Minnett is not taken to have contravened subsection 798H(1) of the Corporations Act.
These allegations led to a fine of $777,000, taking into account Ord Minnett’s good compliance history, while a further $111,000 penalty was issued as the trades at 99.5cps were contrary to the client's instructions of $1 per share.
It was clarified that this slightly lower price was facilitated by Ord Minnett not charging brokerage, so the selling client received the same outcome as if its shares were sold at $1.
"While the MDP considered that the contravention was a genuine error and inadvertent, Ord Minnett did not have adequate internal controls to prevent or detect the contravention and on being alerted to the contravention, did not take remedial steps in response," ASIC said in a release.
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