Re Donald and Australian Securities and Investments Commission - [2001] AATA 366

CATCHWORDS – CORPORATIONS LAW – securities – representative of a dealer – banning order – whether banning order should be issued – market trading - whether false or misleading appearance likely to be created with respect to the price of shares – likely – breach of s. 998(1) Corporations Law – public protection – whether enforceable undertaking should be imposed – decision affirmed subject to submissions.

Administrative Appeals Tribunal Act 1975 – ss. 37, 43
Australian Securities and Investments Commission Act 1989 – ss. 11, 93, 93AA, 244
Corporations Law – ss. 5, 19, 806, 807, 809, 824-826, 828, 829, 830, 831, 832, 833, 837, 998

Alphacell Limited v Woodward [1972] AC 824, [1972] 2 AllER 475; [1972] 2 WLR 1320
Australian Securities Commission v Kippe and Another (1996) 67 FCR 499; (1996) 137 ALR 423; (1996) 20 ACSR 679; (1996) 14 ACLC 1226
Australian Securities Commission v Nomura International PLC (1998) 89 FCR 301; (1998) 160 ALR 246; (1998) 29 ASCR 473; (1999) 17 ACLC 55
Donald and Australian Securities and Investments Commission [2000] AATA 21 (Unreported, Deputy President G L McDonald, 21 January 2000)
Fame Decorator Agencies Pty Ltd v Jeffries Industries Ltd (& Ors) (1998) 28 ACSR 58; (1998) 16 ACLC 1235
Hardcastle v Commissioner of Police (1984) 53 ALR 593
Ke Kaw The v The Queen (1985) 157 CLR 523; (1985) 60 ALR 449; (1985) 59 ALJR 620; (1985) 15 ACrimR 203
New South Wales Bar Association v Evatt (1968) 117 CLR 177; (1968) 42 ALJR 13
New South Wales Bar Association v Hamman [1999] NSWCA 404 (Unreported, Mason P, Priestley A and Davies AJA, 29 October 1999)
North v Marra Developments Ltd (1981) 148 CLR 42; (1981) 37 ALR 341; (1981) 56 ALJR 106; (1981) 6 ACLR 386
Pillai v Messiter [No. 2] (1989) 16 NSWLR 197
Re Wolstencroft and Companies Auditors and Liquidators Disciplinary Board (1998) 54 ALD 773

DECISION AND REASONS FOR DECISION [2001] AATA 366

ADMINISTRATIVE APPEALS TRIBUNAL     )
  )          V2000/1256
GENERAL ADMINISTRATIVE DIVISION      )

Re ANDREW WILLIAM DONALD

Applicant

AndAUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION

Respondent

DECISION

Tribunal  Miss S A Forgie (Deputy President)
  Mr W G McLean (Member)
  Mr D L Elsum, AM (Member)

Date 4 May 2001

Place Melbourne

DecisionThe Tribunal adjourns further consideration to a date to be fixed.

S A FORGIE
Deputy President

REASONS FOR DECISION

On 5 August, 1999, the applicant, Mr Andrew William Donald, applied for review of a decision of a delegate of the respondent, the Australian Securities and Investments Commission ("Commission") dated 20 July, 1999. That decision was to make a banning order prohibiting Mr Donald from doing an act as a representative of a dealer for a period of four years from that date. The decision was reviewed by a differently constituted Tribunal. On 21 January, 2000, it decided to vary the decision by reducing the period of the banning order from four years to two years. Following an appeal lodged by Mr Donald to the Federal Court, Heerey J allowed the appeal and remitted the matter to a differently constituted Tribunal for re-hearing. On 22 November, 2000, the President granted a stay of the banning order.

At the re-hearing, Mr Donald was represented by Mr Murley of counsel and the Commission by Mr Waller of counsel. Documents lodged pursuant to s. 37 of the Administrative Appeals Tribunal Act 1975 were admitted in evidence ("T documents"). Also admitted were a print out of opening and closing prices and highs and lows for shares in Burswood Limited ("Burswood") between 2 March and 29 May, 1998, a Trade Line chart for the period April to September, 1998, a statement of Mr Paul Masi and exhibits A1-A14 and R1-2 from the previous hearing. Together with Mr Casey, Mr Donald gave oral evidence in support of his own case while Mr Thomson gave evidence in support of the Commission's case.

THE ISSUE

The issue in this case is whether a banning order prohibiting Mr Donald from doing an act as a representative of a dealer should be issued and, if so, for what period.

BACKGROUND

There was no disagreement between the parties on a number of factual matters forming the background to the decision under review. In light of that and in light of the evidence in this matter, we have made a number of findings of fact that we will set out in the following paragraphs.

Mr Donald was born on 22 September, 1969 and is now 31 years of age. In 1998, he was a sales trader with ABN AMRO Equities Australia Ltd ("ABN AMRO"), which is engaged in investment banking, stock broking and bonds and currency dealings. In that position, which he had held for some eighteen months, Mr Donald was responsible for two staff. Previously, he had spent two years as a derivatives adviser with ABN AMRO (and BZW which ABN AMRO took over). For five and a half years, he had been a registered trader with BZW. On 29 May, 1998, Mr Donald received an order to purchase shares in Burswood from Mr Thomson.

On the basis of the evidence of Mr Masi, who was Mr Donald's supervisor at ABN AMRO, we find that the role of a dealer is to purchase or sell securities in accordance with the instructions of his or her client and comply with the rules of the Australian Stock Exchange and the Corporations Law ("the Law").

Mr John Fabian Thomson, who holds a Bachelor of Commerce degree and is an Associate member of the Securities Institute of Australia, is a dealer with National Australia Asset Management ("NAAM") and has been since 1996. He works at the equities dealing desk where his supervisor is Mr Stephen Hiscock. NAAM manages superannuation money on behalf of retail and wholesale clients, equity funds and other forms of trust investments. Prior to his employment with NAAM, Mr Thomson held a similar position with Potter Warburg for five years. Earlier in his career, he been a client adviser with Potter Warburg or its predecessor, Potter and Partners for two years and had worked with Rothschild Australia for eighteen months and, in the fixed interest markets, with J B Were.

Mr Thomson and Mr Donald have had a considerable number of dealings over the years. On 29 May, 1998, Mr Thomson placed an order to purchase shares in Burswood with ABN AMRO and did so through Mr Donald. Up until the time he placed the order, Burswood shares had been trading at 88 or 89 cents (T documents, pages 1460-1469). Mr Thomson placed the order by telephoning Mr Donald at 3.24pm and the following conversation ("1st conversation") ensued:

"Andrew Donald:       Andrew.
John Thomson:          Hi there.
Andrew Donald:        Gidday John.
John Thomson:          It's that time of the month to get stitched up in Burswood again.
Andrew Donald:        Right. Yeah.
John Thomson:          Is there any around?
Andrew Donald:        Let's have a look if there's any around.
John Thomson:          Going through at eight.
Andrew Donald:        Yeah, they're going through at eight at the moment. From a depth point of view, there's 58,000 at 89, 78 at 90, and not much up to 93 from there.
John Thomson:          Hmm.
Andrew Donald:        But there's sort of – what's that? A 100 – about 160,000 up to 93.
John Thomson:          Oh well we can try and buy. A few hundred.
Andrew Donald:        Okay, not a problem. I'll do my best there – try and get you some stock. And these – what's going on with these AGL buys – who's – what's going?
John Thomson:          They're just selling them up.
Andrew Donald:        There's just sellers everywhere is it. It's unbelievable. Oh, anyway.
John Thomson:          I think energy stocks seems to have – got frightened by it or (inaudible).
Andrew Donald:        Look at – look at United Energy. Yeah.
John Thomson:          AGL.
Andrew Donald:        Yeah. Well, that article in The Age didn't help this morning.
John Thomson:          No. They said it (inaudible) calculations and stuff.
Andrew Donald:        Yeah.
John Thomson:          It seems to have frightened the retail market and the creditors stampede and the European markets trying to doubt it.
Andrew Donald:        Yeah.
John Thomson:          No one really coming up with any support at this stage but – –
Andrew Donald:        Yeah.
John Thomson:          Anyway IRB will help, I suppose.
Andrew Donald:        A little bit like that. You see these TNZCA's?
John Thomson:          Na.
Andrew Donald:        I need another hundred thousand to go through of those things for them to get through.
John Thomson:          A hundred.
Andrew Donald:        Yeah, the index.
John Thomson:          Mm.
Andrew Donald:        All righty. I will do my best on Burswood.
John Thomson:          All righty. Buy up to about a half. If you have to. If you can.
Andrew Donald:        Okay.
John Thomson:          (inaudible) Ridiculous about it.
Andrew Donald:        All right. No worries.
John Thomson:          All right.
Andrew Donald:        Okay.
John Thomson:          Okay. Thanks mate." (T documents, pages 1455-1457)

Mr Donald then telephoned Mr Casey to implement Mr Thomson's order for Burswood shares.

Mr Michael Casey was an employee of ABN AMRO for seven years and has over ten years experience with other firms. He is a receipts operator and a Designated Trading Representative with the Australian Stock Exchange Automated Trading System ("SEATS"). Mr Casey heads a team of seven operators. Operators buy and sell stock on the instructions of others. Mr Casey and his team are responsible for buying and selling stock in leading Australian companies. He and his team are based in Sydney but are responsible for the execution of orders in London, South East Asia, New York and Japan.

As a result of his part in the purchase of Burswood shares, Mr Casey entered an enforceable undertaking with the Commission. As a result of that undertaking, he had to undertake studies in law and ethics and to prepare and present seminars in Sydney and Melbourne on issues of law, practice and procedure relevant to Designated Trading Representatives. He was required to refrain from acting as a representative of a dealer or investment adviser for two months. A practical outcome of the undertaking was that he was unemployed for that period.

At 3.33pm on the day at the centre of the issues in this case (29 May 1998), Mr Donald telephoned Mr Casey and the following conversation took place ("3.33pm conversation"):

"Michael Casey:        ABN Amro.
Andrew Donald:        Gidday Case. Andy.
Michael Casey:          Gidday mate.
Andrew Donald:        Mate, it's the end of the month and I want to give these Burswood's a bit of a nudge upwards, all right. I've given it to you because I want to make sure it's done today, right. The client (inaudible) – fuck we stuffed it up last time with the client.
Michael Casey:          Did we?
Andrew Donald:        Yeah so I've got up to half a million to buy, right. But we want to make sure we have the stock whole – we don't want to fire our shots too early. All right.
Michael Casey:          So what's the code B ---
Andrew Donald:        BIR.
Michael Casey:          BIR?
Andrew Donald:        Yeah. Up to – up to half a million, you know, we don't – we don't have to buy half a million buy 200 if we don't need to but ---
Michael Casey:          Right. We just want to try and close them up at a high price as possible but on the lowest amount possible.
Andrew Donald:        Yeah. But you know, up to half a million if need be.
Michael Casey:          No worries.
Andrew Donald:        All right.
Michael Casey:          Burswood. All right Andy.
Andrew Donald:        Thanks, mate.
Michael Casey:          I'll obviously look at this in the five past match out mate.
Andrew Donald:        Yeah, beautiful.
Michael Casey:          No worries.
Andrew Donald:        Thanks mate.
Michael Casey:          Bye, bye.
Andrew Donald:        Bye." (T documents, page 1458-1459)

At 3.35pm, Mr Donald telephoned Mr Thomson and the transcript of their conversation ("2nd conversation") reads:

"John Thomson:         Hello.
Andrew Donald:        Gidday, John. … We'll be leaving those Burswood until the match out. That's the only way really to do it these days.
John Thomson:          Yeah.
Andrew Donald:        So we'll do what we can in the match out process.
John Thomson:          Oh, okay.
Andrew Donald:        Okay. That's where the last sales counted anyway – that's what – what it's all about.
John Thomson:          Yeah. I mean that's not particularly worrying me.
Andrew Donald:        No. Well, my – my instructions have been to try and buy as little as you can at the best possible price.
John Thomson:          Oh, no I am happy to buy them – happy to buy – when to – –
Andrew Donald:        Yeah.
John Thomson:          So – –
Andrew Donald:        All right.
John Thomson:          You know, they've come back a fair way in the last few days and those lines that went through the other day might give them – –
Andrew Donald:        Yeah.
John Thomson:          -- might have given them a kick in the bottom.
Andrew Donald:        Well, we hope so, yeah.
John Thomson:          Yeah. Righto mate.
Andrew Donald:        Yeah.
John Thomson:          (Inaudible) happy to pick it up.
Andrew Donald:        Okay. Not a problem.
John Thomson:          Okay.
Andrew Donald:        Okay.
John Thomson:          Bye.
Andrew Donald:        Thanks." (T documents, pages 1479-1480)

On the basis of the evidence of Ms K. L. Neuss, the National Manager of the Equities Market Operations of the Australian Stock Exchange, we concur with the description of the market set out in Deputy President McDonald's reasons:

"… 10:00 a.m. to 4:00 p.m. is normal trading during which stock purchase and sale orders will be matched in order to determine a price. Any unmatched quantity of any order will be either placed in priority by price and time in the SEATS order book or is to be cancelled. An order not having priority is placed in the order book in price, then time priority. After the close of normal trading, the ASX conducts a single price auction. A closing auction has a five -minute pre-open period during which orders may be entered, amended or cancelled. … The system gives priority to dealings between the highest priced buy order and lowest priced sell order as determined at the time immediately before the auction commences. Orders are completed until the buy price for a stock matches the sell price. At that point, since the buy and sell prices no longer overlap, no further trading can occur." (paragraph 10)

At 4.03pm, Mr Casey telephoned Mr Donald ("4.03pm conversation") and they said:

"Andrew Donald:       Andrew.
Michael Casey:          Andy?
Andrew Donald:        Yeah.
Michael Casey:          I can close these things 95 bid. I just need to have a, you know, that will take on board 2 – about 250,000.
Andrew Donald:        Sounds good to me mate.
Michael Casey:          Okay, then.
Andrew Donald:        Righteo.
Michael Casey:         Bye.
Andrew Donald:        Bye." (T documents, page 1472 and 1526)

At 4.08pm, Mr Donald spoke to Mr Thomson ("3rd conversation"):

"John Thomson:         Hello.
Andrew Donald:        Gidday. I didn't manage to pick up many of those Burswood's at all unfortunately. I've only got – only could've only got a under couple of hundred thousand of them.
John Thomson:          That's fine.
Andrew Donald:        Okay. They've gone out 95/96.
John Thomson:          Yeah.
Andrew Donald:        I'm in the screen now and they've closed them at the moment at 95.
John Thomson:          Oh, okay.
Andrew Donald:        Okay. So, I didn't actually manage to pick up that many at all.
John Thomson:          No, that's fine.
Andrew Donald:        Yeah. With bloody – there were a hundred and something thousand on offer there just before the – just before the death.
John Thomson:          Hmm.
Andrew Donald:        But – yeah. Anyway, you're not a late buyer at that level?
John Thomson:          No, that's fine.
Andrew Donald:        Okay, they're obviously going to go out last 95 Pru Bache and SBC Warburg, our old friends, that always have fun with us, have gone into the screen as late sellers at 95.
John Thomson:          Okay.
Andrew Donald:        So we don't want to buy any more?
John Thomson:          No, that's fine. That will be fine.
Andrew Donald:        Okay.
John Thomson:          Right.
Andrew Donald:        Righteo. Thanks.
John Thomson:          Thanks.
Andrew Donald:        Thanks.
John Thomson:          Bye." (T documents, pages 1474-1475)

At 5.06pm, another conversation occurred. It is transcribed in terms of Speaker 1 and Speaker 2 where Speaker 1 is Mr Thomson and Speaker 2 is Mr Donald (4th conversation"):

"Speaker 1: Hello.
Speaker 2:Gidday.
Speaker 1:Any chance of reporting?
Speaker 2:Oh, sorry. I thought I did it – gave it to you.
Speaker 1:Well, you said you did, sort of, close to 200,000.
Speaker 2:Oh, look mate – sorry. I've had it on my mind that I've actually rung you back and actually said to you the reporting.
Speaker 1:You gave me the details – I assumed you were going come back later and (inaudible).
Speaker 2:Oh, sorry. 184,000 bought. BIRs – –
Speaker 1:Yeah.
Speaker 2:-- at 95.
Speaker 1:95?
Speaker 2:Yeah.
Speaker 1:Bullshit. Are you crazy?
Speaker 2:Well, that's what we bought them to.
Speaker 1:Ah?
Speaker 2:That's what we bought them to, 95.
Speaker 1:Didn't we get any on the way up?
Speaker 2:Na. None. There's a – it matches out that way.
Speaker 1:Yeah. What happened to all the stock in (inaudible)?
Speaker 2:Yeah. But it – because you out weigh the selling it matches out that way. It matches out at whatever the weight is – weighted side is.
Speaker 1:Oh, it's the only way to get a couple of hundred with – with that high, is it?
Speaker 2:Well –
Speaker 1: Shit it looks a bit – it looks a bit rich, doesn't it? Up 8 percent.
Speaker 2:Yeah, probably. Yeah, probably. Well, mate I gave the instructions to try and buy, you know, up to half a million of them and that was the end result to try and get a few.
Speaker 1:Yeah. That – that's all I could do to get a few – –
Speaker 2:Well – –
Speaker 1:-- go up that level.
Speaker 2:Yeah.
Speaker 1:Oh well.
Speaker 2:That was all to get that level. The instructions were, buy half a million – up to half a million of them and that – and that's basically what price they had to pay to sort of get any.
Speaker 1:Far out.
Speaker 2:Yeah.
Speaker 1:Fine. I'll send everything up to you.
Speaker 2:Okay.
Speaker 1:Righto.
Speaker 2:No worries.
Speaker 1:Oh, hang on. Are you there? (inaudible)
Speaker 2:Andrew.
Speaker 1:They are all for NAFM 10.

Speaker 2: They are all for NAFM 10.
Speaker 1: Yeah.
Speaker 2:No worries.
Speaker 1:Bye." (T documents, page 1476-1478)

After 29 May, 1998, the next day of trading was on 1 June, 1998. On that day, Mr Thomson (speaker 1) returned Mr Donald's (speaker 2) call at some time after 10.07am ("5th conversation"). Mr Donald asked Mr Thomson if he was returning his call and then told him about various stock before saying to him:

"Speaker 2: … Did you want to be buying any of these Burswood back here?
Speaker 1:Well. Man, we'll just make it look that much more ridiculous.
Speaker 2:What, buying them back at these levels?
Speaker 1:No, no, no. Paying 95 for the bloody things.
Speaker 2:Yeah it was a little bit bloody too aggressive that, obviously.
Speaker 1:Given that I guess when we have (inaudible) more to buy, and these are the levels we should have been buying them on Friday.
Speaker 2:In hindsight, yeah.
Speaker 1:But we intended, so I guess we can still finish them off or buy a few more at that sort of level.
Speaker 2:All right. They're about 88, 89.
Speaker 1:Mmm.
Speaker 2:Yeah. All right. Working off what the balance from the order.
Speaker 1:Yeah, I might work on the balance of that.
Speaker 2:Yeah, without being stupid with it.
Speaker 1:Yeah.
Speaker 2:Fair enough. All righty I'll get on to that. Do you want to that sort of over the day.
Speaker 1:Well, yeah, hopefully. Around the 88/89 level I'd say.
Speaker 2:Okay.

Speaker 1:Try and improve the price a bit
Speaker 2:Okay.
Speaker 1:Okay.
Speaker 2:Thanks John." (T documents, pages 1617-1618)

At the end of the match out, NAAM had acquired 184,000 shares in Burswood at 95 cents.

Prior to the Commission's making a banning order against him, ABN AMRO took disciplinary action against Mr Donald. That action consisted of reducing his salary by $10,000 for 12 months from 12 May, 1999, demoting him from the level of Associate Director for a period of 6 months (reviewable after 3 months) and suspending his salary at half-pay for a period of 6 months from 12 May, 1999. After the banning order was made, he was asked to resign to protect the integrity of the firm.

Mr Donald was paid his superannuation entitlement and his long service leave. For a period, he was employed at a racecourse by his father, who is a bookmaker. He received $300 - $400 a week in that work. ABN AMRO supported him and paid his legal costs up to and including the previous hearing of his application by the Tribunal. It has not done so since he appealed to the Federal Court.

Since the stay order was made on 22 November, 2000, he has been employed by BNP Pacific (Australia) Ltd ("BNP"). He is engaged in research and sales and does a "little bit" of dealing when a client gives him an order. His main focus is upon research and marketing rather than upon sales. Mr Donald has made BNP aware of his professional history by giving it a transcript of all of the previous hearings. Its compliance department went through those transcripts. His ongoing employment is dependent upon his succeeding in having the banning order lifted.

THE LEGISLATIVE SCHEME

Regulation of participants in the securities industry

Chapter 7 of the Corporations Law ("the Law") deals with securities. It is divided into various parts, each of which deals with a separate aspect of the securities industry. Part 7.3 deals with the participants in the securities industry. So, for example, it requires that those who carry on a securities business or an investment advice business must be licensed as such and sets out the obligations of being licensed and the rights of those who deal with unlicensed dealers and investment advisers (Divisions 1 and 2).

Division 3 regulates representatives of dealers and investment advisers. A body corporate may not act as a representative (s. 809). A person may act as a representative of a dealer but only if the dealer holds a dealer's licence and the representative holds a proper authority from the dealer (s. 806). He or she may act as a representative of an investment adviser only if the investment adviser is either a dealer holding a dealer's licence or holds an investment adviser's licence and the representative holds a proper authority from the investment adviser (s. 807). Division 3 sets out the obligations of the licensed dealer or investment adviser in relation to those holding his or her proper authority and those of the representative.

Division 4 regulates the liability of licensed dealers and investment advisers for the conduct of their representatives while Division 5 provides for the exclusion of persons from the securities industry. Sections 824 to 826 of Division 5 provide for those circumstances in which the Commission may revoke a licence held by a dealer or an investment adviser. In certain circumstances, the Commission may also issue a banning order under s. 828 if the dealer or investment adviser is a natural person.

Section 829 provides for those circumstances in which the Commission may make a banning order against a natural person who is not a licensed dealer or investment adviser but is a representative of a licensed dealer or of an investment adviser. Subject to the Commission's having given the person an opportunity to make submissions and give evidence at a hearing before the Commission, the Commission may make a banning order if:

"(a) he or she becomes an insolvent under administration;
(b)he or she is convicted of serious fraud;
(c)he she becomes incapable, through mental or physical incapacity, of managing his or her affairs;
(d)he or she contravenes a securities law;
(e)the Commission has reason to believe that he or she is not of good fame and character;
(f)the Commission has reason to believe that he or she has not performed efficiently, honestly and fairly the duties of:
(i)a representative of a dealer; or
(ii)a representative of an investment adviser; or

(g)the Commission has reason to believe that he or she will not perform efficiently, honestly and fairly the duties of:
(i)a representative of a dealer; or
(ii)a representative of an investment adviser."

(s. 829 and see also s.837)

Where the Commission decides to issue a banning order, it must do so by a written order. It may:
"… prohibit the person:
(a) in any case – permanently; or
(b)except where the Commission is empowered by virtue of paragraph 828(c) or 829(e) to make the order – for a specified period;
from doing an act as:
(c)a representative of a dealer;
(d)a representative of an investment adviser; or
(e)a representative of a dealer or of an investment adviser;
whichever the order specifies." (s. 830(1))

Whether the banning order is made permanently or for a specified period, it may include a provision that:

"… permits the person, subject to such conditions (if any) as are specified, to do, or to do in specified circumstances, specified acts that the order would otherwise prohibit the person from doing." (s. 831(1))

Subject to the person's being given an opportunity to appear at a hearing and to make submissions pursuant to s. 837, the Commission may, at any time, vary a banning order against a person by, among other matters, adding a provision permitting a person to undertake specified acts as set out in s. 831(1) (s. 831(1)).
The only other way in which the Commission may vary or revoke a banning order is in accordance with ss. 832 and 833 (s. 830(2)). It may not grant a dealer's licence or an investment adviser's licence to a person if a banning order prohibits that person from doing an act as a representative of a dealer or of an investment adviser (s. 836).

Prohibited conduct

Part 7.11 of Chapter 7 is concerned with conduct in relation to securities. It deals with prohibited conduct, insider trading and civil liability. In so far as prohibited conduct is concerned, it deals with matters such as misleading or deceptive conduct, false trading and market rigging, false or misleading statements in relation to securities and fraudulently inducing persons to deal in securities. In so far as this case is concerned, s. 998(1) provides:

"A person shall not create, or do anything that is intended or likely to create, a false or misleading appearance of active trading in any securities on a stock market or a false or misleading appearance with respect to the market for, or the price of, any securities."

Regard must also be had to ss. 998(5) and (6) which provide:

"(5) Without limiting the generality of subsection (1), a person who:
(a)enters into, or carries out, either directly or indirectly, any transaction of sale or purchase of any securities, being a transaction that does not involve any change in the beneficial ownership of the securities;
(b)offers to sell any securities at a specified price where the person has made or proposes to make, or knows that an associate of the person has made or proposes to make, an offer to buy the same number, or substantially the same number, of securities at a price that is substantially the same as the first-mentioned price; or
(c)offers to buy any securities at a specified price where the person has made or proposes to make, or knows that an associate of the person has made or proposes to make, an offer to sell the same number, or substantially the same number, of securities at a price that is substantially the same as the first-mentioned price;

shall be deemed to have created a false or misleading appearance of active trading in those securities on a stock market.
(6) In a prosecution of a person for a contravention of subsection (1) constituted by an act referred to in subsection (5), it is a defence if it is proved that the purpose or purposes for which the person did the act was not, or did not include, the purpose of creating a false or misleading appearance of active trading in securities on a stock market."

THE EVIDENCE

We have summarised the evidence given by Mr Donald, Mr Thomson and Mr Casey. The T documents contain evidence given at the examinations of other persons concerned in the matter as well as other relevant material. So too do the other documents admitted in evidence. Although we have not attempted to refer to every part of that material in this section of our reasons, we have had regard to all of it and make specific reference to parts of it in other sections.

NAAM and its operations

Mr Thomson

Mr Thomson gave evidence at an examination held under s. 19 of the Law in August, 1998 ("s. 19 examination"). He described the way in which NAAM conducts its business and his role in it. NAAM purchases a portfolio of stocks which comprises a range of stocks in the All Ordinaries Index. The profile of that portfolio changes from time to time as stocks are bought and sold. The changes are dictated by the analysts' views. Taking, for example, the equity dealing desk where he works, Mr Thomson said that analyst fund managers are responsible for certain sectors of the market. Each portfolio has a model, which is prepared once or twice a week, and that model is matched against the actual portfolio. If the actual portfolio becomes over or under invested when compared with that model, the fund manager decides whether to sell or buy a particular stock. NAAM's portfolio is valued each night, Mr Thomson said. Monthly performance figures are published and are made available to the public.

In cross-examination, Mr Thomson said that he prepares the reports as to whether the portfolio was over or under invested. That is technical administrative work and that is different from the preparation of the model. The models are prepared by the analysts. By determining the model, the analysts determine the stocks that are bought and sold.

Having decided whether or not to buy or sell particular stocks, Mr Thomson said in his examination, those analyst fund managers instruct brokers to place their orders. They do not instruct the brokers directly but do so through Mr Thomson by giving him verbal instructions. Mr Thomson said that he did not place any order without first getting those instructions. Later, when asked whether he had any discretion to buy stock, he replied "Within limits, perhaps, but I basically rely on the yea or nay from Stephen or the relevant analyst" (T documents, page 557). Mr Thomson does not take notes of the instructions and only takes notes of the transaction he is about to do or has done. Those notes are kept on a continuous running pad and form the basis of the report he prepares on a spreadsheet. The conversations that Mr Thomson has on his telephone are taped and the tapes kept for approximately six weeks.

The instructions he receives normally include an indication of the stock to buy, the volume and, if the fund manager directs, a price limit. Generally, the fund manager does not put a limit on the price and Mr Thomson tries to stay "pretty much close to the market". At times, the volume to be bought is not divulged to the broker but they are told "roughly" how much NAAM wants to buy. With regard to time limits, Mr Thomson said that it is not normal to place a time limit on the execution of orders he has placed. If an order has not been completed on a particular day, the broker will generally check at the beginning of the next business day if he or she is to continue with the order. Mr Thomson said that he does not have any standing instructions in relation to dealing late.

NAAM does not have a structured panel of brokers and Mr Thomson said that he had a discretion as to which broker he chose to deal with. There was a tendency to deal with the brokers who communicated their buy and sell orders to them. At times, a particular broker is particularly good in dealing with certain stocks. If that is the case, he deals with that broker. ABN AMRO is a broker used by NAAM but not in relation to any particular stock. During the examination, Mr Thomson said that he placed orders with Mr Donald at ABN AMRO a few times a week but not every day; it all depended upon what was happening with the market.

Mr Thomson said that he had a screen on his desk that gave him up to date quotes on equity stocks. IRESS is the provider of the information on that screen. The information given related to bids and offers.

The operation of the market

Mr Thomson

When asked about the way in which the market works, the following exchange took place between Mr Thomson and Mr Cleary and Ms Cosenza:

"Q. … I just wanted to ask a few questions about your knowledge of the … market and the way it works. … during 10 and 4, you've got the opening phase? … Are you aware of how that operates?
A.In terms of the matching process?

Q.Yeah.

A.… Not as probably as efficiently as I should be, matching is relatively new, but the market opens in a staggered form, and – closes with that – that matching out that –

Q.And if you use – well, in the – in the opening phase, would it be correct to say that they are matched at an average price on the opening?

A.I'm not sure.

Q.Okay. What about the match-out at the end of the day; can you – are you able to explain how that works to me?
A.No, not sufficiently, no, just closes at a price, but I don't know exactly how it works, though.
MR CLEARY: Okay, thank you.
MS COSENZA: Q. Do you have any understanding at all of how the match-out period works?
A.Well, roughly. People put in bids and they – the market matches them out at the last minute based on the – what the buying and selling, I suppose, matches each other off, but at – at what price, I don't know how it's – quite – I don't understand fully how that is established.

Q.Do you know of any advantages in keeping an order until the match-out period as opposed to having –

A.No, I haven't.

Q.-- it executed during the day?

A.I haven't really used for any purpose, so I don't really know." (T documents, pages 568-569)

In re-examination, Mr Thomson said that he was not aware that shares were traded at only one price in the match out. He had thought that it was an average price and not the highest.

Mr Casey

Mr Casey said at his s. 19 examination that he does not have time to write down his instructions but, instead, keeps them in his mind. At times, the instructions are vague and he can use his discretion. Where price is concerned, the extent of the discretion depends on the dealer's instructions and factors such as the strength of the market and availability of the stock. While he may express an opinion as to how an order should be executed, if a dealer wants it executed in a certain way then he must abide by that. Mr Casey said that he must organise his work and that of the other operators in order of priority.

Mr Casey explained that the market opens alphabetically but randomly. For the "As" and "Bs" it opens within a 15 second time period either side of 10.00am. Taking account of the size of the orders, the opening bids and offers are averaged to the fourth decimal place to ensure that nobody is disadvantaged. The market closes at 4.00pm.

The market opens again for match out, which starts at precisely 4.05pm. Orders to buy or sell can be placed between 4.00pm and match out. Care must be taken not to leave an order too late as the market may close early or late. Match out, however, is never early or late but occurs precisely at 4.05pm. At that time, the market opens instantaneously for a very brief period of time and all overlapping orders will be matched at one price. The price is determined by the weight of the bid and the offer. This occurs to ensure that nobody is disadvantaged.

The dealings between Mr Donald and Mr Thomson regarding the purchase of Burswood shares

Mr Donald

Mr Donald said in giving his evidence that he had traded Burswood shares for Mr Thomson for some six to twelve months before 29 May, 1998. Mr Donald said that he had mostly been a buyer of Burswood stock and had mainly dealt with the one client. Occasionally, he had cross traded Burswood stock. He said that he was used to trading in the 90s in that stock and, before 28 May, 1998, there had never been an occasion when it had closed below 90 cents. The trade on 28 May, 1998 was the first time the stock had sold below 90 cents in the three month period shown on the IRESS report (Exhibit A). The Trade Line document (Exhibit B) shows a sharp fall after the trade on 29 May, 1998 and Mr Donald thought that it could possibly have reflected the "unloading" of 19.6 million shares the day before. Mr Donald had not known about that activity. In the days and weeks after 29 May, 1998, the Trade Line document also shows volatility in the trading of Burswood shares and showed a downward movement of 20% in one week and an upward movement of 13% in another. Prior to 29 May, 1998, Mr Donald had not thought that such volatility had been shown in Burswood shares. There had, however, been a dramatic drop the day before (i.e. 28 May, 1998).

Mr Donald had understood that Mr Thomson's comment in their 1st conversation that "It's time to get stitched up again …" meant that there was a need by NAAM to increase the price because performance is calculated monthly or quarterly. NAAM had bought a lot of shares through ABN AMRO on ABN AMRO's recommendation but, ever since, the share price had depreciated aggressively. It had been a bad research call.

Mr Donald said that he had looked at the screen when Mr Thomson telephoned him. When he added up the numbers on the screens, he saw that there were 160,000 shares up to 93 cents. Mr Thomson's evidence that he wanted to trade at market price could mean anything. If the shares move without his buying, he can buy at a higher price. Therefore, if the shares moved to $1.05, he could buy at $1.06. That is the market; there is no limit. In cross-examination, Mr Donald agreed that, on 29 May, 1998, Mr Thomson had thought Burswood shares were too expensive. At the same time, he (Mr Donald) had thought that they were too cheap.

Mr Donald said that he had not known that Mr Thomson did not understand the match out process. Rather, he had assumed that he did. In cross-examination, Mr Donald said that it was not his job to teach Mr Thomson how the market works. He had assumed that a dealer in a major client would know. In giving evidence, Mr Donald said that when Mr Thomson had suggested that the lines that had gone through a few days before might have given them a kick in the bottom, he had understood that the volume that had been traded might have helped the stock to bottom and so push the market up a bit. Mr Donald had no idea what the price might be in the match out.

In cross-examination, Mr Donald was referred to Mr Thomson's response when he had told Mr Thomson that his instructions had been to try to buy as little as possible at the best possible price. Mr Donald denied that Mr Thomson had clarified his instruction at that point. Mr Thomson was saying to him that he was happy to buy quantity but was not saying to buy the stock now. He was only saying to him that he did not need to buy as little as he could. Mr Thomson was not commenting about price; only about quantity.

When he asked Mr Thomson if he was not a late buyer at that level in their 3rd conversation, he had seen that a couple of offers had come in at 95 cents. He could have achieved the purchase at that level in the after market. Mr Donald said in giving evidence that he believed that Mr Thomson had understood that he had bought at 95 cents and that he was asking him if wanted to buy more. There was nothing in their conversation that led him to think that Mr Thomson might not have understood their earlier conversation. When asked if he believed that he had done anything wrongly, Mr Donald replied that he believed that he had not got enough stock for Mr Thomson. Mr Thomson did not consider that the price was too high.

When suggested to him in cross-examination that he had never told Mr Thomson in their 3rd conversation at 4.08pm that he had bought the shares for 95 cents, Mr Donald said that Mr Thomson had been aware that the shares were being purchased in the match out. He agreed that Mr Casey had reported back to him at 4.10pm that he had bought about 184,000 (T documents, page 1510) but that Mr Thomson could have added up the sales on the screen. There were about 25 sales he could have added up.

Mr Donald thought that Mr Thomson's asking him whether they had got any on the way up was a "little bit ridiculous" when he had known that the purchase was to be done in the match out. He did not accept that this showed that Mr Thomson did not know how the match out worked and said that it was very hard to believe that he did not know.

Mr Donald accepted that he had been lax in not taking full instructions from Mr Thomson. He should, he said, have actually asked him what he wanted to do. As far as he was concerned, their conversation had been ordinary. There was no arrangement with NAAM as to a figure that was appropriate to pay for shares. It did not cause him any concern that the figure of 95 cents was suggested by Mr Casey. At the end of the day after the trade was done, Mr Donald was concerned about the lack of quantity of shares that he had acquired.

Mr Thomson

In 1998, Mr Thomson said in the s. 19 examination, he used ABN AMRO and J B Were to purchase stock in Burswood. The dealer who had responsibility for NAAM's account in ABN AMRO was Mr Donald. On 29 May, 1998, Mr Thomson placed an order for Burswood stock with ABN AMRO. That order was placed after he had gone to see his supervisor, Mr Stephen Hiscock and asked him whether they wanted to buy Burswood. He invariably checked with the fund manager before placing an order. Mr Thomson said that he would have shown Mr Hiscock that the model indicated they were underweight in that stock. That conversation would have occurred between 2.00 and 3.00pm. Mr Hiscock would have responded that he did want to buy Burswood but he left the volume to buy to Mr Thomson who tried to purchase as many as the model indicated were required. Mr Thomson said that he left a market order with ABN AMRO.

Later, in cross-examination, when it was suggested to Mr Thomson that Burswood shares had previously traded at levels up to $1.00 on 9 April, 1998, he responded that it was a good time to buy. He could not say what had been the lowest price paid before the purchase made on his behalf. The trend was down and the shares might not have previously been traded at these levels. NAAM was not selling Burswood shares at the time unless it needed to balance the portfolio. The fact that it was cheap was a good reason to buy at that time.

In cross examination, Mr Thomson said that, even though he had an IRESS screen in front of him, he had asked Mr Donald whether there were any Burswood stock around because IRESS did not necessarily give him that information. He agreed with Mr Murley that he could see that there was some stock there. He denied indicating to Mr Donald that he should buy what was shown on the screen.

Mr Thomson recalled in the s. 19 examination initially suggesting to Mr Donald that he buy 200,000 but he thought that he increased that to 500,00 in case he was able to turn up some more stock. He did not tell Mr Donald why NAAM wanted to buy the shares as "… it's not … their business to know why we want to buy the shares" (T documents, page 580). The order was placed about 3.15pm. As to the price, Mr Thomson said that he had not given any instructions:

"… It was a market order, so there was no talk of the price. He gave me a rundown of the market, but I just gave him an order to buy the shares at – well, at market." (T documents, page 580)

Mr Thomson later explained that he had not placed a limit on the price because he:

"… was placing a market order. Generally they come back if they find a line at a – with – and refer a price, we can talk about the price then." (T documents, page 587)

He had left price up to the discretion of Mr Donald. As to the licence that a broker has on a market order in terms of price, Mr Thomson said that he thought "Not more than a cent or two without – certainly without referring it." (T documents, page 588)

Referring to his opening remarks at the beginning of his 1st conversation with Mr Donald to the effect that "It's time to get stitched up again …", Mr Thomson said that he had made "… a silly flippant remark to him, but it had no bearing on the order whatsoever." (T documents, page 581) When asked in the s. 19 examination if he had been stitched up before, Mr Thomson replied:

"… I wasn't being absolutely serious. There was – looking back at the records after this was brought up, I think there might have been one order a couple of months prior, which price came off the next day or – but that was the one incident, the one instance, and I don't know that there was nothing more meant to – meant to it than that." (T documents, page 584)

Later, he denied that he was giving Mr Donald an instruction to attempt to increase the price of Burswood stock (T documents, page 592). In cross-examination, Mr Thomson repeated that he was being facetious when he had referred to its being time to get stitched up again. He had done that because it is his nature to have a bit of a dig and because he wanted to make sure that NAAM was looked after properly.

In cross-examination, Mr Thomson said that his opening words in the 1st conversation were intended to indicate that he had more Burswood shares to buy. He was open to Mr Donald's coming back to him with offers. He had known that the shares had dropped to 88 cents on 28 April, 1998. Before 19 May, 1998, they had traded in the low 90s and the same had occurred in the period dating back to March. On many occasions, they had traded at $1.00. Mr Thomson denied that he intended to get Burswood shares to trade at their "real value", which he agreed was 95 cents. Rather, he had noticed that the stock had dropped and he wanted to buy at that level.
Mr Thomson explained in the s. 19 examination that, when he had told Mr Donald to "… buy up to a half if you have to, if you can", he had meant to buy up to half a million shares. He continued:

"… Given the depth of the market, it didn't look like there was a lot there, and we had a lot more to buy, so I was in a bit of a quandary whether to give them a small order or a big order. Obviously we wanted to buy more, but I couldn't see that there was enough market to satisfy us, but I gave him a bit of licence to – to buy; if he came across another client who had some to sell, he could buy that size or quantity – that quantity.
…
But, as I said, given the market, it didn't look like there was that sort of quantity on – in the screens, anyway, but that doesn't infer there's not, not some more around somewhere." (T documents, pages 586-587)

When he had told Mr Donald "Don't be ridiculous about it" in the 1st conversation, he had meant that:

"Given that the market looked fairly thin, I didn't want him to go and pay too much, because I – my intention was to pick it up around market of 88/9.
…
… I didn't want to pay more than the market at the time …" (T documents, pages 587-588).

In cross examination at the hearing, Mr Thomson said that it was hard to recall the instructions he had given to Mr Donald but, having read a transcript of them, he did not think that there appeared to be too much clarity. There was a misunderstanding by both parties but he did not think that he was the cause of the misunderstanding.

In cross-examination, Mr Thomson said that he hoped that Mr Donald had picked up 58,000 shares at 89 cents, 78,000 at 90 cents and 160,000 up to 90 cents. They were only a cent away from 90 at the time. When asked whether there were some at 93 cents, Mr Thomson replied that he could not recall the depth of the market at the time but agreed that there would have been stock above those levels. There is always stock on the market at higher levels. Mr Donald had said that there were 160,000 up to 93 cents. Mr Thomson, however, said that he expected to get stock below 93 cents. When asked by Mr Murley what higher level he was prepared to go to, Mr Thomson said that he was prepared to go to as low a level as possible in the market. Mr Thomson agreed with Mr Murley that, had Mr Donald taken all of the stock up to 93 cents, he would then have been paying more but pointed out that Mr Donald had not done that. It was not the market at the time.

In re-examination, Mr Thomson said that he had not snapped up the 160,000 shares at 93 cents because he thought that, if he left them alone, he could look about to see whether he could get more at a lower level before going to the market. He was aware that Burswood shares had been down to 88 cents and he was asking if there were any more at that level.

Again in cross-examination, Mr Thomson denied that he had told Mr Donald to purchase the rest at 93 cents. That would have been ridiculous, he explained, and he had hoped to do better than that.

The 2nd conversation was also the subject of cross-examination. Mr Thomson said that he had not understood what was meant by "match out" as it was a relatively new expression. He had said "yeah" when Mr Donald had said that he would be leaving Burswood to the match out as he was leaving the order to Mr Donald. Mr Thomson said that he did not understand the match out process and did not know why he did not ask Mr Donald what it meant. He had said that he was not particularly concerned about the last price reached by Burswood.

When asked in the s. 19 examination about their 3rd conversation and what he had understood Mr Donald to mean when he said "They're obviously going to go out last 95", Mr Thomson said that he had understood that the last sale price of the day is going to be 95 cents. He was not satisfied with purchasing only in the vicinity of 200,000 shares but said that it "… was all … [he] was going to do, particularly given the price move, and it was all … [he] could get, so … [he] had to be" (T documents, page 605). He was not happy to buy late as the price had gone too high and he did not want to be buying more at that level. When asked why he had not appeared annoyed at Mr Donald's telling him that he could not pick up many at all, Mr Thomson replied that it was all he could do and there was no reason to get upset that he could not fill the order. He did not show any surprise about the price as he did not know that NAAM had paid 95 cents at that stage. At no time during the conversation did he know what price had been paid for the Burswood shares.

In cross-examination, Mr Thomson denied that Mr Donald had told him the price he had paid when they had their 3rd conversation. He had not asked the price because he was distracted at the time and had telephoned Mr Donald later. Mr Thomson also denied that he had been told that Mr Donald had bought the shares when Mr Donald said to him "So we don't want to buy any more?".

With regard to the 4th conversation Mr Thomson said in the s. 19 examination that, when he said "Bullshit, are you crazy?", he:

"… couldn't believe that he paid that much, that high a price, given where the market had been trading when I placed the order." (T documents, page 608).

When he had asked Mr Donald "Didn't we get any on the way up", he said that he thought that the "… reporting would have been at an average price with stock bought out of a screen on the way up" (T documents, page 608). He explained in re-examination that he would have thought that the average price would have been lower even if shares had been purchased at 95 cents. His comment that "It looks a bit rich, doesn't it, up 8 per cent?" was, he said in the s. 19 examination, intended to emphasise:

"… the fact that we'd paid 8 per cent more than what the market was when I placed the order, which was excessive." (T documents, page 609)

Mr Thomson said in cross-examination that he would have reported the 4th conversation to Mr Hiscock. They spoke about it and decided that the best thing to do was not to proceed with the order with ABM AMRO but to place it with another broker (J B Were). That decision was made some time before the start of trade on 1 June, 1998. As his recollection was to that effect, he said that he could not work out what he was referring to in the 5th conversation when he talked about the Burswood shares. His recollection was that the order had been cancelled.

In cross-examination, Mr Thomson said that he had not taken any steps to withdraw the order and was still prepared to deal with Mr Donald. The following trading day, he had directed Mr Donald to get Burswood shares at a "better price" than he had the previous trading day i.e. at a lower price. Mr Hiscock directed him not to and to reinstitute the order with another broker.

The dealings between Mr Donald and Mr Casey regarding the purchase of Burswood shares

Mr Donald

In an undated statement made some time after his s. 19 examination on 15 September, 1998 but before his subsequent examination on 23 June, 1999, Mr Donald denied that he had, at any time, contravened s. 998(1) of the Law. He agreed that he had made the statements attributed to him in Annexure "A" to the Notice of Hearing dated 25 May, 1999 and sent to him. Those statements extracted the essential exchanges between Mr Donald and Mr Casey in their 3.33pm conversation and between Mr Donald and Mr Thomson in their 3rd conversation (T documents, pages 65-66). Mr Donald then continued:

"…At the time it was my intention to carry out Mr Thomson's order to purchase shares in Burswood Ltd. on 29 May 1998 and to do this so that the shares would be purchased at a price higher than that at which they had previously been trading.

3.I did not at any time indicate to the SEATS operator Mr. Michael Casey what was the level at which I wanted him to bid for the shares. Originally I did not anticipate that he would bid at 95 cents although I well understood that a bid was to be made during the match-out period on that day. What I had intended was to have the shares bought at a somewhat higher price than they had been and certainly not to have the price pushed down.

4.As I indicated at my examination conducted pursuant to section 19 of the A.S.C. Law, I considered that previous trading in Burswood shares had been unsatisfactory for some period prior to 29 May 1998.

5.Because I considered that the price of the shares was unreasonably low compared with their true value I intended to have the shares moved to a more reasonable level.

6.Taking into account the fact that the trading was occurring in an open market as well as my view that it was legitimate for the client to endeavour to have the price of the shares moved to a reasonable level upwards in light of their true value, I did not and still do not consider that to make a bid higher than the previous market level was in any way improper.

7.At the same time, I consider that my attempted execution of the client's order was badly performed on the day.

…" (T documents, pages 126-127)

In cross-examination, Mr Donald said that he had wanted Mr Casey to execute the order because he was a senior operator. A junior operator had mishandled an order at an earlier time. The timing in the match out was very important. Orders can be generated or withdrawn before match out occurs. Mr Casey was an experienced operator in the whole of the trading day.
When asked about paragraph 3 of his statement (paragraph 73 above) in giving his evidence, Mr Donald confirmed that he continued to stand by it. He added that he believed that the client was disadvantaged by a lower share price. Burswood shares were an important part of the client's shareholding. His view in paragraph 5 of his statement was tempered by the views of the ABN AMRO's analyst. In Mr Donald's view, a reasonable level at which Burswood shares should trade was in the low dollar range. He had advised NAAM that, in his view, Burswood shares were unreasonably low. When he spoke to Mr Thomson, there were Burswood shares on offer to sell at 93 cents.
Mr Donald said in giving evidence that, in saying to give the shares "a bit of a nudge upwards", he had meant he wanted the shares to close a little higher. In cross-examination, he agreed that he had instructed Mr Casey to raise the price. He acknowledged that he knew that Mr Thomson thought that the Burswood shares were too expensive but said that he was not generating the order. It did not matter what his view was. The instructions were coming from Mr Hiscock. He had spoken to him on many occasions but not on that day. Mr Donald later explained that it was Mr Thomson's responsibility to implement orders and not to undertake research. He is an operator as is Mr Casey.

In giving evidence, he could not remember why he had wanted to buy the stock "whole" or all at once. Mr Donald recalled that he had not wanted to force the price too high for he would not be left with enough shares at the end of the day to achieve the closing price. His performance was judged against the weighted average and he needed to achieve better than that. With regard to paragraph 6 of his statement (paragraph 73 above), Mr Donald said that he still stood by the views he had expressed. He repeated that he was not happy that he had not bought the whole 500,000 shares. As to the price of the shares at 95 cents, at the time he had not considered that an unreasonable price at which the shares should be trading. He now considers that it was too high.

In cross-examination, Mr Donald said that buying the stock whole did not mean that it had to be bought in one parcel but it did mean that the whole of the stock was wanted. He agreed that his later agreeing with Mr Casey's statement that he wanted to close on the highest price possible at the lowest amount possible was contradictory. He said that he was intending to increase the share price but that he wanted the volume of stock as well. Mr Donald agreed that he had contradicted that position when he had told Mr Casey that "… we don't have to buy half a million buy 200 if we don't need to …" (T documents, page 1458)

Mr Donald said that he understood what Mr Casey meant by "match out". He was content with what Mr Casey proposed as it seemed well under control. Mr Donald now believes that he should have given Mr Casey more instructions. Those instructions would have been that Mr Casey was to purchase at market price at his discretion but he did not think that those additional instructions would have made a difference. With hindsight, a fairer price to pay to would have been 92 to 93 cents.

In giving oral evidence, Mr Donald said that, from memory, he did not give a price at all when he placed the order. He had formed a view that Burswood shares were "pretty cheap". Mr Donald later said that ABN AMRO's analyst's view had been that Burswood stock was very cheap, and that the analyst had held that view for some time. The value of the stock, Mr Donald said, had been about $1.80 or $1.90 per share but, at this stage, the price had dropped away. NAAM were a large client and they wanted to reflect the true value of the shares. Mr Donald said that his view of the true value was biased by ABN AMRO's research. He denied in cross-examination that ABN AMRO's recommendation to buy Burswood stock had been an embarrassment to it.

Later, in response to a question from the Tribunal, Mr Donald said that he had not given Mr Casey a price to which he could go in the match up because he had a lot of faith in him as an operator. Mr Casey was very highly regarded as an operator and Mr Donald still holds that view. Having thought about what he himself had done, Mr Donald said that he would no longer allow a person in Mr Casey's position to fix a price.

In cross-examination, Mr Donald said that it was his role to take an order and to pass it on to an operator. He told the operator generally what his instructions were. Mr Donald agreed that, shortly after he received the order from Mr Thomson, he had filled out an order form for the purchase of the Burswood shares (T documents, page 1595). Under the word "limit", he had written "mkt". He always makes that entry, he said, unless he is given a specific limit. Mr Thomson never gave him a limit. When asked whether Mr Thomson had said nothing about price, Mr Donald replied that it was that time of month. When asked whether he had interpreted that as meaning to push the price up, Mr Donald replied "no" but that it was market terminology and he understood what he was saying. He never told Mr Casey that the shares were to be bought at market price.

When asked why he had waited for match out to purchase the Burswood stock, Mr Donald replied that he had already said that he wanted to take the stock out to its true value. He had never intended to trade at a lower price but had intended to purchase at a higher price. The match out was the only way to achieve the last sale and to get the true value reflected. The bid to purchase at 95 cents would determine the closing price unless another were made in the 14 seconds remaining after it was entered. Mr Donald agreed that he had not told Mr Casey in their 4.03pm conversation that Mr Thomson was happy to buy quantity. He also agreed that Mr Casey was putting both quantity and price to him. In his view, he said, he had not done it properly as he should have told Mr Casey to get more shares than that proposed by Mr Casey.

Mr Donald said in giving evidence that he had never had a complaint of impropriety made against him before or been the subject of an investigation. He understood what he had done wrongly and that it would never occur again.

Mr Donald accepted that it is in the interests of the market that it be free of manipulation. Further, he agreed that buyers generally wish to purchase shares at the lowest price possible. A trade is done when an offer to sell and an offer to purchase come together. When asked if an artificial market can be created if a buyer is not seeking to buy at the lowest possible price, Mr Donald asked whether it is artificial if the buyer is prepared to pay a price. If a trade occurs, that is the market. He now thinks that the trade of Burswood shares at 95 cents was too high and did not reflect what the market was trading at on the day. He did not agree that the bid of 95 cents presented a misleading appearance on the day. Burswood shares had been trading at all sorts of higher prices. The price had come down 6% before 29 May, 1998. The price had been 98 cents. Mr Donald did not think that 95 cents was too high. At the same time, Mr Donald agreed that the price had moved back to 90 cents and had never returned to 95 cents. The shares had a definite momentum and were going all the way down.

A little later, Mr Donald said that he had been wrong in asking Mr Casey to push the share price higher. He then said that he could not see anything wrong in making a higher offer if there was nothing on offer. Later, he disagreed that what he had done was unethical. What he had done was inappropriate but not unethical. If he had achieved six or seven million at 95 cents, it would have been all right. That is, if he had achieved volume, it would have been all right. As it was, 95 cents was too high a price for the volume he achieved. If he is looking for volume, it is not inappropriate to take the share price to a higher level. If the share price could not be moved, the market could not work. Where action is taken to move the share price, it is inappropriate. Where action is taken to acquire volume or to dispose of it, action is not inappropriate. The result may be an increased price but volume, rather than price, is the purpose.

Today, he would think that there is something improper about seeking to raise the price of shares by making a bid substantially above where the market was trading. He would not again engage in the conduct in which he engaged on 29 May, 1998 if he believed the stock undervalued. Mr Donald would not do so because achieving a price move of 6% and not acquiring the volume is not appropriate. It is not proper trading. At the time, he did not regard his action as particularly bad but he does so now.

In his s. 19 examination, Mr Donald had agreed that he had missed opportunities to purchase at 88 and 89 cents. In cross-examination, he explained why he regarded these as missed opportunities when it had been his intention to purchase the Burswood shares in the match out. They were missed, he said, because it had been his intention to purchase 500,000 shares and he had acquired only 184,000. He had dealt in the match out to reflect the true value of the shares. Had an offer to buy at 95 cents not been made, Mr Donald thought that the closing price of Burswood shares would have been about 88 to 90 cents and probably not 95 cents.

In response to the Tribunal's asking him why he would not repeat his actions of 29 May, 1998, Mr Donald said that he can now see that there was no true reflection of the market at the time. His action took away the ability of the buyer to buy shares to the level where it could not buy. His idea of where the true value of Burswood shares lay was irrelevant.

Mr Thomson

Mr Thomson said that he had never spoken with Mr Casey regarding the purchase of Burswood shares. He read the transcript of the conversation between Mr Donald and Mr Casey and said in cross-examination that it did not accord with the instructions he had given to Mr Donald. He had given an initial order for 200,000 shares but had not indicated a half million shortfall in that stock. Instead, he had indicated that it could be increased to 500,000 to indicate that NAAM had buying capacity. Mr Thomson did not believe that Mr Donald's instruction to Mr Casey to give Burswood shares a nudge upwards had been consistent with his instructions. He believed that the volume he wanted could have been achieved at the lower prices.

Mr Casey

At the s. 19 examination, Mr Casey said that, apart from his London cables, he does not know the identity of the dealer's client. He may be told later but it does not appear on the IRESS system, which captures the orders. Mr Casey said in giving evidence that, when he receives a client's order, his normal practice is to look at the stock on the screen if he has time to do so. He decides whether to buy or sell after taking into account share price, the course of sales, what is on bid and what is on offer and the volumes of those bids and offers. On 29 May, 1998, he did not spend much time looking at Burswood. It was not a stock he usually followed. He formed a view to purchase it.

At the s. 19 examination, Mr Casey said that, when Mr Donald said "It's the end of the month"; it had significance to him. From his own point of view, it meant that "… he might be in some way trying to do something in, in the stock" (T documents, page 663). That "something" was to buy on the close transactions and to close the stock at a certain price. He could not accurately state what the purpose would have been. Mr Casey observed that he had no recollection of that having been said in the conversation and he was giving his interpretation as to what had been meant. Apart from listening to what stock Mr Donald wanted to buy and at what price, together with any other instructions, Mr Casey said that he would not have listened to what Mr Donald said. He is too busy and does not interpret what Mr Donald says. Although Burswood stock was not a stock he normally traded in, it was not unusual for him to accept an order in a stock outside his normal range.

Apart from the taped record of their conversation, Mr Casey could not recall Mr Donald's telling him that he wanted to give the Burswood stock a bit of a nudge upwards. His understanding of such a statement was that it meant exactly what it said. He has executed orders where he has had to offer in the match out stock significantly below the level at which it closed. In cross-examination, Mr Casey said that, as a SEATS operator, he had to take instructions from the dealer. While he had discretion in the execution of an order, he could not go outside the dealer's instructions.

Although he had the capacity to tell a dealer that what he wanted was not right or proper, he could count on the fingers of one hand the number of occasions when he had done so. There was a reluctance to do so in the industry as there could be recourse against an operator in that it could be said that the operator was not doing his or her job properly. The operator is in a subservient relationship to the dealer. In view of his experience with the Burswood shares, however, he would no longer follow such an instruction. He is "professionally ashamed" about what happened. At the time, he had offered to resign from ABN AMRO.

When Mr Donald had told him that he wanted to "have the stock whole", Mr Casey said in giving evidence that he had understood him to mean that he wanted to buy the whole half million shares in Burswood. That meant that Mr Donald did not want to impact the market early as the sellers might run away.

Mr Casey agreed that the SEATS print out for 29 May, 1998 showed that 8,000 Burswood shares were traded at 3.34pm at 89 cents and an ask for 120,000 was entered at 3.47pm at 88 cents. At 3.50pm, Pru-Bache entered 120,000 on the offer at 89 cents. Mr Casey agreed that 120,000 would have been a "pretty chunky" part of an order of 500,000 (T documents, page 682). He would have had a chance of buying 120,000 at 89 cents had he been executing the order at that time. He probably did not look at that aspect, however, until after the market had closed. That was so because he had interpreted Mr Donald's instructions to mean that he wanted to buy them at the close. At 4.04pm, an undisclosed bid was put in by ABN AMRO of 500,000 at 95 cents. There was nothing mysterious about an undisclosed bid because, as an institutional broker, ABN AMRO often used it so that they did not give too much away.

During the s. 19 examination, Mr Casey was asked whether 7 cents above the prevailing price was outside the limitations when he had been given a market order. He did not think that 5 cents would be excessive on a dollar stock if a statement were being made that a certain amount of stock had to be bought. As to 7 cents, he could not recall what he thought on the day. When he thought about it at the s. 19 examination, perhaps 7 cents was too much when it is thought of as a 10% increase on the previous price. It "… may have been a bit punchy, … a bit aggressive" (T documents, page 686). When asked whether he looked at the last trade when he placed an order in the match out, he said that he did not get a lot of time to see that it was a 10% increase. An operator should try to check because someone might have been trying to sell at that price. We note that the increase was later acknowledged to be about 8% and not 10%.

As to the selection of 95 cents, Mr Casey said that he knew Mr Donald wanted to buy about 200,000 and, after looking at the SEATS screen, he decided he had to go to that level to buy that number of shares. He denied that it was his intention to close the price of Burswood shares on 29 May, 1998 during the match out at an artificially higher level. It was not his understanding that he was given instructions to do that. He was just dealing in the match out.

In giving evidence, Mr Casey said that he had no formula by which he arrived at a bid of 95 cents. He did not have a notion that it was the level at which the stock was trading. He would have seen the course of sales for Burswood stock had he looked at the screen. This is shown on the print out from IRESS (Exhibit A). As it was, he had been too busy to look at the course of sales as he needed to do that on a separate computer. The difference of 6.8% between 88 and 95 cents was not, in his experience, a large increment. At the time it did not cause him any concern but it did later when he assessed it against his bench marks of performance.

The Trade Line document (Exhibit B) shows that trading in Burswood stock had been fairly stable with most swings only being in the 5 cent trading range. On 1 June, 1998, the price fell to 90 cents. It followed that the share price of 95 cents achieved on 29 May, 1998 remained in place for only one day. That price had been achieved only because of his conduct, Mr Casey acknowledged. There were trades in Burswood shares for 88 cents shown on the SEATS report at 15:48:30pm, 15:21:49pm and 15:47:57pm and at 15:15:19, 15:50:56 and 15:51:27 for 89 cents (T documents, pages 1469-1470).

Mr Casey said that he had to telephone Mr Donald twice as he was not clear as to what he wanted. In the s. 19 examination, Mr Casey said that he had understood that Mr Donald wanted to deal in the match out. In cross-examination, Mr Casey said that he had understood Mr Donald to ask him to raise the share price. His strategy to use the match out had been designed to do that. There were numerous opportunities to buy between 3.30 and 4.00pm but he did not take them up. His aim was to get the highest price with the lowest volume of stock purchased. He did not feel under any obligation to buy the whole 500,000 ordered because the point of the exercise was the price and not the volume. By bidding at 95 cents for 500,00 at 4.04.46pm, he achieved that unless a larger offer came in. Mr Casey agreed that the bid "really stood out" in terms of price when viewed against all that preceded it. All trades that then occurred resulted from that bid.

In re-examination, Mr Casey agreed with Mr Murley that the SEATS report showed that a bid to sell 109,569 at 88 cents was cancelled at 16:04:52 in response to his offer of 95 cents. He also agreed that, had it not been cancelled, he would have got close to securing the 500,000 Burswood shares. Mr Casey also agreed with Mr Murley that he had tried to get the whole 500,000. When asked by Mr Murley as to whether he had seen anything sinister in being asked by Mr Donald to get the highest price possible, he said that he should have been more diligent as it is his role to look at the execution of an order. He has learnt an enormous amount from what happened. Until Mr Donald subsequently left ABN AMBRO, Mr Casey said that he continued to deal with him and nothing ever went wrong either before or after the Burswood share purchase.

Any impact of the acquisition of Burswood shares by NAAM

Mr Thomson

Mr Thomson considered at his s. 19 examination whether a share price of 95 cents would have enhanced NAAM's performance. His view was:

"… it might have enhanced the performance of the fund over that month a minor amount, I can't quantify that. But given it was only a small holding in – in the whole portfolio, but overall in the next month, it – it offsets itself, so I don't see any advantage in – in doing it at all." (T documents, page 620)

In cross-examination, Mr Thomson agreed with Mr Murley that the end of the month affected the portfolios as far as their shares were concerned and said that he was conscious that it was the end of the month.He later added that he did not have to explain if he did not trade on the last day of the month. Mr Thomson denied that he had wanted the price of Burswood shares to stabilise and denied that the fact that the shares closed at 95 cents on 29 May, 1998 meant that the portfolios would look good. Burswood shares represented only 1½ % of the portfolio and the price movement contributed approximately 0.1% to the portfolio. A 95 cent closure was a marginally better result for the portfolios than closure at 93 cents.

CONSIDERATION

The first issue that we must consider is whether Mr Donald comes within any of the circumstances described in s. 829 and, in particular, s. 829(1)(d). That requires us to consider whether Mr Donald has contravened a securities law. In this case, the relevant securities law is s. 998(1). In considering the appeal from the earlier Tribunal's decision in this matter (Donald v ASIC [2000] FCA 1142 (Unreported, Heerey J, 10 October, 2000)), Heerey J adopted the analysis of Sackville J in Australian Securities Commission v Nomura International PLC (1998) 89 FCR 301 in which his Honour divided the provision into six components:

"…A person shall not
[i]create; or
[ii]do anything that is intended to create; or
[iii]do anything that is likely to create;
a false or misleading appearance
[iv]of active trading in any securities on a stock market;
[v]with respect to the market for any securities; or
[vi]with respect to the price of any securities." (page 390 quoted at paragraph 17)

In this case, we have focused upon components [iii] and [vi]. That is to say, did Mr Donald do anything that was likely to create a false or misleading appearance with respect to the price of any securities and, in particular, with respect to the price of Burswood shares?

On the basis of his own evidence, we find that, on 29 May, 1998, Mr Donald asked Mr Casey to give Burswood shares "a bit of a nudge upwards". By that expression, we find, on the basis of his express acknowledgment during the hearing, that Mr Donald wanted the price of the shares to be raised above the level of 88 or 89 cents that they had traded at earlier in the day. We find that he considered that the price should be raised because he thought that they were not trading at their true value. In his view, a reasonable level at which Burswood shares should have been trading at the time was in the low dollar range. We find that Mr Donald's view was formed, at least in part, on the basis of the opinions expressed by analysts within ABN AMRO. His view did not accord with that of Mr Thomson who thought that the shares were too expensive at 93 cents.

We also find that Mr Donald did not give any direction to Mr Casey as to the level to which the price should be raised but he did agree with Mr Casey's suggestion in their 4.03pm conversation that he would bid at 95 cents. After discussing the mode of executing his order with Mr Casey, we find that Mr Donald instructed Mr Casey to bid for the shares in the match out. Having regard to the evidence of both Mr Donald and Mr Casey, we find that Mr Casey put in a bid to purchase an undisclosed number of shares at 95 cents in the match out. The undisclosed number of shares was 500,000. Mr Casey took that action on the basis of his understanding that Mr Donald wanted to raise the price of the Burswood shares. He was not concerned about obtaining all of the 500,000 shares but he was concerned to raise the price of those shares. His choice of making a bid in the match out and his choice of doing it at 4.04.46pm was intended to ensure that, provided no other bid was made before 4.05pm, that bid would determine the closing price of Burswood shares.

On the basis of the SEATS report, we find that there were six sales in the last hour immediately before the match out period on 29 May, 1998. Prices of either 88 or 89 cents were paid in those sales (see paragraph 99 above). The price of 95 cents was 6.8% above the price previously reached on that day. On the basis of the evidence of Mr Casey, supported as it is by the history of previous trading on 29 May, 1998, we find that the price of 95 cents on that day was achieved only because of Mr Casey's execution of the order. His execution of the order only came about because Mr Donald instructed him to give the Burswood shares "a bit of a nudge upwards".

We find that the price of 95 cents for Burswood shares did not reflect the level at which those shares had been trading earlier in the day. Furthermore, the price did not reflect the general decline in the price over the period 2 March, 1998 to 29 May, 1998 (Exhibit A). Certainly, there had been occasions in that period when the price closed higher than on the previous day but, despite that, the overall trend was down. The price of 95 cents was likely to give a false or misleading appearance with respect to the price of Burswood shares as it was likely to suggest genuine market support for a reversal in the overall trend rather than simply a small correction as can be expected in any trend, whether it be downwards or upwards. As Mason J said in North v Marra Developments Ltd (1981) 148 CLR 42:

"When purchases have been made of shares in a company at or about a particular level for the purpose of setting and maintaining a market price for those shares there is a breach of the statutory prohibition. At the very least purchases have then been made which are calculated to create 'a false or misleading appearance with respect to the market for, or the price of' the shares. In reality the purchases are calculated to create a false market or false price. The false or misleading appearance is that the market, in the absence of any disclosure that a market support operation is on foot, appears to be real or genuine, there being no overt sign of market support or manipulation." (page 59)

While Mr Casey's execution of the order was the immediate cause of Burswood shares' closing price of 95 cents on 29 May, 1998, we find that Mr Donald's action in instructing Mr Casey to give Burswood shares "a bit of a nudge upwards" was the cause of Mr Casey's taking that action. In view of Heerey J's analysis of He Kaw Teh v The Queen (1985) 157 CLR 523 (Gibbs CJ, Mason, Wilson, Brennan and Dawson JJ) and Alphacell Limited v Woodward [1972] AC 824, s. 829(d) does not require that we find that Mr Donald knew, or had in mind, that a false and misleading appearance would be likely to be created by his conduct. Consequently, we make no such finding but do find that Mr Donald's instructions to Mr Casey were likely to create a false or misleading appearance with respect to the price of Burswood shares and that Mr Donald was in breach of s. 998(1) of the Law.

Our finding does not lead automatically to the conclusion that a banning order should be made against Mr Donald. Section 829(d) does not make it mandatory and it is a matter of discretion. What matters should be taken into account in considering whether or not that discretion should be exercised? This question has been considered in the context of many cases concerned with disciplinary action taken in respect of persons engaged in certain professional activities.

At the heart of those cases is the principle that we must bear in mind that we are not imposing a penalty. As the Full Court of the Federal Court said in Australian Securities Commission v Kippe and Another (1996) 67 FCR 499 (Von Doussa, Cooper and Tamberlin JJ) in relation to a banning order made under s. 829 of the Act against a dealers representative:

"The immediate and direct legal effect intended by a banning order is not to impose a penalty or punishment on the person concerned, but to be preventive in that it removes a perceived threat to the public interest and to public confidence in the securities and futures industry by removing that person from participation therein." (page 508)

This approach is consistent with the more recent judgement of the New South Wales Court of Appeal in New South Wales Bar Association v Hamman [1999] NSWCA 404, (Unreported, Mason P, Priestley JA and Davies AJA, 29 October 1999). The court considered disciplinary proceedings against a legal practitioner and said:

"… Disciplinary proceedings against a legal practitioner are concerned with the protection of the public (Wentworth v New South Wales Bar Association (1992) 176 CLR 239 at 250-251). The object is not to punish the practitioner but to protect the public and to maintain proper standards in the legal profession. …" (paragraph 21)

Authorities such as New South Wales Bar Association v Evatt (1968) 117 CLR 177 (Barwick CJ, Kitto, Taylor, Menzies and Owen JJ) and Hardcastle v Commissioner of Police (1984) 53 ALR 593 (Bowen CJ, Gallop and Lockhart JJ) acknowledge that, in achieving the objects of public protection and the maintenance of proper professional standards, an order made in disciplinary proceedings may involve great deprivation for the person who is the subject of that order. Despite that, the object of the order is not to punish or to extract retribution.

Cancellation or suspension of a person's right to engage in his or her chosen profession does not only follow because a person has intentionally committed a wrong-doing. As Kirby P said in Pillai v Messiter [No.2] (1989) 16 NSWLR 197:

"… The public needs to be protected from delinquents and wrong-doers within professions. It also needs to be protected from seriously incompetent professional people who are ignorant of basic rules or indifferent as to rudimentary professional requirements. Such people should be removed from the register or from the relevant roll of practitioners, at least until they can demonstrate that their disqualifying imperfections have been removed. …" (page 201)

How is the public to be protected? In Re Wolstencroft and Companies Auditors and Liquidators Disciplinary Board (1998) 54 ALD 773 (Deputy President Forgie and Mr Way, Member) the Tribunal, which was reviewing a banning order made in respect of an auditor, considered in what respects the public is to be protected. It said:

"It follows from the view taken by the full court of the Federal Court in the Kippe case that our choice of one of those courses must be guided by what is in the public interest in two senses. First, there is a public interest in ensuring that the individual follows the appropriate course of action in the future. Second, there is the public interest in ensuring that the public can be secure, or as secure as is reasonably possible, in the knowledge that those who are entrusted with the auditing of accounts can be properly entrusted with that task. It is particularly important that auditors ensure that the financial information of whom they audit is presented fairly within an identified financial reporting framework. That is so because their reports are relied upon by those who are both related to and unrelated to the subject of the audit. Those people must have confidence that they can rely on the audited accounts." (page 786)

The imposition of a banning order against a dealers representative certainly achieves, in respect of at least one member of that profession, the second aspect of public protection for the period in respect of which it is imposed. That is, it ensures that the public can be certain that a particular person, who has been found to have breached a statutory standard applicable to him or her, is no longer entrusted with dealing in shares. At the same time, it informs both other dealers representatives and members of the general public that the behaviour is neither acceptable nor tolerated.

Whether it achieves the first aspect of public protection is more debateable. A period of prohibition may, rather like a retreat or a period of contemplation, lead a person to reflect upon his or her behaviour and to come to an understanding of why that behaviour has been regarded as inappropriate by others and, if it is necessary to do so, to take steps to improve his or her knowledge of what is an appropriate manner of behaviour. On the other hand, a period of prohibition may not result in such reflection or lead to a person's coming to any greater understanding than he or she had when it was imposed.

In this case, we have come to the conclusion that Mr Donald comes within the latter, rather than the former, category. At the time that the stay order was made, he had been prohibited from carrying out any duties as a dealers representative for a period of approximately sixteen months. In those sixteen months, he has had time to reflect upon his behaviour on 29 May, 1998 and has had time to do so while experiencing the hardship that has followed his not being able to pursue his chosen occupation. Despite that time, he has, in our view, failed to gain a proper understanding of why his behaviour is inappropriate.

We should first set out why Mr Donald's behaviour was inappropriate. The reason is apparent from the passage in the judgement of Mason J in North v Marra Developments Ltd set out by Heerey J in his judgement:

"It seems to me that the object of the section is to protect the market for securities against activities which will result in artificial or managed manipulation. The section seeks to ensure that the market reflects the forces of genuine supply and demand. By 'genuine supply and demand' I exclude buyers and sellers whose transactions are undertaken for the sole or primary purpose of setting or maintaining the market price. It is in the interests of the community that the market for securities should be real and genuine, free from manipulation. The section is a legislative measure designed to ensure such a market and it should be interpreted accordingly." (page 59 and paragraph 19 of Heerey J's judgment)

Similar views were expressed by Gleeson CJ, with whom Powell JA agreed, in Fame Decorator Agencies Pty Ltd v Jeffries Industries Ltd & Ors (1998) 28 ACSR 58 and to which Heerey J also referred:

"This approach accords with United States authority on similar legislation, where a price reflecting basic forces of supply and demand working in an open, efficient and well-informed market, is contrasted with an artificial price resulting from manipulative conduct: see eg, Cargill Inc v Hardin 452 F 2d 1154 (1971); Freeman v Laventhol & Horwath 915 F 2d 193 (1990).
Section 998 aims to preserve the integrity of the share market. Markets, in reflecting the interaction of forces of supply and demand, may suffer from a variety of imperfections, including mismatches of information, without such imperfections destroying their integrity. However, the conduct of a seller of thinly traded shares, calculated to effect sales at the lowest, rather than the highest, obtainable price, and timed so as to deflect the possibility of some purchasers bidding up the price, had both the purpose and effect of creating, temporarily, an artificial market and price." (pages 62-63)

Despite these issues being considered by Heerey J in his judgement and despite Mr Donald's having had time for reflection on his behaviour, we find that he has yet to gain a full and proper appreciation as to why his behaviour was inappropriate.

Certainly, we find, Mr Donald does understand that he was not sufficiently careful in taking instructions from Mr Thomson. Mr Donald himself admitted that he had been lax. He assumed that he knew what Mr Thomson was talking about. Mr Donald was also concerned that he had not purchased the whole of the half million shares he had been authorised to purchase. In the context of a breach of s. 998(1), however, these issues provide, at best, some of the context in which the breach occurred. They do not point directly to the issue of which he should have gained a greater understanding during his sixteen month prohibition. That issue is that of market price and the reasons why s. 998(1) prohibits a person from creating, or doing something that is intended or likely to create, a false or misleading appearance with respect to the price of any securities.

Putting to one side for the moment his response to a question from the Tribunal near the conclusion of his evidence, we find that Mr Donald considered, for the majority of his evidence, that his action was inappropriate because he did not obtain the volume of shares he had been seeking. Had he obtained that volume, it was his view that it would have been all right to push the share price up to a level 6.8% above the level at which it had previously traded. In Mr Donald's view, action that is intended solely to raise the share price is inappropriate but action that raises the share price with the intention of acquiring, or disposing of, a volume of stock is not appropriate.

It was only at the end of his evidence and in response to the Tribunal's asking him why he would not repeat his actions of 29 May, 1998, that Mr Donald moved his focus from his assessment of appropriateness in terms of volume of stock acquired to a consideration of the effect of his action upon the market. Only at that late stage did he speak in terms of his action leading to a price that was not a true reflection of what the market was at the time. Only then did he look at the effect of his actions upon other buyers in the market and the irrelevance of his view that the price of Burswood shares should reflect what he considered to be their true value.

While Mr Donald's answers to the Tribunal give us some reason to think that he has some understanding of the inappropriateness of his behaviour, his earlier answers did not. With regard to the acquisition, or disposition, of a volume of stock at a particular price, it is one thing to do so after fully informing the Australian Stock Exchange and the market and making appropriate arrangements and quite another to do so in match out in the last trading moments of the day and without the market's being fully informed. The former action tends to preserve the integrity of the market where the latter does not.

In our view, it seems to us that Mr Donald needs further time to reflect upon his actions so that he gains a proper understanding of what is appropriate behaviour of a dealers representative. But in what circumstances is he to reflect? Had the operation of the banning order not been stayed, we might have considered it appropriate to affirm the banning order of two years previously imposed by the earlier Tribunal. We might even have contemplated a banning order for a longer period for, in our view, the protection of the public requires that persons operating in the market as dealers representatives understand that their behaviour must be such that it protects the integrity of the market.

As it is, the stay was granted. We are in no way critical of that decision but it is a factor that changes the circumstances from those that prevailed at the time Deputy President McDonald reviewed the Commission's decision. Mr Donald has been permitted to return to work as a dealers representative and has successfully obtained a position with BNP, which, we find on the basis of his evidence, has full knowledge of the history of this matter. There is no evidence that Mr Donald's behaviour has been anything other than appropriate in the two months he had been with that firm at the time of the hearing. At the same time, we are satisfied on the same basis that Mr Donald has been engaged mainly in marketing and research.

To impose a further banning order when a banning order has been stayed and there is no evidence of further inappropriate behaviour in the short period of Mr Donald's resuming work as a dealers representative almost smacks of punitive action rather than of protection of the public. Considerations of punishment are as inappropriate as are considerations of the hardship that has been caused to Mr Donald by his inability to work as a dealers representative. At the same time, it seems to us that Mr Donald should not be permitted to resume his duties as a dealers representative without some form of supervision or education for we have already expressed our view that Mr Donald has an imperfect understanding of the inappropriateness of his behaviour on 29 May, 1998. Until he gains that proper understanding, we cannot be confident that the public will be protected from any inappropriate behaviour by him in the future. We have formed that view even though we have had regard to the numerous statements speaking highly of Mr Donald's skills as a dealers representative and fine personal qualities.

Do we have power to do more than simply impose a banning order either permanently or for a specified period? This is a matter that was not raised during the hearing. Consequently, it is a matter upon which the parties should be given the opportunity to make submissions. We will give them that opportunity but will outline a possible line of reasoning that, if correct, would enable us to permit Mr Donald to resume his career while at the same time providing an appropriate level of public protection.

Section 43(1) of the Administrative Appeals Tribunal Act 1975 provides, in part, that "For the purpose of reviewing a decision, the Tribunal may exercise all the powers and discretions that are conferred by any relevant enactment on the person who made the decision … ". One such power conferred on the decision maker in this case (i.e. the Commission) is found in s. 93AA(1) of the Australian Securities and Investments Commission Act 1989 ("Act"). It provides that "The Commission may accept a written undertaking given by a person in connection with a matter in relation to which the Commission has a function or power under this Act." Among the Commission's functions are those conferred on it by "a national scheme law of another jurisdiction" (Act, s. 11(7)) and one such law is the Law (s. 5(1)). As the Law has given the Commission a function and power in relation to the discipline of dealers representatives, it follows that the Commission, and so the Tribunal, may accept a written undertaking under s. 93AA(1). That is so even though we accept that the effect of s. 244 of the Act is that the Tribunal does not have power to review a decision of the Commission whether or not to accept an enforceable undertaking under s. 93.

A person may withdraw from an undertaking at any time but only with the consent of the Commission (s. 93AA(2)). If the Commission considers that he or she is in breach of any of the terms of the undertaking, it may apply to the Federal Court for an order under s. 93AA(4) (s. 93AA (3)). If the Federal Court is satisfied that the person has breached all or any of the terms of the undertaking, it may make all or any of the following orders:

"(a) an order directing the person to comply with that term of the undertaking;
(b)an order directing the person to pay to the Commonwealth an amount up to the amount of any financial benefit that the person has obtained directly or indirectly and that is reasonably attributable to the breach;
(c)any order that the Court considers appropriate directing the person to compensate any other person who has suffered loss or damage as a result of the breach;
(d)any other order that the Court considers appropriate." (s. 93AA(4))

What form should that supervision or education take? Again this is a matter for submissions by the parties but we will set out our thinking to date. We have considered whether we should require Mr Donald to enter an undertaking that he be directly supervised in any dealings he undertakes as a dealers representative. After careful consideration, we are not inclined to take that course. The manner in which that supervision would be carried out in the day to day dealings of any firm for which he may work is difficult to conceptualise and would be difficult to monitor. In any event, there is already a scheme of monitoring carried out by the Australian Stock Exchange. It examines the trading each day and conducts its own system of monitoring which identifies discrepancies in trading of the sort identified in this case.

A better course of action, we are minded to consider at this stage, is to require Mr Donald to enter an enforceable undertaking in terms similar to those agreed to by Mr Casey. In our view, there was wisdom in that course. That would mean that he would be required to undertake appropriate studies in law and ethics and to prepare and present appropriate seminars on issues of law, practice and procedure relevant to dealers representatives. We are also minded to add a further term to the enforceable undertaking that, for a period of three and a half years from the date on which he enters the enforceable undertaking, Mr Donald shall not create, or do anything that is intended or likely to create, a false or misleading appearance of active trading in any securities on a stock market or a false or misleading appearance with respect to the market for, or the price of, any securities. It may be said that breach of that term is already an offence pursuant to s. 998(1). Making it a term of the undertaking would mean that, should he be in breach of it, he will be subject to any order made by the Federal Court under s. 93AA(4) were the Commission to make an application under s. 93AA(3). While the nature of the orders are in the discretion of the Federal Court, it is specifically empowered to direct the person in breach of his or her undertaking to pay the Commonwealth the amount of any financial benefit gained by the breach and to compensate any person who has suffered loss or damage as a result of the breach. It would also be open to the Commission in those circumstances to make a further banning order if it thought that course appropriate. The consequences of any breach of the undertaking would be an added incentive to Mr Donald to engage in the appropriate behaviour about which he has refreshed his memory in undertaking the course of study and in preparing and presenting seminars.

We are also minded to require Mr Donald to give all licensed dealers, by whom he is employed during the term of the enforceable undertaking, a copy of that undertaking. While not wishing to restrict his employment opportunities, we are of the view that such disclosure is consistent with the theme of public protection which is inherent in the disciplinary provisions in the Act.

Were Mr Donald not prepared to enter an enforceable undertaking, we would make a decision the effect of which would be to require Mr Donald to complete the remainder of the four year banning order as originally made by the Commission.

We are mindful that the question of an enforceable undertaking was not canvassed as such at the hearing. It is important that both Mr Donald and the Commission be given an opportunity to consider it further and to make submissions as to its precise terms. For that reason, we adjourn further consideration to a date to be fixed.

I certify that the one hundred and thirty six preceding paragraphs are a true copy of the reasons for the decision herein of Miss S A Forgie (Deputy President),
Mr W G McLean (Member) and Mr D L Elsum, AM (Member)
Signed:          ..............................................
  A Horne         Associate
Dates of Hearing       5, 6, and 7 February, 2001
Date of Decision       4 May 2001
Counsel for the Applicant                 Mr Murley
Solicitor for the Applicant                Raelene A Murley
Counsel for the Respondent             Mr Waller
Solicitor for the Respondent             Australian Securities & Investments Commission