pif debt repaid, page-2

Very quiet on the OCV thread, a relief to have the debt paid down and interesting to see what response the marketing campaign of some PIF assets gets. I was sent an interesting article from todays Business Spectator from another PIF investor who thought the last two paragraphs were of particular interest. I will paste the full article as I don't have the link but I agree and I know the same was brought to ASIC's attention in May last year regarding our own situation. I can only hope it is being investigated also in view of the fact that OCV was still accepting money in January 2008 without revealing the true financial state of the PIF when they knew it was in trouble in Dec 2007. Regards, Seamisty:::Catch them if you can



It is not quite rumourtrage, but the Australian Securities and Investments Commission’s inquiries into market manipulation, dubbed "Project Mint" has claimed its first casualty.

ASIC’s announcement this morning that it has banned a dealer with boutique securities house, Linwar Securities, from providing any financial services for 18 months, is the first "success" it has had in its investigations into allegations of rumourtrage in this market, an investigation that began a year ago.

The commission alleges Richard John Macphillamy, a 32-year-old from Bondi in NSW, spread false and misleading information about Macquarie Group and the Macquarie Cash Management Trust. It says he sent emails to 32 traders in financial institutions here and overseas, claiming that a run on the cash trust had affected the group’s ability to meet withdrawals and that when this became known it would halve the group’s share price. ASIC says this wasn’t true.

ASIC says there was no evidence Macphillamy had any dishonest purpose or was engaged in manipulative behaviour, but rather that his conduct was "rash, ill-judged and wholly inappropriate." He has the ability to appeal the decision.

ASIC’s description of Macphillamy’s actions stops somewhat short of "rumourtrage," where destructive rumours are circulated with the intent of driving a share price down and creating profits for short-sellers. ASIC has said previously it is investigating numerous complaints about false rumours and market manipulation, but cautioned that it would take some time to produce results.

Common to most of ASIC’s public pronouncements on rumourtrage has been its identification of Macquarie as a particular target. The introduction and maintenance of the ban on short-selling of financial stocks, and the Federal Government’s guarantee of bank deposits, has been linked directly to the rumours that swirled around Macquarie throughout last year.

While ASIC has yet to publicly identify a significant case of rumourtrage, there is little doubt that there have been instances of coordinated attempts to drive down share prices of financial institutions, if not in this market (although the anecdotal evidence suggests strongly that there were) then certainly offshore.

Last year HBOS, subsequently acquired by Lloyds TSB, suffered a 92 per cent shortfall to an $8 billion rights issue targeted by hedge funds. Circulating widely at the time were detailed game-plans issued by the dealing desks of European rivals, hedge funds and other institutions from around the globe explaining how to force a massive shortfall and implosion in the HBOS price.

After the $7.8 billion shortfall the UK authorities introduced measures to force hedge funds to disclose their short positions in companies conducting rights issues and the US Securities and Exchange Commission introduced a temporary ban on "naked" short-selling in specified financial stocks.

While the offshore regulators have removed their bans on short-selling of financials, the Australian ban remains in place. There is a clear nervousness about what might happen to Macquarie and Suncorp and other smaller banks and non-bank financials if direct short-selling were allowed, although it would appear that the more sophisticated players have found ways to circumvent the ban.

The banning of Macphillamy for something significantly less than rumourtrage sends a strong signal to the markets about how seriously ASIC would act against something more sinister, while also reminding market participants that passing on false and misleading information is by itself a breach of the law.

ASIC has said previously that, while it is difficult to obtain the evidence needed to prosecute alleged rumourtrage, it has substantially upgraded its efforts to crack down and prosecute instances of insider trading and market manipulation.

It is an offence to make a statement or disseminate information if it is false or materially misleading; if it is likely to induce persons to buy or sell financial products or reduce the price of securities; or if the person disseminating the information doesn’t care whether the information is true or false or knows, or ought to know, that it is false and misleading.

The offences attract up to five years’ jail and/or a fine of $220,000 – a successful prosecution of a significant instance of rumourtrage would send a desirably chilling signal around the market.