is asx liable for losses, page-7

GoneSurfing

I think that if the ASX has anything its angling on, it will be TTY's Board discussions of why they thought $15M of loans written every week for a couple of months, wasn't "material", and on the converse side, why Monarch was not informing shareholders it was asking for basicaly weekly top-ups of the kitty. I mean, look at the dates;
4 Jan 08
18 Jan 08
29 jan 08
31 Jan 08
15 Feb 08
26 Mar 08

Add in the loans from India Resources, and its clear Monarch was blowing $4M a week and getting nothing in return, and crucially NOT informing shareholders their operation was operating at a loss for that period.

The other thing the ASX will be asking is this; if MK knew or had reasonable prospects of knowing MON was cactus, during his deliberations on the Board of TTY, how did he handle his conflict of interest? It is an interesting question.

On the one hand as a member of TTY's board he would have to exclude himself from voting for the loans because he also represented MON. However, he would surely have known the real state of affairs at Monarch, and thus, he's in a bind; either he looks after Monarch (in a way, though against the law, by propping up a dead horse) or he looks after Territory by saying "Look, what a stupid idea, lets not do this."

So, this conflict of interest, even if handled properly by MK zipping his fat lips and saying nothing, would only have perpetuated the dangers because without MK spilling inside information on MON's affairs to TTY's Board, the exclusion of this information would have portrayed an unrealistic health to Monarch's position and got them to tip moulah into the pot. Whereas if he had been bad and disclosed the sorry state of Monarch's affairs to TTY's Board he'd have been in breach of the Corporations Act again!

I guess it just goes to show how insidious and manipulative you can be - the absence of information allowed MK to appropriate money from TTY for MON, by legally excluding himself and his inside knowledge from the TTY board meetings. We would hope. Because if they did lend money to Monarch knowing it was in trouble, then its worse for all.

The materiality of the loans is another issue for ASX/ASIC. Territory's Board's opinion that $15M was immaterial is ridiculous - its a couple of years profits from Frances Creek, ffs. Maybe not a $2M tranche, but you can't treat each tranche in isolation because your risk is compounding all the time. Immaterial is an opinion, and clearly it would be if everything went OK and they got their money back and Monarch made 500KOz p.a. but I personally think that related-party loans to speculative stocks by speculative-ish stocks, is material no matter how small.