Menzies and Australian Securities and Investments Commission
[2016] AATA 699
•9 September 2016
Menzies and Australian Securities and Investments Commission [2016] AATA 699 (9 September 2016)
Division
TAXATION AND COMMERCIAL DIVISION
File Number
2016/3817
Re
Mark Menzies
APPLICANT
And
Australian Securities and Investments Commission
RESPONDENT
DECISION
Tribunal Egon Fice, Senior Member
Date 9 September 2016 Place Melbourne The Tribunal decides that the operation and implementation of the decision of the respondent dated 13 July 2016 be stayed pending the hearing and final determination of this matter.
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Egon Fice, Senior Member
Catchwords
PRACTICE AND PROCEDURE – Stay application – ASIC Banning Order – financial services industry – MINI warrant trading – market manipulation – creating an artificial price – maintaining an artificial price level – creation of false or misleading appearance of active trading – applicant’s prospects of success in application for review – consequences for applicant – review application rendered nugatory – whether deterrent – stay granted subject to conditions
Legislation
Administrative Appeals Tribunal Act 1975 (Cth) s 41(2)
Corporations Act 2001 (Cth) ss 761A, 920A(1), 920A(1)(e), 920A(1)(f), 920A(1)(g), 920A(2), 920B(2), 1041A, 1041B(1)(a)
Corporations Regulations 2001 (Cth) Reg 7.8.19Cases
Director of Public Prosecutions (Cth) v JM (2013) 298 ALR 615
Re Anthony Scott and Australian Securities and Investments Commission [2009] AATA 798REASONS FOR DECISION
Egon Fice, Senior Member
Mr Mark Menzies was appointed the sole Director, Secretary and Shareholder of Menzies Securities Pty Ltd (Menzies Securities) on 27 June 2009. Menzies Securities was granted an Australian Financial Services (AFS) licence on 31 August 2010. Its AFS licence authorised Menzies Securities to carry on a financial services business, to provide general advice and to deal in securities, derivatives, managed investment schemes and margin lending facilities to wholesale clients. Mr Menzies was the designated Key Person for Menzies Securities. He was responsible for its day to day management.
Attached to an affidavit sworn by Mr Menzies on 24 August 2016 was the client list of Menzies Securities. It lists 21 clients. Mr Menzies testified that all of the clients of Menzies Securities are sophisticated investors.
Mr Menzies testified that in about March 2011 he was approached by Mr David Anderson, an employee of Citibank to trade in warrants. He said Mr Anderson explained to him how warrant trading worked and in particular how trades were placed and executed. In about September 2012 Mr Anderson left Citibank to take up a position at Credit Suisse and he approached Mr Menzies to continue warrant trading with him at his new employer.
In particular, Credit Suisse was a market maker for MINI warrants. Mr Menzies dealt with Mr Anderson and his offsider, Mr McLean. Penson Financial Services Australia Pty Ltd (Penson) was a Trading Participant of the Australian Securities Exchange (ASX) and a Clearing Participant of ASX Clear. Penson and Menzies Securities entered into an Equities and Derivatives Execution and Clearing Agreement on or about 1 November 2010. As a result of the agreement:
(a)Menzies Securities became a Correspondent of Penson;
(b)Penson provided equities and derivatives execution and clearing services to Menzies Securities and its clients;
(c)Penson provided a Direct Market Access (DMA) Service to Menzies Securities enabling Menzies Securities to enter orders directly into the ASX trading platform relating to ASX products;
(d)Menzies securities acted as agent for its clients in receiving orders from a client and communicating such orders to Penson or placing it through the DMA Service; and
(e)Penson would not accept or act on any order placed by a client of Menzies Securities other than an order communicated to Penson by Menzies Securities as agent for the client, or placed through the DMA Service.
Penson was renamed Pershing Securities Australia Pty Ltd (Pershing) in December 2011.
Between 29 November 2010 and 19 June 2014 (the Relevant Period) Mr Menzies placed all orders to deal in financial products and executed all orders to deal in financial products through Pershing for Menzies Securities.
In a notice dated 20 November 2015, which was served on Mr Menzies on 23 November 2015, the Australian Securities & Investments Commission (ASIC) set out particulars of his conduct with which ASIC was concerned. Those concerns were:
(a)Mr Menzies may not have complied with a financial services law (Corporations Act 2001 (Corporations Act) s. 920A(1)(e));
(b)Mr Menzies may have been involved in the contravention of a financial services law by another person (s. 920A(1)(g)); and
(c)ASIC may have reason to believe that Mr Menzies was likely to contravene a financial services law (s. 920A(1)(f)).
After some rescheduling, ASIC and Mr Menzies agreed to hold a hearing on 15 March 2016 to enable Mr Menzies to make written and oral submissions regarding ASIC’s concerns. Section 920A(2) of the Corporations Act provides that ASIC must provide a person against whom it is considering to make a banning order the opportunity to appear, or be represented, at a hearing before ASIC and to make submissions on the matter.
Following consideration of the submissions made by an on behalf of Mr Menzies, in a letter dated 13 July 2016, a delegate of ASIC informed Mr Menzies that she had decided to make a banning order against him prohibiting him from providing any financial services for a period of four (4) years.
On 21 July 2016 Mr Menzies lodged an application with the Tribunal seeking review of ASIC’s decision to make a banning order against him. On the same day, Mr Menzies lodged with the Tribunal a Request for Stay Order seeking an order staying or otherwise affecting the operation or implementation of ASIC’s decision.
I held a Stay Hearing on 31 August 2016 and reserved my decision.
ASIC’S POWER TO MAKE A BANNING ORDER
ASIC’s power to make a banning order is set out in s. 920A of the Corporations Act. Relevantly, it provides:
(1) ASIC may make a banning order against a person, by giving written notice to the person, if:
(a)…
(e)the person has not complied with a financial services law; or
(f)ASIC has reason to believe the person is likely to contravene a financial services law; or
(g)the person has been involved in the contravention of the financial services law by another person; or
(h)….
The expression financial services law is defined in s. 761A as follows:
financial services law means:
(a) a provision of this Chapter or of Chapter 5C, 5D, 6, 6 a, 6B, 6C or 6D; or
(b) a provision of Chapter 9 as it applies in relation to a provision referred to in paragraph (a);
(c) a provision of Division 2 of Part 2 of the ASIC Act; or
(d) any other Commonwealth, State or Territory legislation that covers conduct relating to the provision of financial services (whether or not it also covers other conduct), but only in so far as it covers conduct relating to the provision of financial services; or
(e) in relation to a financial services licensee that is a licensed trustee company (in addition to paragraphs (a) to (d)) – any rule of common law or equity that covers conduct relating to the provision of financial services that are traditional trustee company services (whether or not it also covers other conduct), but only in so far as it covers conduct relating to the provision of such services.
Section 920B of the Corporations Act describes the meaning of a banning order. Relevantly, it provides:
(1) A banning order is a written order that prohibits a person from providing any financial services or specified financial services in specified circumstances or capacities.
(2) The order may prohibit the person against whom it is made from providing a financial service:
(a)permanently; or
(b)for a specified period, unless ASIC has reason to believe that the person is not of good fame or character.
…
THE CLAIMED OFFENDING
ASIC’s concern with Mr Menzies’ conduct arose from trading in MINI warrants on 5 December 2012, 7 December 2012, 31 December 2012 and 14 February 2013. Specifically, ASIC contended that those transactions evidenced market manipulation. Sections 1041A and 1041B of the Corporations Act prohibit various kinds of conduct. Relevantly, s. 1041A provides:
A person must not take part in, or carry out (whether directly or indirectly and whether in this jurisdiction or elsewhere):
(a)a transaction that has or is likely to have; or
(b)2 or more transactions that have or are likely to have;
the effect of:
(c)creating an artificial price for trading in financial products on a financial market operated in this jurisdiction; or
(d)maintaining at a level that is artificial (whether or not it was previously artificial) a price for trading in financial products on a financial market operated in this jurisdiction.
Section 1041B deals with creating a false or misleading appearance of active trading. The relevant provision in this case is 1041B(1)(a) which provides:
(1) A person must not do, or omit to do, and act (whether in this jurisdiction or elsewhere) if that act or omission has or is likely to have the effect of creating, or causing the creation of, a false or misleading appearance:
(a)of active trading in financial products on the financial market operated in this jurisdiction; or
The questionable transactions all involved trading in MINI warrants. The warrants in question were all based on exposure to the S&P/ASX 200 index (SPI index futures). Those MINI warrants have the prefix XJO followed by the letter K, L, M or Q. The fifth letter identifies the warrant issuer (in this case C identifiing Credit Suisse) and the last letter identifies the particular warrant series. Generally, they are used for trading and hedging in the Australian Equity index market. The asset underlying the warrants is of course the index which, collectively, reflects the value of the assets listed on that index.
Mr S Rubenstein of counsel, who appeared on behalf Mr Menzies, submitted that the following distinctive features appeared from the trading activity in question:
(a)when taking orders, Mr Anderson or Mr McLean did not necessarily expect Mr Menzies to buy or sell a MINI warrant every time a hedging transaction took place. A number of transactions took place over the course of the day and the net exposure of the hedging trades was calculated in order to determine the volume and price of associated warrant trades;
(b)after multiple hedge transactions were executed in the course of the day, Mr Anderson or Mr McLean would speak with Mr Menzies and they would book the purchase or sale of MINI warrants to reflect the net exposure of the hedging transactions;
(c)by netting off the hedging transactions executed in the course of the day, a warrant would be traded to reflect the net exposure based on the aggregate hedge trades in order to determine the price and volume of a corresponding MINI warrant;
(d)Credit Suisse could trade any warrant which was not in respect of the same underlying hedge transaction. This might happen where a stop-loss event may have occurred in respect of the relevant MINI warrant preventing orders being placed or trades occurring in that particular warrant. In addition, an intermediary (such as Menzies Securities) may wish to reduce costs by reducing the number of MINI warrants bought or sold;
(e)after intraday hedges were liquidated and a profit or loss calculated, Mr Anderson or Mr McLean would be required to buy and sell a MINI warrant against the intermediary. They would exercise two trades, one in which they purchased the MINI’s from the market participant and another in which they sold the MINI to the market participant. Those trades would occur at prices and volumes reflecting the resulting profit or loss incurred in the hedge transactions. This had the effect of the MINI warrant trades reflecting the profit or loss associated with the hedge transaction which had been liquidated;
(f)Mr Anderson or Mr McLean were responsible for making the market for MINI warrants and Mr Chighine, who was responsible for overseeing the management of the warrants desk at Credit Suisse, regarded this as ordinary and normal derivative trading; and
(g)Credit Suisse, on enquiry by ASIC, confirmed that its warrant trading activity reflected Australian market practice enabling intermediaries an opportunity to trade on an intraday basis thereby reducing trading costs. Credit Suisse indicated that the practice of accommodating intraday trading activities for intermediaries was an evolving business practice.
In his affidavit sworn on 24 August 2016 Mr Menzies said that Mr Anderson explained to him how the trading in the Credit Suisse MINI warrants worked and how particular trades were placed and executed. Mr Menzies said he trusted Mr Anderson and Mr McLean to carry out warrant trading in an appropriate manner. He was informed by Mr Anderson that Credit Suisse’s practice of warrant trading included the practice of netting out MINI orders and his understanding was that this was a common market practice. He did not believe that the form which the trading took place resulted in him engaging in artificial trading.
Mr Menzies also said in his affidavit that his current lawyers had been engaged to seek independent market expert opinion about MINI warrant trading.
According to Mr S Rosewarne of counsel, who appeared on behalf of ASIC, the manual trading procedure adopted by Credit Suisse Investment Services (Australia) Limited (CSISAL) was as follows:
(a)a counterparty would contact Mr Anderson or Mr McLean by telephone to discuss trade and, assuming the warrants desk was willing to trade with the counterparty, it would take an order;
(b)the order represented an understanding between CSISAL and the counterparty that they were interested in buying or selling a MINI warrant after the price had been determined based on hedging trades that would be executed in the underlying instrument (the SPI index or a particular share);
(c)Mr Anderson or Mr McLean would execute the hedging trades in the underlying instruments and, when it was in place, determine the price for the relevant MINI warrant;
(d)on completion of the hedging trade, Mr Anderson or Mr McLean would place a buy or sell order in the market for the relevant quantity and price of MINI warrants and the counterparty would enter an opposing order so that a trade could occur;
(e)Mr Anderson or Mr McLean did not necessarily expect the counterparty to buy or sell a MINI warrant each and every time a hedging trade was discussed and executed. The warrants desk could instead agree to execute a number of hedging transactions as instructed by the counterparty over the course of the day and then calculate the net/aggregate position in order to determine the volume and price of a corresponding MINI warrant; and
(f)the MINI warrant trade was typically in respect of the same underlying instrument which comprised the hedging trades.
However, the procedure described by CSISAL differed from the conduct of Mr Menzies when he took part in trades in MINI warrants. ASIC claimed those trades involved pre-arranged, back-to-back buy and sell trades in MINIs conducted on the ASX in order to transfer a net/aggregated profit (or loss), in circumstances where that profit (or loss) arose from prior trading in underlying assets not directly referable to the MINI that was traded.
ASIC claimed that none of the transactions the subject of its investigation involved the forces of genuine supply and demand.
In addition, ASIC claimed that Menzies Securities had not complied with Reg 7.8.19 of the Corporations Regulations 2001 (the Corporations Regulations) in that it had failed to keep records of the instructions received from its clients in respect of the impugned MINI warrant transactions. Although ASIC had initially raised the claimed failure of Menzies Securities to comply with s. 1041B(1)(a) of the Corporations Act, in light of its findings concerning s. 1041A, that claim was not pursued.
THE TRIBUNAL’S POWER TO GRANT A STAY
Section 41 (2) of the Administrative Appeals Tribunal Act 1975 (the AAT Act) provides:
the Tribunal may, on request being made by a party to a proceeding before the Tribunal (in this section referred to as the relevant proceeding), if the Tribunal is of the opinion that it is desirable to do so after taking into account the interests of any persons who may be affected by the review, make such order or orders staying or otherwise affecting the operation or implementation of the decision to which the relevant proceeding relates or part of that decision as the Tribunal considers appropriate for the purpose of securing the effectiveness of the hearing and determination of the application for review.
In determining whether it is desirable to grant a stay, there are a number of matters which I must consider. In a similar matter, where the applicant was banned for a period of 18 months from managing a corporation (Re Anthony Scott and Australian Securities and Investments Commission [2009] AATA 798), Downes J set out the following relevant considerations:
1. The prospects of success.
2. The consequences for the applicant of the refusal of the stay.
3. The public interest.
4. The consequences for the respondent in carrying out its functions depending upon whether a stay is granted or not.
5. Whether the application for review would be rendered nugatory if a stay were not granted.
6. Other matters that are relevant, amongst which I would include the length of the time that the ban has already been in place and the gap between today and the hearing of the application.
In my opinion, determining the prospects of success is an important element when considering whether a stay should be granted. If there are no prospects of success or very limited prospects of success, it would be rare where it would be appropriate to grant a stay. That would simply result in a waste of time and money for all concerned.
I am also aware that prospects of success in a case such as this, where the applicant has been banned for a period of four years from providing financial services, does not necessarily mean 100% success. Conscious of the fact that Downes J in Scott did not consider the prospect of reduction of the prohibition period from 18 months to 4 months as sufficient to justify the grant of a stay, it seems to me that in this case, because the length of stay is more significant, were I to consider that Mr Menzies had reasonable prospects of a significant reduction in the length of the prohibition period, I would consider that should be regarded favourably. Furthermore, unlike the matter in Scott, where the substantive hearing was about 1½ months away, the substantive hearing in this matter is unlikely to be able to be put on for hearing before about March 2017. I should also take that into consideration.
I am of course conscious of the fact that I am not required to conduct a preliminary hearing and to undertake full consideration of the merits of Mr Menzies’ application. As was submitted by Mr Rubenstein, I must consider whether there are facts and circumstances which, if established at the substantive hearing, would provide a basis for success on the substantive application, or whether there are points of law raised which if sustained would lead to that conclusion.
The High Court of Australia dealt with the construction of s. 1041A of the Corporations Act in Director of Public Prosecutions (Cth) v JM (2013) 298 ALR 615. The Court said, at [71]:
The forces of “genuine supply and demand” are those forces which are created in the market by buyers whose purpose is to acquire at the lowest available price and sellers whose purpose is to sell at the highest realisable price. The references in s. 1041A to a transaction which has, or is likely to have, the effect of creating an “artificial price”, or maintaining the price at a level which is “artificial”, should be construed as including a transaction where the on-market buyer or seller of listed shares undertook it for the sole or predominant purpose of setting or maintaining the price at a particular level.…
The Court continued, at [72]:
The price that results from a transaction in which one party has the sole or dominant purpose of setting or maintaining the price at a particular level is not a price which reflects the forces of genuine supply and demand in an open, informed and efficient market. It is, within the meaning of s. 1041A, an “artificial price”. The offer to supply or acquire of the kind described is made at a price which is determined by the offeror’s purpose of setting or maintaining the price. It is not determined by the offeror’s purpose, if buying, to minimise, or, if selling, to maximise, the price paid, and it is not determined by the competition between other buyers whose purpose is to minimise the price and other sellers whose purpose is to maximise the price.…
The Court also stated that for the purposes of s. 1041A, it is not necessary to demonstrate that the impugned transactions did create or maintain an artificial price.
Mr Menzies denied that his trading in MINI warrants as described above resulted from his intention to create an artificial price for those warrants. He contended that the price and volume of the MINI warrants were established by Credit Suisse as the market maker. His sole or dominant purpose was to affect the sale and purchase of the MINI warrants to reflect the net exposure incurred by Credit Suisse as a result of the underlying hedging transactions. Mr Menzies claimed that the sole purpose of those impugned transactions was to account for the profit or loss associated with the hedging transactions undertaken by Credit Suisse. This, according to Mr Menzies, was consistent with the then Australian market practice referred to in the Project Hudson Interim Report, a report prepared by Credit Suisse.
According to Mr Menzies, the trading in question was undertaken not to set and maintain the prices of the MINI warrants nor was it intended to create an appearance of active trading in MINI warrants on the market. It does not fit the usual scenarios to which section 1041A is applied.
Mr Rubenstein referred to the reasons of ASIC’s delegate at paragraph 55.3 where she said:
As noted above, a key aspect of ASIC’s concerns about the Transactions is that the MINI series chosen in each of the Transactions and the price at which the warrants were traded did not correspond to or reflect the underlying assets that were traded. Mr Menzies’ submission that the hedges in the underlying assets were conducted in accordance with genuine market forces of supply and demand does not address this concern.
Mr Rubenstein submitted that the delegate did not address why the form of trading described cast doubts on Mr Menzies’ stated purpose for the transactions. He said:
The MINI Warrant trades in question were transacted because they were identified by Credit Suisse to be appropriate to satisfy its net exposure arising from the underlying hedging transactions. It was not a relevant consideration for Mr Menzies that a correlation was necessary between the MINI Warrants that were traded and the underlying XJO Futures. His purpose was to enter into a MINI Warrant trade that satisfied any obligation (loss) or provided the benefit (profit) arising from the hedge.
Mr Rubenstein said Mr Menzies intended to engage an independent expert to provide an opinion as to whether or not the price at which the MINI warrants traded could be regarded as artificial in circumstances where the trading was reflective of the overall hedging transactions conducted by the intraday trading.
Mr Rubenstein submitted that Mr Menzies’ position was supported by what Credit Suisse said in its Project Hudson Interim Report which was made on 11 September 2013. The Project Hudson report states, at [42]:
The business rationale for this trading activity reflects (1) Australian market practice; (2) providing intermediaries the ability to trade on an intra-day basis that will allow the intermediary to reduce the trading costs and improve Credit Suisse’s market share. This report did not identify any activity that would suggest that the individuals involved were operating on any other basis.
In response, Mr Rosewarne submitted that in assessing Mr Menzies’ prospects of success, the contents of the recorded telephone conversations between him and the Credit Suisse warrant desk staff are crucial. He submitted that those conversations, which corresponded with the subsequent trading, demonstrated that the applicant actively engaged with Credit Suisse staff to trade MINIs for the purpose of transferring agreed amounts arising from trading in underlying assets; and the terms on which the MINIs were traded were at prices designed to achieve that purpose.
Mr Rosewarne was also critical of the evidence filed by Mr Menzies in support of his stay application. He submitted it was insufficient for the tribunal to reach a conclusion that the stay was warranted.
Although I am concerned that Mr Menzies has not put on evidence of an independent expert for the purposes of this stay application, it is my opinion that Mr Menzies has some prospects of success. That is because there is evidence from Credit Suisse that the trading activity in which Mr Menzies was involved regarding the MINI warrants was Australian market practice. Credit Suisse acknowledged that the individuals involved all had trader mandates authorising them to execute a number of products for hedging purposes and that the activities which they investigated were broadly in line with that mandate. However they accepted that as the business practice evolved to accommodate intraday trading activities for certain intermediaries, the link between the warrant trade and the hedge transaction were not adequately recorded. Credit Suisse then decided to discontinue that booking practice.
The Hudson report also recorded that the transactions which were investigated were all linked to customer instructions. Credit Suisse stated it was aware that other warrant issuers and brokers appeared to be settling trades in a manner which may be consistent with the practices of Mr Anderson and Mr McLean. Although the evidence thus far discloses that as a result of the impugned transactions, the price of the MINI warrants may not have reflected the forces of genuine supply and demand for those warrants, it is not entirely clear that the transactions were undertaken for the sole or dominant purpose of setting or maintaining the price at a particular level. In my opinion, this will only be determined after hearing all available evidence regarding those transactions.
A refusal to grant a stay in this case will clearly have serious adverse consequences on Mr Menzies. In his affidavit sworn on 24 August 2016 lodged with the Tribunal in support of this stay application Mr Menzies said that since ASIC made its banning order, Menzies Securities was unable to provide financial services and general advice to its clients. Mr Menzies testified that a number of his clients had open positions and were therefore forced to engage another broker or adviser while this application was determined. He also testified that his clients continued to have confidence in him and Mr Menzies attached to his affidavit statements of 12 of his 21 clients. In supporting Mr Menzies, those clients indicated they were aware of ASIC’s banning order.
Mr Menzies testified that if his clients were required to use other brokers and advisers for any length of time, he risked losing their business permanently. Given that it is unlikely the Tribunal can provide a substantive hearing in this matter before February or March next year, I accept that this is a serious problem for Mr Menzies.
Mr Menzies also said in his affidavit that he was suffering significant emotional and financial hardship. He said he had incurred significant legal fees and other costs as a result of ASIC’s decision. Mr Menzies testified he did not have any other professional skill set than in financial services. There being no evidence to the contrary, I accept Mr Menzies’ submissions regarding the consequences for him should stay be refused.
ASIC placed significant weight in opposing Mr Menzies’ stay application on its function to protect the public and to give effect to the laws of the Commonwealth. In fact Mr Rosewarne submitted that the purpose of the power given to ASIC to make a banning order is so that it may protect the public, deter the offending conduct and maintain investor and consumer confidence in the financial markets.
While I do not for one moment intend to understate the importance of ASIC’s role in respect of the provision of financial services and in particular ensuring the integrity of the equities market, the impugned trading conducted by Mr Menzies with those on the trading desk at Credit Suisse was unusual to say the least. There was no evidence that any member of the public was adversely affected by that trading. Furthermore, Mr Menzies agreed that if a stay were granted, he would not engage in trading warrants of any kind prior to a final determination of this matter. He also agreed not to solicit any new clients and to provide services only to the existing clients of Menzies Securities.
Although Mr Rosewarne also pointed to the fact that one of the concerns raised by ASIC was Mr Menzies’ failure to comply with Reg 7.8.19 of the Corporations Regulations which deals with record-keeping obligations, as best I can determine from the materials before me, this only related to the trading in MINI warrants. There was no evidence of any failure to keep records of other transactions. Also, as I have mentioned above, 12 of Menzies Securities’ 21 clients have no difficulty with Mr Menzies continuing to act on their behalf even though they are aware of the banning order. Therefore, were the stay granted, there is no basis for concluding that the public at large will be at risk particularly if Mr Menzies provides the services in respect only of existing clients. In its statement of facts, findings and reasons for making the banning order, ASIC accepted that the impugned transactions took place in the context of practices established by Credit Suisse staff. Since then, Credit Suisse has withdrawn from this market. Accordingly, I find that there would be little, if any, detriment to public confidence in the equities market if a stay were granted.
While the issue of deterrence also arose in the course of the stay hearing, it seems to me that until a final determination has been made in respect of the impugned trading by Menzies Securities, it is premature to further consider this issue to any extent.
Mr Rubenstein also referred to the fact that the Hudson report prepared by Credit Suisse was dated 11 September 2013. It is now some three years after that report, which in fact identified the problems associated with the methods adopted by Credit Suisse in trading MINI warrants, and some 18 months since ASIC conducted its s. 19 examination. Mr Rubenstein submitted that ASIC’s delay in issuing a banning order is indicative of the fact that it did not consider there was imminent risk to the public or an enforcement priority. With respect, there is some force to that submission.
The final relevant matter which I believe I need consider is whether Mr Menzies’ application for review would be rendered nugatory if the stay were not granted. In his affidavit, Mr Menzies said his professional skills were limited to the provision of financial services and that he had already suffered significant financial detriment up until the banning order was made. He also testified that he had creditors to pay in relation to his business practice conducted from an office in Richmond. Although I had no independent evidence of the state of Mr Menzies’ financial status, logically, if unable to continue to provide financial services to existing clients in the very near future, I accept it is likely that he will lose his business. Whether it can be resurrected in 6 to 12 months’ time, assuming he is able to succeed on the substantive matter, must be doubtful.
CONCLUSION
In my opinion, the appropriate course to take on this application is to stay the operation and implementation of the banning order made on 13 July 2016 until final determination on the conditions that Mr Menzies:
(a)not engage in trading warrants of any kind;
(b)only engage in trading equities, equity options (listed and unlisted company issued options) and debt instruments; and
(c)only provides financial services to the existing clients of Menzies Securities as listed in exhibit MM-3 to his affidavit sworn on 24 August 2016.
I certify that the preceding 51 (fifty-one) paragraphs are a true copy of the reasons for the decision herein of Egon Fice, Senior Member
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Associate
Dated 9 September 2016
Date of hearing
31 August 2016
Counsel for the Applicant
Mr S Rubenstein
Solicitors for the Applicant
Minter Ellison
Counsel for the Respondent
Mr S Rosewarne
Solicitors for the Respondent Australian Securities and Investments Commission
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