Lack of Market Regulations

[reece55]

for starters prawn (and I agree with you there is a major problem), the ASX shouldn't be the organisation monitoring trades...that's a gross conflict of interest as they rely on trading volume for income. The market is not transparent and the removal of broker codes by the ASX a couple of years back has made things worse.

Competition is coming for the ASX and it can't come fast enough as far as I am concerned, the ASX has let retail investors down badly.

Of course ASIC needs to be better resourced to attract talent, and have some successful prosecutions because at the moment they look inept.

I have to come to the defense of ASX here.... Personally, being involved in the secretarial side of several companies that are listed, they do an excellent job of monitoring, trust me they don't miss a beat......

The problems like these off market short selling issues and Opes Prime are Corporations Act issues, which reside with ASIC. It is ASIC that hasn't been doing it's job. The old MD of ASX who is now the head of ASIC has been doing a good job of shifting the blame though!!!

Prawnster, Opes Prime is another highlight of the abuses of the substantial shareholder regime... I haven't seen a 603 or 604 from ANZ x20 yet, however they have over 5% of many companies. What about the takeover regime with a company like the Austin Group, is that really appropriate. ASIC should be going after ANZ and Merrills for not obeying Corps Law......

Cheers

 

[Broadside]

I have to come to the defense of ASX here.... Personally, being involved in the secretarial side of several companies that are listed, they do an excellent job of monitoring, trust me they don't miss a beat......

The problems like these off market short selling issues and Opes Prime are Corporations Act issues, which reside with ASIC. It is ASIC that hasn't been doing it's job. The old MD of ASX who is now the head of ASIC has been doing a good job of shifting the blame though!!!

Prawnster, Opes Prime is another highlight of the abuses of the substantial shareholder regime... I haven't seen a 603 or 604 from ANZ x20 yet, however they have over 5% of many companies. What about the takeover regime with a company like the Austin Group, is that really appropriate. ASIC should be going after ANZ and Merrills for not obeying Corps Law......

Cheers

reece....that may be the case....but there is definitely a conflict of interest. In such matters perception counts. The market is not transparent and the ASX has also contributed to that.

On the ASIC side, if ANZ was the beneficial owner of Opes shares, why did they not declare substantial s/holder notices across many many stocks...that would have alerted many of the "naive" Opes clients that there shares weren't actually theirs!

And you'd have to agree notification of change in shareholdings in general is very lax and not strongly enforced? It's hard enough in this market without the disclosure cards also being against you.

 

[Trembling Hand]

Watchdogs are a joke - Sack them

Another good article from Michael West

Opes Prime had warned both the ASX and ASIC in February that it was in breach of its liquidity requirements. Both failed to act. Any client of Opes whose exposure to the collapsed Prime broker increased between that time - at the latest - and the collapse in March presumably has an action against the regulators.

How much longer can the Boys at ASX hang on to their conflicting interest of being profiteers and regulators of their own market? It doesnt take a genius in free market functioning or either a mad anti-capitalist to see the absurd role they have. And with all of the burnt Mom & Pop bull market punters screaming out about shorts & now systemic failures & the media salivating at a scandal AND a new government trying to look tough and on the 'working families' side the ASX will surely be hung out to dry here.

Will be a ripper to see the first lawyer take aim at them and what there defense will be. It has been very bizarre their total lack of comments up to this point.

 

[prawn_86]

Not many out there interested in this.

just a state of complacency that things will not change? Or do people just genuinely not care abut what regulations happen in our market?

 

[Julia]

Not many out there interested in this.

just a state of complacency that things will not change? Or do people just genuinely not care abut what regulations happen in our market?

Prawn, another option, perhaps? That there's a sense of despondency and despair born of the powerlessness of the small individual to effect any change. The 'regulatory authorities' will do or not do whatever they want.

A bit similar to feeling outraged about stuff like the baby bonus from politicians.

 

[prawn_86]

Don't get me wrong Julia, I'm enough of a realist to know that we small investors cannot affect any change, just as a small group of voters cannot affect political change.

I did think however, that more people would have an opinion on the matter though

 

[prawn_86]

A DIRECTOR who was an architect of insider-trading legislation in 1985 has regularly bought his company's shares shortly before market-sensitive announcements.

As a director of the junior iron ore and gold explorer Pluton Resources, Ray Schoer made six share purchases in the seven days before company results or a big company announcement. He also made up to 18 purchases outside the company's published share trading policy for directors.

Mr Schoer is well known as the chief executive of the National Companies and Securities Commission between 1980 and 1990 and in the next five years as national director of the Australian Stock Exchange.

http://business.smh.com.au/director-defends-timing-of-purchases/20080415-26dr.html?page=1

More of the old boys club?

 

[ithatheekret]

I think the $300K floor on enquiries should be scrapped for starters , IT crimes are just the tip of the iceberg .

But then that would mean ASIC would actually have to do something other than being a political party tool , good for a headline here or there .

Then perhaps the culture would be stopped from spreading farther abroad , yeah righto , suuure , anything to delude ourselves with hey .........

Okay so why did they take away the client codes from view in market depth for brokerages identification ?

When a simple hidden code in market depth volumes is just as plausible a way to signal intent to others in the know .

I think the initiative to actually do anything that involves mountains of paper work is a cyclical event , that follows or is enacted by an Administrations whim or event driven intent .

The free and fair market theory is just a game , especially when it's good business to break the law .

If they [Admins ] were serious about it , knowing the effort involved to police the industry is suuuch a heavy task , why don't they simply increase the penalty to levels that would scare any thoughts of it out of the system or at least leave only the stupid and overly confident to take up the practice ???

I think ASIC should have their own courts for what it's worth , but then why spend millions on buildings that will rarely get used under current directives ?

I don't think many pollies want to police their own tax bracket either , until all the offenders friends have disappeared or gotten too close for comfort . Or the floor would be lifted and the scope of enquiries would be allowed to take up the role of being a public office and address the goings on much further down the line at an individual level , like the retail investors ..... shock , horror , heaven forbid .

The exposure at this level is much higher and this is where the market get's it's impetus from , institutions can buy all they want , but they need retail investors to make the real profits .

If they expect to manage IT's and other discouraged activities effectively , they would need full regulation and a task force , but I can't see that happening , except for the odd bout here and there until the next Admin .

Definitely a policy issue . Not that it will get much notice . But policy needs to get descriptive enough for the law to be enacted properly , even then it will have hiccups and a bit of gas to get over , yet alone the warts . As it stands ASIC doesn't have that much muscle nowdays , it's never been able to play catch up either , or it's avenues of prosecution would not revolve around a budget , it would be based on the law , with a clear directive backed up by a clear policy .

Until that happens , I'd be sticking to the Minties .

 

[chops_a_must]

In light of the recent Opes and Lift failures i thought i would bump this thread.

It seems common opinion that the regulators are hamstrung by lack of resources, so apart from gov action (which wont happen) is there anything that can be done?

You don't buy shares of, or use products from, companies you don't think have an acceptable corporate operation framework. I wouldn't have touched ANZ with a barge pole previously because of some things in Iraq they were involved in. And it appears they haven't lifted their game at all, standards wise... i.e. Opes Prime.

You can also downramp... according to VRE loyalists, I downramped it right into administration, so it can work. Lol! Or pick on ardent supporters of stock despite the company's incredibly questionable actions. After all, they are the people voting with their feet as to corporate actions.

Probably most importantl, is to contact companies or to get someone to ask tricky questions at AGM's. Worked for WOW when they were doing something pretty low over here last year. Still... I could never hold them for the same reasons.

But you know... free hands and all that...

 

[prawn_86]

While i agree Chops that it is up to indivudual investors to decide where they put thier money, and they need to read the fine print etc etc

The thing that annoys me is the fact that illegal acts are being blatantly carried out and no one is getting reprimanded. Its not as though the laws have changed, old rules/laws are currently being broken and ASIC are powerless to stop it.

 

[doctorj]

The way I see it market regulations are a little like a lock on your front door. They're very good at keeping honest people honest but are poor at preventing those who proactively seek ways to break the rules.

The reality is, in Australia we actually have quite a robust and effective regulatory system. Take the insurance industry as an example - whether the insurer is based in Sydney, Perth or 100km west of Ballarat they're all going to be subject to the rules set by APRA. Compare that to the US where the regulator (and the rules) vary from state to state. In fact, there's pressure within the US to modernise their system and the Australian system is being used as a model for that regulation regime.
The problem is that the number of things that can go wrong are infinite and regulators are focused on developing and enforcing a quantitive regulatory system. This brings me back to the 'locks on doors' analogy. A finite set of quantitive rules will make sure the good companies stay well behaved but they inherently can't deal with all situations.

Companies will always fail and the reality is that failure is healthy for the economy. That said consumers need to be protected to some degree. Perhaps a more qualitative approach is in order?

 

[cuttlefish]

http://business.smh.com.au/director-defends-timing-of-purchases/20080415-26dr.html?page=1

More of the old boys club?

I've been following Pluton and haven't seen any evidence of the pattern that this article implies. Ray Schoer has been buying shares in small quantities with monotonous regularity - usually on a day when there's been some selling down of the stock - typical for a long term investor averaging in on dips. Given the amount of times he's bought stock I think its likely to be just co-incidence that he's bought near announcements.

This might sound naive on my part, but I don't believe I am being naive, and this is the reason:- Ray is the guy that wrote the rule book on insider trading - so would he be that stupid to risk an insider trading charge for a paltry $30,000 or so worth of stock?

If you look at the pattern he's been buying stock once or twice a month for a while now - so the odds on one of those purchases being within seven days of an announcement are pretty high given there's only 20 trading days in a month.

What they should be looking with PLV though is the substantial shareholder notices on this stock - I'd love someone to explain to me whats been going on there.

 

[prawn_86]

I actually thought there was a rule preventing directors buying a certain time period before or after price sensitive announcements. Obviously i was wrong, and those rules are set by individual companies.

I personally think it should be set by ASIC, so it is the same across the board for every co.

 

[reece55]

The way I see it market regulations are a little like a lock on your front door. They're very good at keeping honest people honest but are poor at preventing those who proactively seek ways to break the rules.

The reality is, in Australia we actually have quite a robust and effective regulatory system. Take the insurance industry as an example - whether the insurer is based in Sydney, Perth or 100km west of Ballarat they're all going to be subject to the rules set by APRA. Compare that to the US where the regulator (and the rules) vary from state to state. In fact, there's pressure within the US to modernise their system and the Australian system is being used as a model for that regulation regime.
The problem is that the number of things that can go wrong are infinite and regulators are focused on developing and enforcing a quantitive regulatory system. This brings me back to the 'locks on doors' analogy. A finite set of quantitive rules will make sure the good companies stay well behaved but they inherently can't deal with all situations.

Companies will always fail and the reality is that failure is healthy for the economy. That said consumers need to be protected to some degree. Perhaps a more qualitative approach is in order?

Exactly DocJ, completely agree here........

We already have a system that is, in some respect, more complicated and stringent than many other nations in the world. We don't necessarily need more legislation (although some elements of the substantial shareholder regime needs to be reworked, for instance), we just need the regulators (ASIC) to actually start chopping some heads off of those people who continually break the rules, regardless of their financial stature in the market place....

Inevitably, over regulation just ends up making things harder for those companies that always do the right thing - those that break the rules are always going to, regardless of how high the bar is set....

Cheers

 

[reece55]

I actually thought there was a rule preventing directors buying a certain time period before or after price sensitive announcements. Obviously i was wrong, and those rules are set by individual companies.

I personally think it should be set by ASIC, so it is the same across the board for every co.

Prawnster....

That would be a little bit difficult to implement across the board...

Example: Should all company directors be barred from buying shares for a week after an announcement of financials? Sure, for Wollies, the answer is a definite yes. But what about a speculative Oil and Gas play, who is continually making losses? In my opinion (in the case of the O&G entity), it doesn't matter.

Securities trading policies need to be modified by Company to suite the nuances of the company concerned. What I think would be useful is to see ASIC hold entities accountable when the directors breach their own policies, which does happen. Have a look at what is happening to the ex QGC Company Secretary - good example of what should happen more often...

Cheers

 

[doctorj]

I personally think it should be set by ASIC, so it is the same across the board for every co.

I think your looking at the problem from the wrong side. The problem is not director's buying when they shouldn't - the problem is continuous disclosure.

Put it this way. If a director buys shares on day 1 and drilling results are back from the lab much earlier than expected on day 5 - should they delay the release of the information?

Insider trading is almost never a problem with rigorous continuous disclosure and proper use of trading halts.

 

[Wysiwyg]

That there's a sense of despondency and despair born of the powerlessness of the small individual to effect any change. The 'regulatory authorities' will do or not do whatever they want.

I think this covers the broader social system too.

 

[Julia]

There was an enlightening report on the 7.30 Report this evening about insider trading by company directors, specifically the buying of large quantities of shares during the period after the closing of the books and the market announcement.

Surely this should be easy enough to police and should be stopped.

The ASX was also accused of failing in its charge of policing the regulations.
In the face of a suggestion that they can't adequately do this and run a for profit business at the same time, their spokesman of course denied that they were failing in any way.

Imo there is a decided bad odour attached to the market at present.

 

[doctorj]

Imo there is a decided bad odour attached to the market at present.

I think its more the media looking to draw on Joe Public's desire to outsource blame for the downturn in their portfolios and superannuation.

If its not directors selling shares, it's margin loans, short selling, stock lending, regulators, 'rogue traders' or the direction of the wind.

The reality is market cycles will go on, as will people's inherent nature to blame others for their losses in life and the markets.

There's no story here. It's all hype.

 

[Julia]

I think its more the media looking to draw on Joe Public's desire to outsource blame for the downturn in their portfolios and superannuation.

If its not directors selling shares, it's margin loans, short selling, stock lending, regulators, 'rogue traders' or the direction of the wind.

The reality is market cycles will go on, as will people's inherent nature to blame others for their losses in life and the markets.

There's no story here. It's all hype.

Can't agree that it's all hype, Doctorj. I don't think the average person feels OK about their shares in superfunds being used by borrowers to short and drive down the price.
And no, it's not hype that directors are e.g. buying large quantities of shares prior to a good profit announcement which at that stage is not known to the general market. Imo that is insider trading and should not happen.