[pic of V8 racing car](caption: Opes Prime sponsored a V8...

[pic of V8 racing car]
(caption: Opes Prime sponsored a V8 supercar team.)

Opes goes sub-Prime


ASIC investigates Opes Prime
Michael West

March 28, 2008 - 2:18PM

Just five weeks ago, Opes Prime told its clients that it was "not in strife'' despite the "Tricom fiasco''.

Today its bankers ANZ and Merrill Lynch told receivers they were appointed to Opes and began selling more than $1 billion worth of shares from the Opes loan book into the market.

Laurie Emini, the principal of the aggressive broker, was forced out by Opes this week before a voluntary administrator was appointed by the troubled lender. ANZ appointed its own receiver from Deloitte yesterday to control the prospective wind-down.

Then the regulator ASIC announced this morning it was investigating following "a number of internal stock and cash movement irregularities.''

Like Tricom, which is still trying to find a white knight to take it over, Opes Prime effectively pooled its clients shares then lent them out to professional market players to short them, providing title over the stock to its banker ANZ.

Like Tricom, ANZ and Merrill were the bankers and the securities were not all S&P/ASX 200 stocks. The small company holdings will be hard to offload without driving market prices down dramatically.

It is understood Merrill's and the ANZ's lending is covered by the value of the shares but market speculation has it that the bankers may offload some stocks as low as Opes clients' loan-to-valuation ratios (LVRs) to protect themselves against a further drop in the market.

Hence, the Opes sell-off is rattling market confidence today.

Following the appointment of receivers to Opes Prime yesterday evening, Opes has been suspended as a trading, settlement and clearing participant of the ASX. The impending Opes shakedown will further undermine confidence in the regulators who had once again failed to take pre-emptive measures to stop the more racy brokers from blowing up.

After the Tricom debacle, Opes sent out a letter debunking "market commentators'' who had suggested the group was potentially in trouble. The departure of Opes boss Emini suggests things were worse than anyone had anticipated.

The letter, sent in late February, said the media speculation had been "purely because we offer a similar offering under a similar legal structure (ie: Australian Master Securities Lending Agreement: AMSLA). The simple fact is that we are NOT in any form of trouble that Tricom encountered and there are some simple (& factual) reasons why:

1) Opes Prime Stockbroking is exclusively a securities lending and borrowing house _ we are not distracted by balance sheet exposures from FX, CFD's, ETO trading, Futures, Equity Dealing Desks, etc;

2) We specialize in our field and have systems, operational procedures and risk management controls in place to avoid issues that were encountered by Tricom;

3) Our collateral/loan book is closely monitored and managed on a daily basis by the securities lending desk;

4) Our primary financiers (ANZ & Merrill) have explicitly told us that they support our business, business model and risk controls;

5) We have spent in excess of $3mil on our Back Office system and we can collate appropriate reports to manage our book and risk profile;''


In light of this, said Opes, it was more than capable of refinancing any Tricom loans. ``Our LVR's are still a standout feature of our model and we can move loans across from Tricom with minimal disruptions.''

Anyone who took that advice would appear to have good grounds for calling their lawyers.

[email protected]

http://business.smh.com.au/opes-goes-subprime/20080328-223z.html

cheers
Marny