manipulating their time will come yi ha

5:13 PM, 3 Jul 2008 Tony Boyd
Big brother is watching

The revamped markets supervision division of the ASX is getting some good runs on the board judging from the latest data on enforcement activity against wayward brokers.

Fines imposed against market participants totalled $1.1 million for the year to June 2008, more than double the level of 2007 and the highest in five years.

Since its establishment in July 2006, ASX Markets Supervision under Eric Mayne has been taking a tougher stance against brokers who have breached ASX operating rules or are suspected of having broken the Corporations Law.

A lot has been happening under Mayne's leadership, including the streamlining of processes for referring matters to ASIC, tighter coordination between ASX and SFE, 10 per cent increase in staff in 2008 and better systems for surveillance.

The latest figures on supervisory monitoring and enforcement show a significant uptick in brokers being nailed for suspected market manipulation. The number of suspected contraventions for market manipulation referred to ASIC was 20 in fiscal 2008, compared with 11 in 2007.

The ASX says market manipulation is a deliberate attempt to interfere with the free and fair operation of the market and create artificial, false or misleading appearances with respect to the price of, or market for, a stock.

What will come of these referrals may never be known as ASIC has the power to prosecute, not the ASX.

Some will argue that the doubling in market manipulation referrals by the ASX is simply a reflection of surging rumour mongering on the back of short selling and margin call driven volatility, and not of increased ASX vigilance.

Either way, there is a clear warning for those using devious means to create an opportunity for profit, that more ASX staff are monitoring them and doing so with better technology.

Referrals to ASIC for suspected insider trading totalled 27 in the year to June 2008, compared with 34 in 2007.

ASX markets supervision beefed up its approach to insider trading as part of its establishment in 2006 with the creation of a dedicated insider trading unit.

Prominent industry players such as Peter Hunt at Caliburn say insider trading in Australia is rampant. At least the ASX is maintaining a reasonable hit rate.

However, the real test will be for the offices of ASIC and the director of public prosecutions, both of which have recognised that insider trading is the hardest breach of the Corporations Law to prove.

Referrals to ASIC for suspected contraventions of the continuous disclosure regime were virtually steady over the past 12 months with 23 in 2008 compared with 18 in 2007.

The ASX Disciplinary Tribunal and the Appeal Tribunal were particularly active in 2008 with record fines and other punishments including censure of participants. This is the hard edge of the self regulatory model, where brokers judge their peers for bring the market into disrepute.