Poidevin and Australian Securities and Investments Commission

[2019] AATA 6806

Poidevin and Australian Securities and Investments Commission [2019] AATA 6806 (20 December 2019)

Division:TAXATION & COMMERCIAL DIVISION

File Number:2017/7111          

Re:Simon Poidevin  

APPLICANT

AndAustralian Securities and Investments Commission

RESPONDENT

File Number:2017/7531          

Re:Damien Rodr

APPLICANT

AndAustralian Securities and Investments Commission

RESPONDENT

DECISION

Tribunal:                The Hon. Justice D G Thomas, President &

Deputy President J Redfern

Date:20 December 2019

Place:Sydney

(1)Publication to the parties of certain findings in case no. 2017/7111 and 2017/7531 but otherwise these findings and reasons are to be confidential until further order;

(2)The Tribunal directs that the applications in case no. 2017/7111 and 2017/7531 be adjourned to a date to be fixed to allow the parties to consider these reasons and the appropriate directions for the further conduct of the applications.

.................................[SGD].......................................

The Hon. Justice D G Thomas, President

CATCHWORDS

CORPORATIONS LAW – banning order – applicants prohibited from providing any financial services for a certain period – alleged market manipulation over a period of nine days – whether transaction likely to have had the effect of creating an artificial price for trading in a financial product on a financial market – meaning of ‘transaction’ in s 1041A of the Corporations Act 2001 (Cth) –– whether the applicants had the sole or dominant purpose of setting or maintaining the price for shares – meaning of ‘take part in or carry out’ – whether there is reason to believe that the second named applicant is likely to contravene a financial services law pursuant to s 920A(1)(f) of the Corporations Act 2001 (Cth) – findings of contravention made

PRACTICE AND PROCEDURE – threshold issue – findings of contravention – whether banning to make banning orders enlivened

PRACTICE AND PROCEDURE – evidentiary standard to be applied in respect of finding(s) of serious contravention of the law, including market misconduct provisions of the Corporations Act 2001 (Cth) – finding(s) of contravention to be based on cogent, reliable evidence

PRACTICE AND PROCEDURE – consideration of the application of the rule in Jones v Dunkel to assist in the fact finding process – no inference drawn against the applicants in relation to their failure to call certain witnesses in support of their respective applications

PRACTICE AND PROCEDURE – purported failure to deny or explain prior inconsistent statements and other evidentiary discrepancies – consideration of the circumstances in which an adverse inference can be drawn – case by case assessment by reference to particular evidence and submissions made is required

LEGISLATION

Administrative Appeals Tribunal Act 1975 (Cth), ss 2A, 33, 37, 39(1)

Australian Securities and Investments Commission Act 2001 (Cth), ss 1(2), 4(1)(a), 19
Corporations Act 2001 (Cth), ss 9, 64, 79, 798H(1) 760A, 761A, 766A(1)(a), 910A, 911A(1), 911A(2)(a), 913B, 914A, 915A, 915B, 915C, 915D, 915E, 915F, 915G, 915H, 915I, 915J, 916A, 920A, 920A(1)(da), 1041A, 1041B

Corporations Regulations 2001 (Cth), reg 7.2A.10

CASES

Australian Securities and Investment Commission v Soust (2010) 183 FCR 21

Australian Securities and Investment Commissionv Westpac Banking Corporation (No 2) [2018] FCA 751
Bond v Australian Securities and Investments Commission [2009] AATA 50
Briginshaw v Briginshaw (1938) 60 CLR 336
Browne v Dunn (1894) 6 R 67
CWR v Minister for Immigration and Border Protection [2018] FCA 859
Director of Public Prosecutions (Cth) v JM (2013) 250 CLR 135
Drake v Minister for Immigration and Ethnic Affairs (1979) 24 ALR 577
Fame Decorator Agencies Pty Ltd v Jeffries Industries Ltd [1998] NSWSC 157
Gore v Australian Securities and Investment Commission (2017) 341 ALR 189
Jones v Dunkel (1959) 101 CLR 298
LifeplanAustralia Friendly Society Ltd v Ancient Order of Foresters in Victoria Friendly Society Ltd [2017] FCAFC 74
McLean v Australian Securities and Investment Commission [2017] AATA 2566
Poidevin and ASIC [2018] AATA 124
R v Manasseh and Austin [2002] NSWCCA 27
Shi and Migration Agents Registration Authority [2008] HCA 31

Sullivan v Civil Aviation Safety Authority [2014] FCAFC 93

SECONDARY MATERIALS

ASIC Market Integrity Rules (ASX Market) 2010 (Cth), rr. 5.7.1, 5.11.1

TABLE OF CONTENTS

REASONS FOR DECISION

1.        Introduction

2.        Outline of the Tribunal’s findings

3.        Background facts

4.        Decisions under review

Findings about Mr Rodr

Findings about Mr Poidevin

5.        Relevant law

6.        Contentions of the parties

ASIC’s contentions

Contentions of Mr Poidevin

Contentions of Mr Rodr

7.        Issues for consideration and structure of this decision

8.        Evidentiary issues

Standard of proof

Jones v Dunkel inferences

The rule in Browne v Dunn

9.        Market trading terminology

10.      Expert evidence

ASIC’s experts

Mr Poidevin’s experts

Mr Rodr’s expert

Expert evidence in response

Evidence at the hearing and observations on the expert evidence

Conclusions

11.      Sole or dominant purpose

Introduction

ASIC’s case theory

The evidence – an overview

The ‘motivation’ – the DirectMoney fundraising and backdoor listing

The Bell Potter house order

12.      Admissions made by Mr Rodr

The telephone conversation on 14 July 2015

Did Mr Rodr lie to Mr Kirton on 14 July 2015?

Is Mr Rodr’s evidence in the proceedings a recent invention?

Objective facts – trading and telephone calls on 14 July 2015

Findings on the evidence about the conversation of 14 July 2015

13.      Did Mr Poidevin give instructions to Mr Rodr?

Analysis of the evidence and contentions

Findings on Mr Poidevin’s evidence about the conversations on 14 July

14.      Evidence and analysis of trading on 14 July 2015

15.      Conclusions about trading on 14 July 2015

16.      Other trading in the Relevant Period: the Tribunal’s approach

Evidence about Mr Rodr’s strategy in executing the Bell Potter house order

Telephone communications between the applicants

Trading on 15 July 2015

Trading on 16 July 2015

Trading on 17 July 2015

Trading on 22 July 2015

Trading on 23 July 2015

17.      Conclusions − sole or dominant purpose

18.      Meaning of ‘transaction’

19.      Trading in the Relevant Period – effect or likely effect?

20.      Did the applicants take part in or carry out the impugned transactions

21.      Accessorial liability

22.      Is Mr Rodr likely to contravene a financial services law?

23.      Conclusions

REASONS FOR DECISION

The Hon. Justice D G Thomas, President &
Deputy President J Redfern

20 December 2019

1.     INTRODUCTION

1. The respondent, the Australian Securities and Investment Commission (‘ASIC’), regulates among other things financial services and the financial markets.

2. In early 2016, ASIC commenced investigations into market conduct in respect of trading in DirectMoney Limited (‘DirectMoney’) shares in the period 14 to 23 July 2015 (the ‘Relevant Period’). DirectMoney is a company involved in “peer to peer lending”.[1] It commenced trading on the Australian Securities Exchange (‘ASX’) on 13 July 2015 through a reverse takeover of a listed company, otherwise known as a “backdoor listing”. Bell Potter Securities Pty Ltd (‘Bell Potter’) was engaged as the lead manager for the initial public offering (‘IPO’) and was the underwriter for the fundraising.[2] Bell Potter is a brokerage and financial advisory firm and holds an Australian Financial Services Licence (‘AFSL’).[3]

   [1] Exhibit 11 - Statement of Stephen Porges dated 6 June 2018 at [37](b).

   [2] Exhibit 18 - Poidevin T-documents, T5.14 and T5.45 - 502, lines 3 - 10.

   [3] Ibid T5.2.

3. The applicant in matter no. 2017/7111, Mr Simon Poidevin, has worked in financial markets for approximately 35 years. He joined Bell Potter in March 2013 as the Managing Director of Corporate Broking in the Equity Capital Markets (‘ECM’) division of Bell Potter (now renamed ‘Corporate Finance’).[4] He was responsible for supervising and directing the work undertaken as part of the engagement. The applicant in matter no. 2017/7531, Mr Damien Rodr, was during the Relevant Period, a participant in the financial markets. He was employed by Bell Potter in 2011 as a booking manager, which included acting as a Designated Trading Representative (‘DTR’) for the company.[5]

   [4] Ibid T5.85.

   [5] Ibid T5.2.

4. At the end of the first day of trading, the price of DirectMoney shares had fallen by 20 cents. Bell Potter management decided to invest in DirectMoney by acquiring a volume of shares valued at $200,000 through the house trading account (the ‘house account’). Mr Rodr was the Bell Potter trader instructed to execute the house order to acquire the DirectMoney shares. The house account trading during the Relevant Period was the subject of ASIC investigations.

5. Following these investigations, ASIC referred the conduct of Bell Potter to the Markets Disciplinary Panel (an independent peer review body established by ASIC) and referred the conduct of the applicants to a delegate for consideration of administrative action. Hearings were conducted and all administrative proceedings were finalised in November 2017.

6. The Markets Disciplinary Panel issued an infringement notice against Bell Potter for breach of the ASIC Market Integrity Rules (ASIC Market) 2010 (Cth) for false or misleading trading, which Bell Potter paid without admission of liability or guilt, discharging it from liability or actions under the CorporationsAct2001 (Cth) (‘Corporations Act’).[6] The delegate banned Mr Poidevin and Mr Rodr from providing financial services on the grounds that they had contravened a financial services law by engaging in market manipulation of DirectMoney shares during the Relevant Period. Mr Rodr, who conducted the trades on behalf of Bell Potter, was banned for four years. Mr Poidevin, who it was alleged instructed or encouraged Mr Rodr to undertake the transactions, was banned for five years. The banning orders were made on 29 November 2017.[7] Both Mr Rodr and Mr Poidevin deny the allegations of market manipulation and applied for review of these decisions to this Tribunal.[8]

   [6] Subsection 798H(1) of the Corporations Act 2001 and reg 7.2A.10 of the Corporations Regulations 2001; see also ASIC Market Integrity Rules (ASIC Market) 2010 (Cth), rr 5.7.1 and 5.11.1.

   [7] Exhibit 18 - Poidevin T-documents, T2.

   [8] Ibid T1.

7. Mr Poidevin sought an interim stay pending the outcome of the substantive review application and confidentiality orders. The Tribunal declined to make the confidentiality orders but granted a stay of the banning order subject to conditions.[9] Mr Rodr did not seek a stay or confidentiality orders.

   [9] Poidevin and ASIC [2018] AATA 124 at [74] and [85].

8. The questions for determination in both proceedings are whether the applicants contravened a financial services law or whether, in the alternative, the applicants were involved in the contravention of a financial services law. The financial services law alleged to have been contravened is the unlawful market manipulation of financial products under s 1041A of the Corporations Act. There is a further question raised about whether there is reason to believe Mr Rodr will contravene a financial services law in the future. This was not alleged in respect of Mr Poidevin.

9. There is no dispute that these questions, which we will refer to as the ‘threshold issues’, will determine whether the ground on which the banning orders were based is established. If the Tribunal is satisfied about these matters in respect of each applicant, it will then fall to the Tribunal to decide whether banning orders should be made and, if so, the length of the order. If the Tribunal is not satisfied there was a contravention; any discretion to make a banning order does not arise.

10. Given the common factual and legal issues that require determination in both proceedings, the reviews have been case managed together. The Tribunal directed, and the parties agreed, that the hearings on the question of whether the power to ban was enlivened should be conducted concurrently, with evidence in one review being evidence in the other.[10]

    [10] The respondent provided documents pursuant to s 37 of the Administrative Appeals Tribunal Act 1975 (Cth) in both proceedings which contained a significant number of duplications. During the hearing the parties generally referred to the s 37 documents provided in relation to matter no. 2017/7111. The references in the footnotes to these reasons also adopt this approach.

11. If the Tribunal finds the discretion to make a banning order is enlivened, there will be different considerations in relation to each applicant as to how the discretion should be exercised. It was therefore directed by the Tribunal, and again agreed by the parties, that this question should be deferred until after the determination of the threshold issues.

12. While the decisions of the delegate in respect of Mr Rodr and Mr Poidevin are separate and each decision gives rise to independent rights of review, there is a common factual matrix between the two cases. We have therefore set out our reasons in a single written statement but have made factual findings in respect of each applicant on the threshold issues.

    2.       OUTLINE OF THE TRIBUNAL’S FINDINGS

13. In essence, we accept some contentions made by ASIC but reject the key allegation that all of the alleged impugned trades made by Mr Rodr in the Relevant Period were improper.

14. ASIC contends the applicants contravened s 1041A of the Corporations Act by unlawfully manipulating the share price of DirectMoney shares in the Relevant Period.

15. Market manipulation involves the creation or maintenance of an “artificial price” for trading in the market. The question of how to assess whether an artificial price has been created or maintained is difficult to answer given the complexities of trading in financial markets and notions of market theory such as supply and demand. This was recognised by the High Court in Director of Public Prosecutions (Cth) v JM (2013) 250 CLR 135 (‘DPP v JM’), which is authority for the proposition that trading which has the sole or dominant purpose of creating or maintaining a particular price for a listed share is an important evidentiary basis to prove market manipulation. This is accepted by the parties.

16. ASIC submits that the applicants had the sole or dominant purpose to set or maintain the price for DirectMoney shares during the whole of the Relevant Period and that Mr Rodr traded on Mr Poidevin’s instructions.

17. It is acknowledged by ASIC that its case is circumstantial because there is no direct evidence of the applicants colluding to manipulate the price of DirectMoney shares. The nature and extent of the alleged impugned trading during the Relevant Period is described in expert evidence relied on by ASIC. This evidence identifies suspicious patterns of trading said to be “indicative” of manipulative trading. ASIC relies on the existence of numerous telephone communications between the applicants during the course of certain trading days in the Relevant Period which it says were often followed or preceded by suspicious trading. On some occasions, there was trading during these conversations. ASIC also relies on inferences it contends should be drawn from contemporaneous records, such as statements made in recorded telephone conversations and written communications, and inconsistencies between the evidence of the applicants at the time of ASIC’s investigations and these proceedings.

18. A central premise of ASIC’s case theory is that all of the impugned trades identified in the Relevant Period are unlawful. It is asserted that the applicants’ conduct during this period is tainted by Mr Poidevin’s strong desire to restore his reputation following what ASIC describes as a capital raising and relisting for DirectMoney that was managed by Mr Poidevin and was a “disaster”. It is alleged that Mr Poidevin was driven by this and Mr Rodr was a ‘weak willed’ facilitator. It is contended that an apparent admission of manipulative trading was made by Mr Rodr at the end of his first day of trading, when combined with the pattern of suspicious trading identified by ASIC’s experts and Mr Poidevin’s strong desire, evidences a broader intention to manipulate the price of DirectMoney shares which taints the rest of his trading. According to ASIC, Mr Rodr made 90 trades in the Relevant Period and just under half of those trades are alleged to be impugned by an improper purpose and allegedly had the effect of maintaining, increasing or restoring the price of DirectMoney shares.[11]

    [11] ASIC Statement of Facts Issues and Contentions in both proceedings at [111] to [191] in Poidevin proceedings and [114] to [190] in the Rodr proceedings. This excludes allegations in relation to trades undertaken on 20 July 2015, which ASIC conceded were not undertaken by Mr Rodr.

19. We are not satisfied these contentions have not been established. We do not accept that the DirectMoney capital raising and relisting was the “disaster” portrayed by ASIC or that Mr Poidevin had a strong desire to protect his reputation. Nor do we accept that an admission made by Mr Rodr about manipulative trading on 14 July 2015, of itself, leads to an inference of improper purpose in respect of every subsequent impugned trade.

20. Market offences attract criminal and civil penalties and enliven ASIC’s discretion to impose significant regulatory sanctions. Findings of contravention of market offences cannot be made lightly and we must be comfortably satisfied on the material available that there have been contraventions of the Corporations Act by the applicants.

21. The applicants deny the allegations of market manipulation and say that ASIC’s contentions are overstated and unsupported by the evidence. They have provided expert evidence challenging the conclusions of ASIC’s experts. The applicants say that market manipulation cannot be established by identifying trading as “indicative” of market manipulation and concluding it was so simply because some of the trading also coincided with telephone conversations between the applicants. It is submitted that this is highly speculative and should be rejected by the Tribunal given the seriousness of the allegations made.

22. It is further submitted by the applicants that Mr Rodr executed the Bell Potter house order in accordance with the order, which was to acquire $200,000 worth of DirectMoney shares at “no more than 20% of the volume on any day”. He had a broad discretion as to how to execute the order. According to Mr Rodr, he made 86 bids in respect of DirectMoney shares during the Relevant Period. He traded every day, with the exception of 20 July 2015 when he was away from work due to illness, and acquired approximately 20% of the volume of DirectMoney shares most days. This was the percentage nominated by Bell Potter executives as trading that would not disrupt the market. It is submitted that Mr Rodr traded in line with, or close to, the market Volume Weighted Average Price (‘VWAP’) for DirectMoney shares and when his overall trading in the Relevant Period is analysed it is apparent that only 24% of his trades were followed by a price increase, 16% resulted in a price decrease and 60% were price neutral.[12]

    [12] Applicant’s closing submissions – Mr Rodr dated 16 July 2018 at [49].

23. ASIC’s experts point to trading said to be indicative of manipulation. The applicants submit that this is not enough and taking a “broad-brush approach” to Mr Rodr’s trading is flawed. They contend that there is no direct or compelling evidence of market manipulation. The applicants say they have explained the circumstances leading to the impugned trading during the Relevant Period and their evidence is credible and should be accepted. The applicants submit that evidence of telephone communications between the applicants and with third parties needs to be understood in context − they can be explained.

1. The expert evidence provided by the parties was extensive and highly contested. While one of Mr Poidevin’s experts, Professor Michael Aitken, gave evidence that there were five transactions that required explanation, there is otherwise little common ground. ASIC’s experts criticised Mr Rodr for failing to acquire DirectMoney shares at the “best price” during the whole of the Relevant Period. This is what a patient buyer who is not time constrained would do. However, the applicants say this fails to recognise the terms of the order and Mr Rodr’s evidence about his approach to executing the order. It is not in dispute that the initial order was to purchase $200,000 worth of DirectMoney shares at no more than 20% of the volume on any day over a period of one week. DirectMoney was a thinly traded stock and this order would have been impossible to execute in a week without disrupting the market. There is no allegation that this was the purpose of the Bell Potter order and it is accepted that the decision by Bell Potter to purchase DirectMoney shares was a commercial investment and was not itself improper. It is also accepted that the order was amended to extend the period over which this volume of shares could be purchased.

2. Mr Rodr submitted that even though the period of the order had been extended he believed he should execute the order as quickly as possible and used the 20% volume cap as a guide for his daily trading. He says that this was not always easy as he needed to monitor the market during the course of the day and trade when the rest of the market traded. We have accepted this evidence which is generally consistent with the trading undertaken by him during the Relevant Period, with the notable exception of his trading on the last day. He traded around 20% of the market volume on 14 and 15 July; just under at 17% on 17 July and over at 26 and 27% on 16 and 22 July, although arguably this was not a significant divergence. On 23 July 2015, he traded 36% of market volume for DirectMoney shares and most of this was traded at the end of the day’s trading in the Closing Single Price Auction (‘CSPA’). 

3. This is not a case where there is expert evidence of trades which were obviously manipulative. At best, ASIC’s experts identify particular trades and trading patterns which are said to be indicative of market manipulation. When the circumstances surrounding the trading are examined, it may be possible to draw negative inferences about this but the expert evidence is just one of the evidentiary matters that the Tribunal must take into account when weighing all of the evidence. When many of the impugned trades are analysed on a trade by trade basis, it is apparent that Mr Rodr was able to give a plausible and rational explanation for those trades that were considered by ASIC’s experts to be indicative of market manipulation. As such, the question of whether there had been contraventions of the market manipulation provisions of the Corporations Act cannot be answered by expert evidence alone.

4. ASIC alleges that even if either of the applicants did not themselves have a sole or dominant purpose to set or maintain the price of DirectMoney shares; they were the “central participants in an overall scheme of buying DirectMoney shares on the Bell Potter house account coupled with knowledge that bids and purchases were being made by Mr Rodr without the purpose of acquiring the shares at the lowest available price”. This submission was unclear and during the course of the hearing and in closing ASIC was questioned about what was meant by an “overall scheme” and, in particular, whether Bell Potter’s role as a purchaser of DirectMoney shares was alleged to have been improper. ASIC confirmed this was not alleged. ASIC accepts that Bell Potter was the purchaser of DirectMoney shares in the Relevant Period as a commercial investment; it accepts that the terms of the Bell Potter order were changed to allow Mr Rodr to execute the order over a longer period and it does not challenge the evidence that the instruction about the 20% cap was to ensure the market was not disrupted. ASIC describes the Bell Potter house order as “dangerous, not illegal”.  

5. ASIC does not point to any direct evidence of collusion by the applicants to manipulate DirectMoney shares over the Relevant Period nor did any such evidence emerge during the hearing.

6. Instead, ASIC drew attention to the number of telephone communications that took place during the Relevant Period, particularly those between Mr Poidevin and Mr Rodr. Telephone conversations between the Sydney and the Hong Kong office of Bell Potter were recorded but telephone conversations between Mr Poidevin and Mr Rodr were not. This means that the only evidence of what was said during these discussions is the evidence of Mr Poidevin and Mr Rodr. Both say they do not have specific recollections of these discussions and acknowledge their evidence is based on reconstruction.

7. Evidence that there were telephone communications between Mr Rodr and Mr Poidevin during the trading day, together with trading identified by ASIC’s experts as suspicious does not, of itself, establish market manipulation. We accept there may have been legitimate reasons for a number of those discussions.

8. For instance, Mr Poidevin said he wanted to be informed about the progress of trading after the relisting and wanted to report to management of DirectMoney. This explanation was not seriously challenged and is accepted. It is also relevant to note that based on the timing of the telephone calls between Mr Poidevin and Mr Rodr, in a number of cases there is no obvious proximate link between the timing of the telephone call and the trading which was identified as being suspicious.

9. Mr Poidevin also said that there were times when he made telephone calls to Mr Rodr to remind him to buy DirectMoney shares to maintain the 20% volume because he was “monitoring” Mr Rodr’s execution of the Bell Potter order to ensure he acquired sufficient volume each day. His evidence about this was challenged in cross-examination. For the reasons we later outline in more detail, we do not accept this further explanation. The terms of the Bell Potter order did not require Mr Rodr to purchase 20% of the volume each day, there is no evidence that Mr Poidevin was requested to take on the role of supervising this order, in fact there was evidence to the contrary, and there is no dispute that Mr Rodr is an experienced trader. It is difficult to understand why his trading on the house account would need to be monitored.

10. In short, some of the explanations for these communications between the applicants are accepted and some are not. Some of the trades can be explained satisfactorily by Mr Rodr but some cannot. The Bell Potter order was a volume order and, subject to the daily trading constraint, the method of its execution was largely discretionary. As already noted, the expert evidence is not determinative.

11. In the absence of clear and direct evidence of collusion between the applicants or involving Bell Potter in an overall scheme of manipulation, ASIC’s case is based on inferences that it says should be made by the Tribunal. We are not satisfied it can be inferred from the evidence that all of the alleged impugned trading during the Relevant Period was improper. This does not preclude the possibility, which we have ultimately found, of opportunistic manipulation. We accept we cannot adopt a broad brush approach and that we must be comfortably satisfied there was an improper sole or dominant purpose in relation to each contravention alleged.

12. In coming to the view about whether there has been market manipulation, we have examined each of the impugned transactions against the background of the surrounding circumstances to ascertain whether there is cogent reliable evidence of an improper manipulative purpose by the applicants or either of them. In particular, we have considered any contemporaneous records which may shed light on the intention of the applicants at the relevant time.

13. In considering the trading and communications relied on by ASIC, we have found the observations made by Beach J in the recent Federal Court case on market manipulation of ASIC v Westpac Banking Corporation (No 2) [2018] FCA 751 (‘ASIC v Westpac’) to be instructive. While Beach J was considering alleged manipulation in a different financial market and ASIC’s case relied heavily on contemporaneous communications, the following comments are apt:

    But I would note that ASIC’s purpose case does not principally follow the conventional path of demonstrating manipulative purpose from the absence of any rational explanation for the impugned trading. In most cases it has downplayed the objective circumstances of the trading and asked me to principally infer manipulative purpose from the contemporaneous communications. But many of these communications are open to competing interpretations, particularly when understood in context. Now ASIC has sought to construe such communications in ways different from the explanations given by Westpac’s witnesses. But in order for ASIC to discharge its onus, I am required to be comfortably satisfied that its interpretation is what was meant and intended by the parties to the communications. Accordingly, where there has been uncertainty as to what was said or what was meant or conveyed after considering the context and all relevant circumstances, I have resolved that uncertainty in Westpac’s favour.[13]

    [13] ASIC v Westpac at [23]

14. This approach is persuasive and we have taken a similar approach. Where there is uncertainty about what was meant by communications or where the trading made by Mr Rodr has a plausible explanation that is not otherwise challenged by cogent reliable evidence to the contrary, we have resolved the uncertainty in the applicants’ favour. 

15. We have closely examined the circumstances leading to Mr Rodr’s trading, the impugned trading and the relevant communications in the Relevant Period. Trading in DirectMoney shares commenced on Monday, 13 July 2015. The second day of trading was Tuesday, 14 July 2015. Bell Potter traded on its house account from 14 July to October 2015 when the order was finally executed in full. ASIC alleges market manipulation by the applicants of some of the trades that took place in the period 14 to 23 July 2015. Mr Rodr commenced trading on 14 July 2015, he traded the rest of the week and the following week on every day with the exception of 20 July 2015. Following his trading on 23 July 2015, Mr Rodr was given certain instructions by Mr Bell, a Director of Bell Potter, to among other things, refrain from trading at the close of trading. Mr Rodr continued to trade after this period and ASIC makes no allegations in respect of these trades.

16. We have found that the applicants had the sole or dominant purpose to set or maintain the price of DirectMoney shares in relation to some transactions on 14 and 23 July 2015, being the first and last day of trading in the Relevant Period, but not in respect of the other trading days. Based on the significant body of evidence concerning the identified impugned trading on 14 and 23 July 2015, we are comfortably satisfied that certain trades on those days were in fact tainted by an improper purpose. In contrast, having closely examined the evidence concerning other impugned trading, we are not so satisfied. We have given significant weight to the fact that there are audio recordings of what we consider to be admissions made by Mr Rodr about market manipulation in respect of both days. These admissions are broadly consistent with Mr Rodr’s trading and with the timing of telephone communications with Mr Poidevin at or around the impugned trading. However, it is important to note that there are a number of other matters ASIC points to in support of its contentions.

17. We now outline the key reasons why we are comfortably satisfied that ASIC has established its case in respect of certain trades which it alleges are impugned but not others.

18. DirectMoney shares did not perform well on the first day of trading following the relisting of the stock on the ASX. Mr Rodr commenced trading in DirectMoney shares through the Bell Potter house account on 14 July 2015. On the face of it, this was an important trading day for DirectMoney. It was the second day of trading. The issue share price on relisting was 20 cents and the share price had fallen to 17.5 cents by the end of the first day. It opened at 16 cents and there was continued selling during the course of the second day with the share price of Direct Money falling as low as 13.5 cents.

19. We have found that there is cogent and reliable evidence to support a finding that Mr Rodr traded in DirectMoney shares during the afternoon of 14 July 2015 with the sole or dominant purpose to manipulate the price of those shares following instructions from Mr Poidevin. In summary, there are five factors, taken cumulatively, that have led us to this conclusion.

20. First, after the first day of trading, there was pressure on Mr Poidevin from the Hong Kong office of Bell Potter, which had clients who had invested in the capital raising managed by Bell Potter, for Bell Potter to support the share price of DirectMoney. We have found that this pressure may have motivated Mr Poidevin to instruct Mr Rodr to trade to keep the share price of DirectMoney above 14 cents.  

21. Second, there were a number of telephone discussions between Mr Poidevin and Mr Rodr which were during or shortly followed by suspicious trades. The existence and timing of these telephone discussions and the fact of the trades are not in dispute.

22. Third, and perhaps most significant, Mr Rodr made a statement during a recorded telephone conversation with a manager from the Hong Kong office of Bell Potter to the effect that he had purchased shares in DirectMoney on instructions from Mr Poidevin to keep the share price of DirectMoney at a certain level. The statements made were, in effect, an admission by Mr Rodr of market manipulation during the afternoon of 14 July 2015, where Mr Rodr said “Poido kept ringing when they were 13 and a half he wanted me to get them back up to 14”.   

23. Fourth, Mr Rodr’s explanation, that this statement was actually a lie, is not plausible or credible. The terms of the conversation are clear, the information was freely volunteered by Mr Rodr and the statements made apparently admitting to market manipulation were consistent with the objective evidence about what had happened on the day. It is also significant that Mr Rodr did not provide an explanation in these terms when he was first questioned about this by ASIC investigators.

24. Fifth, while the applicants provided evidence in these proceedings denying there was any impropriety in their discussions or in relation to the trading, critical parts of their evidence about these matters is inconsistent with prior evidence they gave during their respective compulsory examinations. These inconsistencies are material and cast considerable doubt about the credibility and reliability of the applicants’ evidence about the trading on 14 July 2015 and their denials of impropriety.

25. Mr Rodr continued to trade over the next three days leading into the weekend, namely on 15, 16 and 17 July 2015. We are not comfortably satisfied that any of the impugned trading in this period was tainted by a sole or dominant improper purpose. ASIC’s experts identify a number of suspicious trades in this period. There were nine telephone calls between Mr Poidevin and Mr Rodr during these three trading days with one call before the opening and one call after the close of trading. Unlike the telephone calls between the applicants on 14 July 2015, there was no trading undertaken by Mr Rodr during or immediately before or after the telephone calls on 15 and 16 July 2015. While there was trading within one minute of a telephone call between the applicants on 17 July, there was otherwise no obvious connection between Mr Rodr’s trading and other telephone communications between him and Mr Poidevin on this day. Other than the trading identified by ASIC’s experts as “indicative” of manipulation, ASIC does not point to objective contemporaneous records to evidence the alleged improper purpose.

26. Mr Rodr was cross-examined extensively about the trading undertaken by him on each of these days. We have concluded that he provided plausible explanations for the impugned trading on each day and that his explanations were broadly consistent with his stated trading strategy and the terms of the Bell Potter order. DirectMoney shares traded between 14 and 16 cents during this period.  The fact that the price of DirectMoney shares closed at a higher price than the opening price on two of those days, namely 15 and 16 July 2015, does not prove that there was market manipulation during the course of the day. The price of shares may increase through trading on the ASX as a result of the usual market forces of demand and supply. A number of other trades undertaken by Mr Rodr on those days were not challenged and Mr Rodr’s trading represented around 20% of the volume traded on each day. In those circumstances, we were not comfortably satisfied there was sufficient evidence to establish market manipulation in respect of these three days of trading.

27. There are no allegations by ASIC in respect of trading on the Bell Potter house account on 20 and 21 July 2015. This was the commencement of the second week of trading on the ASX. Trading on the Bell Potter house account continued throughout this week although Mr Rodr did not trade on 20 July 2015. The trading was untaken by another operator because Mr Rodr was not at work that day. There is no dispute about this. Mr Rodr traded on 21 July 2015 and even though there is evidence of two telephone calls between the applicants just before and just after his trading, there is no allegation of market manipulation made by ASIC in respect of these trades.

28. There are a number of suspicious trades identified by ASIC’s experts that were made both just prior to and during the close of trading on 22 July 2015. There were two telephone calls between the applicants around this time. Mr Rodr gave explanations for this trading which, for the reasons we later outline, we accept are broadly plausible. On balance, we cannot be comfortably satisfied that the trading on this day was tainted with a sole or dominant improper manipulative purpose.

29. The same cannot be said for the trading by Mr Rodr on the following day. This was the last day of trading in DirectMoney shares in the Relevant Period.

30. On the afternoon of 23 July 2015, it is apparent that large parcels of DirectMoney shares, which had been purchased prior to relisting by a Bell Potter client (or associated entities) to comply with ASX Listing Rules, were being sold off. This had the potential to impact on the closing price for DirectMoney shares on that day. Mr Rodr made bids in the CSPA, thereby acquiring these parcels of DirectMoney shares. The CSPA commences at 4 pm and finishes at the close of the market at 4: 10 pm. There is no direct trading between buyers and sellers in this period because bids and offers are matched through an automated auction operated by the ASX on its platform. Mr Rodr’s bids were at prices that were higher than the previous trade. ASIC’s experts and Professor Michael Aitken say these trades were suspicious and require explanation. This trading either followed or was at the same time as telephone discussions between the applicants. There were three telephone calls between the applicants in this period, all initiated by Mr Poidevin.

31. Of significance for this day is the existence of a recorded telephone call between Mr Rodr and the Hong Kong office on 28 July 2015 in which Mr Rodr appears to outline his trading strategy on 23 July 2015 and confirm that Mr Poidevin gave him “instructions” on that trading. The conversation demonstrates that Mr Rodr recognised selling by Bell Potter retail clients was driving the share price to a lower closing price of 14.5 cents. He told the Hong Kong office that he bought these shares. His bids during the CSPA and the trades that followed are consistent with this. Mr Rodr made bids and amended those bids in the CSPA for 60,000 DirectMoney shares at 15.5 cents. The effect was that Mr Rodr acquired all the shares of the Bell Potter retail clients who were selling at this time. As a result of these transactions, Bell Potter acquired 36% of the volume on the day and the price of DirectMoney shares closed at 15 cents following a trade in the CSPA by Mr Rodr. Most of Mr Rodr’s trading was in the CSPA. These are the transactions identified by Mr Poidevin’s expert as transactions that required explanation. We are not satisfied with the explanations given by Mr Rodr and, for the reasons we later outline, we do not accept Mr Poidevin’s denials. In other words, we are satisfied there is cogent reliable evidence, contemporaneously corroborated, that these trades were for the sole or dominant purpose of setting or maintaining the price of DirectMoney shares at 15 cents.

1. While much of the evidence and submissions in the proceedings focused on the question of whether certain trades entered, or bids made, had the sole or dominant purpose of setting or maintaining the price for DirectMoney shares, the applicants contend that we must still be satisfied that the impugned trades on 14 and 23 July 2015 had the effect or, at least, were likely to have the effect of setting or maintaining the artificial price. ASIC contends this is unnecessary or, at best, is a relatively low threshold to meet.

2. Based on our analysis of the trading in this period, we are so satisfied. Relevantly, we are satisfied that the transactions on 14 July 2015 after 1:40 pm were at least likely to have the effect of creating or maintaining an artificial price in respect of DirectMoney shares. There was a real and not remote chance of this happening because it is possible that the share price would have fallen below 14 cents given the depth of the bidding on the market at the time. In relation to the trading in the CSPA on 23 July 2015, it is apparent that if Mr Rodr’s bid for 60,000 DirectMoney shares at 15.5 cents, as amended, had not been entered, there is a real possibility the share price would have closed at 14.5 cents. We are satisfied that these bids resulted in completed trades at the end of the CSPA on 23 July 2015 and they were, at least, likely to have the effect of creating an artificial price in respect of DirectMoney shares, namely the closing price of 15 cents.

3. The applicants raise a number of issues about the interpretation of s 1041A of the Corporations Act, which we have rejected for the reasons outlined in detail later in our decision.

4. Accordingly, we are satisfied the applicants contravened s 1041A of the Corporations Act and there is a power to ban, or take some other regulatory action in relation to the applicants, under the Corporations Act.

5. Because our findings resolve the threshold issue but not the issues that require determination for the finalisation of the applications, these reasons are published to the parties to give them the opportunity to review our findings and confer about the further steps that may need to be taken.

6. The proceedings are to be listed for directions and a further hearing on the balance of the matters that now require determination.

   3.       BACKGROUND FACTS

7. DirectMoney Pty Ltd was established in 2014 as a “marketplace lending” private company that primarily served as “an intermediary for lenders targeting prime retail borrowers”.[14]

   [14] Exhibit 18 - Poidevin T-documents, T5.16 - 275; Respondent’s Statement of Facts, Issues and Contentions – Mr Rodr dated 18 April 2018 at [7].

8. In February 2015, executives of DirectMoney Pty Ltd, Mr Stephen Porges (Chairman), Mr Campbell McComb (Director) and Mr David Doust (Founder), met with Mr Poidevin and other Bell Potter staff to discuss a capital raising and the backdoor listing of DirectMoney Pty Ltd.[15] The listed company identified was Basper Ltd (‘Basper’), whose shares had been suspended from official quotation on the ASX from 6 January 2014.[16] Mr Poidevin had known Mr Porges since about the mid to late 1990’s[17] and introduced DirectMoney Pty Ltd to Bell Potter.

   [15] Respondent’s Statement of Facts, Issues and Contentions – Mr Poidevin dated 16 April 2018 at [10] referring to T5.45-497, lines 20 - 28 and p.498, lines 1 - 28.

   [16] Exhibit 18 - Poidevin T-documents, T5.10.

   [17] Exhibit 7 - Statement of Simon Paul Poidevin, dated June 2018, at [69].

9. Basper entered into a conditional share agreement to acquire all of the share capital in DirectMoney Pty Ltd and undertook capital raising for this purpose. The proposed acquisition and capital raising was announced to the market on 24 March 2015. On 24 April 2015, Basper entered into a mandate with Bell Potter to act as lead manager on the capital raising and to underwrite the offer for a minimum amount of $10 million.[18] The fee for the mandate consisted of a 2.5% management fee and a 2.5% selling fee.[19] Bell Potter’s role included work on the due diligence process and the organisation of “roadshows” for investors.[20] Mr Poidevin had the responsibility for managing the capital raising and was supervised by Mr James Unger, Head of Corporate Finance at Bell Potter.

   [18] Exhibit 18 - Poidevin T-documents, T5.10 T5.45-503, lines 23 - 27.

   [19] Ibid T5.45-502, lines 3 - 10; T5.42 p.521, lines 16 - 28 and p.507, lines 1 - 3.

   [20] Ibid T5.45-506, lines 19 - 28.

10. In late May 2015, a prospectus for the capital raising issued by Basper was lodged with ASIC. It invited investors to apply for up to 75 million shares at an issue price of 20 cents to raise up to $15 million.[21] The minimum subscription was $10 million for 50 million shares.[22] The opening date of the offer was 3 June 2015, with applications closing by 17 June 2015. The prospectus noted that investment in DirectMoney shares was highly speculative given various potential risk factors.[23]

    [21] Ibid T5.16 273.

    [22] Ibid T5.16-273; T5.12-259.

    [23] Exhibit 18 - Poidevin T-documents, p.306 quoting p.41 of the prospectus; Exhibit 7 - Statement of Simon Paul Poidevin, dated June 2018, p.21.

11. Bell Potter initially had difficulty sourcing investors and on 9 June 2015 held a “roadshow” in its Melbourne office to generate interest for the IPO.[24] Mr Julian Farley, a Bell Potter private client adviser based in Melbourne, attended the roadshow[25] and one of his clients, Mr Mark Kawecki (or entities associated with him), subsequently invested $100,000 in DirectMoney shares, spread across 50 accounts.[26] This investment facilitated compliance with ASX Listing Rules, which required a minimum number of investors for the relisting to proceed. Mr Kawecki was paid a fee for each account.[27] This is relevant because ASIC makes a number of allegations about the propriety and subsequent sale of these holdings.

    [24] Respondent’s Statement of Facts, Issues and Contentions dated 18 April 2018 at [17].

    [25] Ibid T10-1997, lines 2 - 10.

    [26] Respondent’s Statement of Facts, Issues and Contentions dated 18 April 2018 at [21]

    [27] Exhibit 18 - Poidevin T-documents T10-2050, lines 4 - 16; T10-2052, lines 10 - 16.

12. On 25 June 2015, Basper issued a supplementary prospectus qualifying the previous valuation of DirectMoney and reopened the offer for subscriptions which was to close on 30 June 2015.[28] Applications were received for $11.057 million under the supplementary prospectus, which was more than the required minimum amount of $10 million.[29] About 40% of the capital raising was placed with investors sourced from the Hong Kong office of Bell Potter Securities Hong Kong Ltd (‘Bell Potter Hong Kong’).[30] Bell Potter Hong Kong had common directors with the Australian company, including Mr Alastair Provan, the Managing Director of Bell Potter.[31] Mr Dan Kirton (Director of Institutional Broking of Bell Potter Hong Kong) and Mr Chris Brice were responsible for running Bell Potter Hong Kong[32] and also acted as dealers.[33] One of the most prominent investors sourced by Bell Potter Hong Kong was Nighthawk Capital Ltd (‘Nighthawk’), a Hong Kong based fund manager.[34] The DirectMoney capital raising was the first IPO in which Bell Potter Hong Kong was involved and it was a significant transaction for that office.[35]

    [28] Exhibit 7 - Statement of Simon Paul Poidevin dated June 2018, p.23; T37

    [29] Exhibit 18 - Poidevin T-documents, T5.15.

    [30] Ibid T5.9 p.250; T5.15; T5.45-519, lines 1 - 9.

    [31] Ibid T5.46 p.767, lines 9 - 25.

    [32] Ibid T5.45 p.497, lines 7 - 11; T5.46-768, lines 23 - 26.

    [33] Ibid T5.45 p.514, lines 26 - 28; T5.45-525, lines 14 - 19.

    [34] Ibid T5.45 p.509, lines 14 - 28; T5.77.

    [35] Exhibit 18 – Rodr T-documents, T13 p. 2554 at lines 5 - 10.

13. In early July 2015, Basper acquired DirectMoney Pty Ltd. Following the capital raising and acquisition, Basper changed its name to DirectMoney Limited, relisted on the ASX and commenced trading on the ASX on 13 July 2015 under the ASX code 'DM1'. Mr Poidevin purchased shares in DirectMoney in his own right, both through the capital raising and after DirectMoney started trading on the ASX following the relisting.

14. On the first day of trading, the ASX published a last sale price for DirectMoney of 48.5 cents.[36] This was the price for Basper shares prior to its suspension from official quotation on the ASX. The Hong Kong office was concerned that this suggested the share price of DirectMoney had fallen significantly following its relisting, causing a potential balance sheet loss for the Hong Kong based investors. There was also a fall in the DirectMoney share price after the first day of trading. Mr Kirton and Mr Brice expressed their concerns about these matters to Mr Poidevin and others at Bell Potter throughout the day as well as after the close of trading.[37]

    [36] Respondent’s Statement of Facts, Issues and Contentions – Mr Rodr dated 18 April 2018 at [35].

    [37] Exhibit 18 - Poidevin T-documents, T5.45 p.569 lines 13 - 28, p.570 lines 25 - 28 and p.571, lines 1 - 28.

15. Before the opening of trading on 14 July 2015, Bell Potter decided to invest $200,000 in DirectMoney shares. Between 14 and 23 July 2015 Bell Potter, through its house account, purchased nearly 26% of the total value of the DirectMoney shares traded. Mr Poidevin denies he was involved in the decision to invest but there is no dispute he monitored Mr Rodr’s trading on the house account during the Relevant Period. Mr Kirton and Mr Brice were involved in a number of telephone conversations with Bell Potter staff and executives in Australia, including Mr Poidevin and Mr Rodr, about trading in DirectMoney shares. These conversations were recorded by the Hong Kong office as part of its usual practice. There were a number of telephone conversations between Mr Poidevin and Mr Rodr in the Relevant Period. There is a record of the calls and the duration of the calls but unlike the telephone discussions between the Hong Kong and Sydney offices, these conversations were not recorded. There were also emails and telephone calls between the Hong Kong office and Mr Tom Monaco, who was the Chief Investment Officer for Nighthawk. He was critical of the investment in DirectMoney. This is not in dispute.

16. On or around 23 July 2015, Mr Rodr’s buying of DirectMoney shares for Bell Potter triggered a number of internal compliance alerts. The compliance team raised concerns with Mr Lewis Bell, Head of Compliance at Bell Potter. Mr Bell spoke to Mr Rodr on 23 July 2015 and instructed Mr Rodr not to execute trades before trading on the ASX opened or in the period before the close of trading. Mr Rodr continued trading after 23 July 2015 and the order remained open until it was finalised in October 2015. As of 23 July 2015, Bell Potter had acquired 615,000 DirectMoney shares for $92,700 which represented 46.4% of the proposed investment.[38] The balance of the investment was purchased over the following two and a half months.

    [38] Ibid T5.20.

17. ASIC commenced an investigation into trading in DirectMoney shares on 22 March 2016. There is no information before the Tribunal as to how the investigation arose.

18. As part of its investigation, ASIC examined the trading in DirectMoney shares, internal Bell Potter emails and recorded telephone discussions between Mr Poidevin, Mr Rodr, Mr Kirton and others relating to trading in the DirectMoney shares. ASIC also examined Mr Rodr, Mr Poidevin and a number of other witnesses from Bell Potter about the trading. The results of ASIC’s investigation were referred to an ASIC delegate, who notified both Mr Poidevin and Mr Rodr of the concerns about trading by Bell Potter in DirectMoney and their role in that trading. Mr Poidevin and Mr Rodr were each invited to attend a hearing to provide evidence and submissions to the delegate in response to the concerns notified. Mr Rodr did not give evidence at the hearing but was represented by Counsel and made detailed written and oral submissions. The hearing was in private. A similar process was adopted in relation to Mr Poidevin, who gave evidence at the hearing and also made detailed written and oral submissions through Counsel.

19. Following the hearings, the delegate made banning orders and provided written reasons in respect of each applicant. Relevantly, the delegate relied on similar evidence and made a number of common factual findings.

    4.       DECISIONS UNDER REVIEW

20. The conduct of the applicants, which is the subject of the findings of contraventions by the delegate, relate to trading in DirectMoney in the Relevant Period. The basis for these findings and the reasons for the respective banning orders are contained in the delegate’s statement of reasons in respect of each applicant, which were dated 29 November 2017.[39] While the Tribunal’s task is to conduct merits review and consider these matters afresh based on the materials before it,[40] it is useful to understand the delegate’s decisions because the parties’ contentions in this review were essentially based on the evidence before the delegate and the critical findings of the delegate.

    [39] Exhibit 18 - Poidevin T-documents, T2 at p 4.

    [40] Drake v Minister for Immigration and Ethnic Affairs (1979) 24 ALR 577 at 589 (per Bowen CJ and Deane J); Shi and Migration Agents Registration Authority [2008] HCA 31 at [98] (per Hayne and Heydon JJ).

21. The delegate noted the role of Bell Potter in the fundraising and that ASIC's analysis of the share trading concluded the house account transactions in DirectMoney during the Relevant Period had a 'disproportionate effect' on the price of DirectMoney shares compared to the rest of the market's transactions. The delegate further noted that the ASIC analysis (which the delegate acknowledged was disputed) concluded these transactions had some, or all, of the following effects:

    (a)     increased, or restored, the last traded price of DirectMoney shares;

    (b)     increased the number of bids for DirectMoney shares on the market;

    (c)increased the best (that is, the highest) bid price of DirectMoney shares on the market;

    (d)increased the best (that is, the lowest) ask price of DirectMoney shares on the market; and/or

    (e)     increased the volume of DirectMoney shares traded.[41]

    [41] Exhibit 18 - Poidevin T-documents, T2 at pp.4 - 41.

    Findings about Mr Rodr

22. After outlining evidence obtained as a result of the investigation and taking into account submissions made and evidence provided by Mr Rodr at the hearing, the delegate concluded (at [138], [139], [144] and [150] to [152] of the Reasons) as follows:

    138.On all the information before me and for all of the reasons discussed above, I accept ASIC's analysis of the relevant transactions in DM1 and I am satisfied that (to use the terminology of the High Court in [Director of Public Prosecutions (Cth) v JM (2013) 250 CLR 135]) the dominant purpose of Mr Rodr's transactions in DM1 in the relevant period was to set or maintain the price of DM1 at a particular level. In particular, I am satisfied the dominant purpose of all of Mr Rodr's transactions in DM1 from 3:42pm on 14 July 2015 (see paragraphs 47 to 51 above), from 4:01pm on 15 July 2015 (see paragraphs 59 to 61 above) and from 4pm on 23 July 2015 (see paragraphs 79 to 83 above) was to set or maintain a particular price for DM1.

    139.It follows that I am satisfied Mr Rodr carried out transactions that had the effect of creating and maintaining an artificial price for DM1, contrary to section 1041A, a financial services law (subparagraph 920A(1)(e)).

    …

    144.I consider that ASIC’s substantive concern about Mr Rodr is that his transactions in DM1 in the relevant period repeatedly contravened a financial services law. Although it is not possible for me to assess his present understanding of the concepts of market manipulation, as he did not attend the hearing, I do not consider that it is necessary for me to make a finding that he is also not adequately trained, or is not competent, to provide financial services.

    …

    150.Time has now passed since the relevant conduct and when Mr Rodr was examined by ASIC. There is no evidence that there have been any concerns about Mr Rodr before or since the relevant trading and, according to the character references, this conduct was out of character for Mr Rodr. I am concerned however that Mr Rodr’s conduct was repeated over the relevant period and there is no evidence to indicate that, apart from the training he has undertaken, Mr Rodr has, at this stage, addressed his conduct or accepted responsibility for it.

    151.Accordingly I am satisfied that ASIC has reason to believe, on the basis of his past conduct as I have found and subsequently, that Mr Rodr is likely to contravene a financial services law for the purposes of subparagraph 920A(1)(f).

    152.As I have found that Mr Rodr has not complied with a financial services law and ASIC has reason to believe he is likely to contravene a financial services law, ASIC’s power to make a banning order against him is enlivened.[42]

    [42] Exhibit 18 - Rodr T-documents, T2 at pp.29 - 31 [138] - [152].

23. The delegate then proceeded to consider whether Mr Rodr should be banned from providing financial services and, if so, the period of any banning order. The delegate noted that a banning order “contributes to the public interest by limiting the conduct of financial services business to people with the requisite capacity and integrity to provide the services in a lawful and competent manner”.[43] The delegate also noted that there was “a strong public interest in maintaining financial markets that are free from manipulation”.[44]

    [43] Exhibit 18 - Rodr T-documents, T2 at p.32 [159].

    [44] Exhibit 18 - Rodr T-documents, T2 at p.32 [164].

24. In applying these principles to the circumstances of Mr Rodr’s case, the delegate noted (at [165] to [168]) as follows:

    165.Mr Rodr’s personal circumstances are that he is the main financial provider for his family. A banning order will cause personal and financial hardship, however there is a need to balance the hardship that Mr Rodr may suffer against public interest considerations.

    166.In determining an appropriate period of banning, I have had regard to [Regulatory Guide] 98 and to the "Factors and examples of conduct relating to specific periods of banning" listed in Table 2. In my view, the conduct which I have found established falls in the lower end of the "Banning for 3 - 10 years" category in Table 2. I consider that the relevant factors in this matter are that it involved conduct inconsistent with the orderly operation of a financial market, adverse impact on confidence in or the integrity of a financial market and disregard for the law and compliance with regulations.

    167.I consider that a banning order for four years is appropriate.

    168.The appropriate order is that Mr Rodr be prohibited from providing any financial services for four years.[45]

    [45] Exhibit 18 - Rodr T-documents, T2 at p.33 [165] - [168].

    Findings about Mr Poidevin

25. The delegate adopted a similar approach to the case relating to Mr Poidevin. It was alleged Mr Poidevin directed or encouraged Mr Rodr to trade in DirectMoney shares for an improper purpose and that Mr Rodr traded accordingly. After referring to what the delegate considered to be inconsistent accounts by Mr Poidevin and Mr Rodr about the trading and their conversations, the delegate found (at [160] to [162]):

    160.On all the information before me and for all of the reasons discussed above, I accept ASIC's analysis of the relevant transactions in DM1 and I am satisfied that (to use the terminology of the High Court in Director of Public Prosecutions (Cth) v JM (2013) 250 CLR 135]) the dominant purpose of Mr Rodr's transactions in DM1 in the Relevant Period was to set or maintain the price of DM1 at a particular level. In particular, I am satisfied that the dominant purpose of all of Mr Rodr's transactions in DM1 from 3:42pm on 14 July 2015 (see paragraphs 60 to 64 above), from 4:01pm on 15 July 2015 (see paragraphs 74 to 76 above) and from 4pm on 23 July 2015 (see paragraphs 93 to 99 above) was to set or maintain a particular price for DM1.

    161.I am also satisfied that for all the above reasons, Mr Poidevin instructed, or at the very least positively encouraged, Mr Rodr to enter transactions for DM1 that had the effect of creating and maintaining an artificial price for DM1.

    162.Accordingly, I am satisfied that Mr Poidevin took part in the transactions carried out by Mr Rodr that had the effect of creating and maintaining an artificial price for DM1, contrary to section 1041A, a financial services law (subparagraph 920A(1)(e)).[46]

    [46] Exhibit 18 - Poidevin T-documents, T2 at p.35 [160] - [162].

1. There are no prescribed matters in the Act which go to the question of whether a person is ‘likely to contravene.’ The material relied on, to make a finding that a person has reason to believe that the person will do something, must be convincing. For example “[a] pattern of past breaches might provide an affirmative answer to that question, whereas in other cases, the gravity of a single episode might be sufficient for that purpose”.[498]

   [498]Bond vAustralian Securities and Investments Commission [2009] AATA 50 at [22].

2. We have found Mr Rodr did not lie but this does not entirely dispose of this contention. The fact Mr Rodr has engaged in market manipulation, does not admit this or has not expressed contrition suggests he does not appreciate the significance of the matter.

3. Accordingly, on the basis of Mr Rodr’s demonstrated conduct we find that it is likely he will contravene the financial services law if he was put in a similar position in the future.

4. ASIC does not make such an allegation in respect of Mr Poidevin, given their case is solely based on allegations of contravention. In the absence of contentions and argument on this matter, we have not made any findings about this because it would be procedurally unfair.

   23.     CONCLUSIONS

5. For the reasons outlined above, we have found that the applicants have each contravened a financial services law, namely s 1041A of the Corporations Act, on 14 July 2015 after 1:40 pm and during the CSPA on 23 July 2015.

6. As such, we are satisfied that the power to ban the applicants under s 920A is established.

7. These reasons are published to the parties to give them the opportunity to review our findings and confer about the further steps that may need to be taken. We will adjourn these proceedings to a date to be fixed.

I certify that the preceding 680 (six hundred and eighty) paragraphs are a true copy of the reasons for the decision herein of The Hon. Justice D G Thomas, President and Deputy President J Redfern

........................[SGD]...........................................

Associate

Dated: 20 December 2019

Date(s) of hearing:	26, 27, 28 and 29 June 2018
3 July 2018
Counsel for the Mr Poidevin:	Mr I Jackman SC
Ms K Madgwick
Solicitors for the Mr Poidevin:	Clayton Utz
Counsel for the Mr Rodr:	Mr D Cook SC
Mr R Glover
Solicitors for Mr Rodr:	Clayton Utz
Counsel for the Respondent:	Mr N O’Bryan SC
Dr P Bender
Solicitor for the Respondent:	Australian Securities and Investments Commission