ASX TRADING ISSUES BLOG

EMAIL: asx.trading.issues@gmail.com
WEB ADDRESS: www.scribd.com/asx_trading_issues/collections

SENATE ENQUIRY SUBMISSIONS
(October - 2013)

Re: The performance of the Australian Securities and Investments
Commission (ASIC)

INTRODUCTION

LINKS TO SUPPORTING INFORMATION
Attachment 1.1: Background to ASIC Complaints (Expanded) <LINK>
Attachment 1.2: An Overview of ASX Trading and its Regulation <LINK>
Attachment 1.3: Trading and Regulatory Issues Identified <LINK>

ASIC Complaint 2013-1 Aug 16, 2013 <LINK>
ASIC Complaint 2013-2 Sep 16, 2013 <LINK>
ASIC Complaint 2013-3 Oct 14, 2013 <LINK>
ASIC Complaint 2013-4 Nov 4, 2013 <LINK>
Short Selling Issue Aug 22, 2013 <LINK>





DISCLAIMER: All information presented as research has been sourced from broker trading
records and registry records. While the author considers the data to be accurate and the
summaries presented as being an accurate reflection of trading, no guarantees are given
as to the reliability of data or any conclusions put forward. Investors are encouraged to
do their own Due Diligence and to make up their own minds in regard to the causes of
any trends present in trading data.
2


CONTENTS


Section One ..... Pg. 3
1.0.1 LINKS TO SUPPORTING INFORMATION

Section Two ..... Pg. 4
1.0.2 INTRODUCTION

Section Three ........ Pg. 7
1.0.3 BACKGROUND TO THE SUBMISSION AND A SUMMARY OF DEALINGS WITH ASIC


APPENDIX 1 - CONTEXT
Background Information Concerning World Markets and The Australian Market... Pg 11

APPENDIX 2 AN INDICATION OF THE EXTENT OF CORRUPTION IMPACTING FINANCIAL MARKETS
Fines Incurred by the Major Investment Banks In Recent Years... Pg 15



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1.01 Section One
ABOUT THE COMPLAINT - LINKS TO SUPPORTING INFORMATION

COMPLAINT FOCUS
The submission focusses on issues affecting Australias financial markets with an emphasis on ASICs
failure in being able to function as an effective regulator. The matters raised apply to the items b, d,
and f in regard to the Terms of Reference.

Terms of Reference
a. ASIC's enabling legislation, and whether there are any barriers preventing ASIC from fulfilling its legislative
responsibilities and obligations;
b. the accountability framework to which ASIC is subject, and whether this needs to be strengthened;
c. the workings of ASIC's collaboration, and working relationships, with other regulators and law enforcement bodies;
d. ASIC's complaints management policies and practices;
e. the protections afforded by ASIC to corporate and private whistleblowers; and
f. any related matters.
Issues concerning the Australian financial markets, particularly the ASX, are deserving of an enquiry in
their own right, and ASICs accountability in regard to its dealing with matters presented to it requires a
critical review.

SUPPORTING INFORMATION

The complaint is structured with an INTRODUCTION that presents the complaint and also links to
supporting information necessary to gauge how a failure by ASIC to provide effective regulation of our
financial markets is such an important matter for the Australian people and the Australian economy.

A list of additional information that has been provided in support of the submission is provided below.
1. The Background to ASIC Complaints <LINK>
2. An Overview of Matters Impacting the ASX and how it is being Regulated <LINK>
3. The Trading and Regulatory Issues Brought to Attention <LINK>

COPIES OF ASIC FORMAL COMPLAINTS
An appreciation of the manner in which ASIC performs its regulatory function can be gauged by viewing
information presented to it, observing how matters are handled and then assessing its findings. The
links to recent complaints are provided below.

Reference Lodged Access
ASIC Complaint 2013-1 Aug 16, 2013 <Reference Link: 2013-1>
ASIC Complaint 2013-2 Sep 16, 2013 <Reference Link: 2013-2>
ASIC Complaint 2013-3 Oct 14, 2013 <Reference Link: 2013-3>
ASIC Complaint 2013-4 Nov 4, 2013 <Reference Link: 2013-4>
Short Selling Issue Aug 22, 2013 <Reference LINK>
OTHER
EMAIL Communications with ASIC Officers <LINK>

Samples of Published Research

Blog Address
www.scribd.com/cudeco_research

CuDeco Research Papers
6.1 6.2 6.3 6.4 6.5

Research on Other ASX Companies
7.1 7.2 7.3 7.4


The supporting information is critical in assessing the effectiveness of ASICs role as market regulator. When the usual
response of We dont have a Problem is measured against the weight of evidence that there are problems, and very
serious problems at that, only then can the effectiveness of the current regime be properly assessed. It is hoped that the
Senate enquiry acts as the catalyst to implement the changes necessary to guarantee an effective regulatory environment
for Australias financial markets, where all dealings are beyond reproach and in the best interests of the nation.
IMPORTANT COMMENT

4

1.0.2 SECTION TWO: INTRODUCTION
The issues brought to attention for consideration by the Senate Committee are twofold.
The first concerns the state of our financial markets because of systemic problems affecting the ASX that
allow sophisticated investors to unfairly take wealth from all others with impunity. It occurs through
manipulative trading behaviours that have flourished because ASIC is not effectively carrying out its
appointed role as market regulator. The problems have been identified through research using empirical
market data that has revealed issues impacting a particular ASX listed company, as well as stocks across
the broader market. At risk is diminished participation in the markets because of acute market integrity
issues, and ultimately, a compromised market unable to effectively perform the roles required of it.

Secondly there are issues associated with the way complaints are dealt with by ASIC. Personal
experience and observations in regard to the experiences of other complainants over a 2.5 year period,
have revealed an approach by the regulator that has been characterized by, a lack of communication,
long drawn out silences, a tendency to not even acknowledge complaints, the use of impersonal generic
replies in dealing with the public, apparent disinterest in matters presented, failure to adequately
address matters that are presented, procrastination, a failure to meet expectations and indeed its own
charter, and the approving of highly questionable trading behaviours without proper explanation.
Generally, ASIC has taken inordinate amounts of time to report back eventual findings which are almost
always of the type no action will be taken - thank you for your complaint.

Importantly, research has shown that it is likely that ASIC is approving behaviours, or at least not acting
on behaviours, which if properly investigated would show breaches of trading guidelines and/or
transgressions against laws within the Corporations Act and laws under the jurisdiction of the ACCC. A
further failing of ASIC is in not tackling issues that may be difficult to address under current
arrangements by advising Treasury and seeking support perhaps through legislative change, so that
systemic issues impacting our markets can be effectively dealt with.

This submission provides a range of supplementary information including, the context in which the Australian
financial market finds itself, largely because of the excesses of the large banks over the last decade, much of it
involving white collar crime and much of it placing the worlds financial system in jeopardy (refer Appendix 1
and Appendix 2). The impact of the investment banks in global markets, with their push for technological
innovation and their encouragement of regulators and market operators to accept changes to the way
markets operate, and for the range of products that can be offered, has meant that it has been difficult to
adequately monitor, supervise and regulate radically changed markets. It means that the problems
accompanying the changes have also been foisted onto the ASX. Some of these problems have been
highlighted by the research undertaken in ways that havent previously been brought to notice in the
establishment press. The background material included in the submission also covers the matters raised with
ASIC, including the trading issues that urgently need addressing. The issues have serious implications for the
markets integrity and the health and sustainability of the Australian economy.

Failures by ASIC to constructively address problems that allow share price manipulation to take place with
impunity, means that official reassurances about fair and transparent markets are far removed from the
reality faced by retail investors, self-funded retirees and small private investors who are all placed at the
mercy of those whose privileged positions in the market allow them to unfairly dominate other
participants. Also impacted are Australian workers who are forced to have exposure to a substantially
compromised market through compulsory superannuation.
5

The issues demand attention because of institutional trading behaviours designed to marginalize retail
investors who now find it difficult to compete in an un-level playing field, and to profit from the
destruction of wealth through the system of short selling. Short selling has resulted in profits for privileged
insiders and has led to undervaluations that make companies susceptible to excessive dilution and
eventual changes of ownership. A highly dubious practice has been for pension fund holdings managed by
custodians on behalf of Australian workers and other groups, being loaned out to hedge funds and insiders
who profit from selling them in the market before buying them back cheaply and returning them back to
custodians. The owners of those shares, e.g. working people through pension funds, mutual funds and the
like, receive a pittance for lending the shares but have their holdings substantially devalued for the benefit
of rapacious hedge funds, which then repatriate their profits overseas.
The practice is highly questionable and hugely damaging to market integrity and the companies that are
targeted by short selling, not to mention the rightful owners of shares. However as far as the ASX is
concerned it is good for business as it is meant to aid liquidity and boost turnovers. It is also very lucrative
for the hedge funds involved with a report by Royal Bank of Scotland claiming $72 billion was stripped from
the market in the period June 2010 to January 2011 through short selling profits. $72 billion represents an
awful lot of money taken from the system by hedge funds being able to sell other peoples shares thanks to
the complicity of custodians who are meant to be responsibly managing shares for clients. <REFERENCE LINK>
Short selling rorts are just the tip of a very large iceberg when it comes to trading issues associated with
the ASX where the regulator tends to support privileged interests rather than ensuring that the market
functions with the highest levels of integrity and with ethical standards that are beyond reproach.
ASIC is on record as saying you get what you pay for <REFERENCE INK> when it comes to funding the
regulator but that is simply not good enough. It is a cop out. At the very least, if it cannot do the job, then it
should say so and it should let the investing public know that markets are not fair and they are not
transparent, which are major outcomes of the research undertaken. What is taking place at the moment is
somewhat of a farce with small investors being lured under false pretences (or forced in the case of
compulsory superannuation contributions) into a treacherous investing environment.
Australia deserves better than a financial watchdog that tends to regulate through:
o Media headlines and public grandstanding but with little follow up;
o continuous but ineffective consultation with industry where vested interests hold sway;
o a system involving light-weight enforceable undertakings;
o a high profile public presence but is unable to effectively engage with the investing public;
o carefully choosing its targets when enforcing laws; and
o an emphasis on covering its tracks through surveys and extensive supporting documentation.
-but at the end of the day, not a lot is actually done. Despite the talkfests, systemic problems remain firmly in
place and dissatisfaction within the ranks of those who have had dealings with ASIC runs at very high levels.
It is imperative that in assessing the performance of the regulator an emphasis be given to not what it says,
or what it says it is going to do, but to what it has actually done or not done. The Australian people need a
regulator that says less and does more and acts impartially in enforcing existing laws in the best interests
of all Australians not just a privileged few, particularly as white collar crime has engulfed the worlds
financial markets and Australia is rapidly discovering that it hasnt been excluded.

6

NOTE:
In relation to the Senate Enquiry being able to effectively review ASICs performance concerning the
trading issues presented, it is important that committee members have an understanding of the nature of
problems identified by research, the extent of the problems across the ASX and the impact that the
problems are having on the financial markets and indeed the Australian economy. Only then can a true
judgement be made about ASICs actions in either ignoring or not effectively addressing large number of
complaints, and what the long term implications might be of their choosing not to act.
Supporting material includes the Appendices attached to this document, the links referred to in the
following section (Section 9.0.2) and the internet links provided throughout the submission that draw
attention to relevant media articles.


7

1.0.3 SECTION THREE: Background to the Submission and a Summary of Dealings with ASIC

Links to Supporting Information
Events resulting in complaints being referred to the regulator, together with a detailed background to
the trading issues identified by research, are fully outlined in the supplementary information available
from the following attachments.
Attachment 1.1: Background to ASIC Complaints (Expanded) <LINK>
Attachment 1.2: An Overview of ASX Trading and its Regulation <LINK>
Attachment 1.3: Trading and Regulatory Issues Identified <LINK>

Background to the Complaint and a Summary of Dealings
A summary of dealings with ASIC is provided below. A full review is available as Additional Information 1.1
December 2010 to May 2011
A number of complaints (8 in all) concerning anomalous data trends were forwarded to the regulator
following poor share price performance by CuDeco Limited and a lack of responsiveness by the share
price to positive announcements.
The approach taken by the complainant was to forward anomalous registry and broker data to the ASIC
assuming that it would have the desire, the resources and the expertise to quickly resolve matters.
May 13, 2011
ASIC organized a teleconference to address matters raised in the complaints. After a lengthy discussion,
ASIC advised that they didnt have any problems with the trading taking place and that the share price
seemed about right.
A meeting summary was prepared by the complainant and submitted to ASIC for confirmation that we
were on the same wavelength but no further correspondence was entered into. The minutes are
available as Appendix 2 of a revised complaint forwarded to ASIC in August 2013.
Refer> ASIC Complaint 2013-1 (Appendix 2, Pg. 133)
Mid-2011 Onwards - Shareholder research resumed and a blog site was created to publish the results
Upon reflection the telephone conference didnt address the data issues presented (i.e., a lot of the
ASIC explanations were based on opinion bordering on conjecture, and the entities responsible for
suspicious data trends were not identified or the trends even discussed). Reluctance for matters to
be discussed or even explained raised frustrations given that trading remained heavily
compromised. It was decided to conduct further research and to focus on what might be
responsible for trading anomalies evident in empirical data.
To assist interested shareholders and investors and to invite enquiry, the research was posted to an
internet blog site. The transparency provided was on the basis that if Company fundamentals and
Company progress have no effect on the share price, then investors are entitled to know about any
trading issues that might be suspending the markets natural pricing function.
Research findings were posted on www.scribd_cudeco_research beginning in early October 2011
8

Referrals to ASIC
As research papers were posted to the web at least one shareholder, acting completely independently,
forwarded each report to ASIC. In effect ASIC was continuously informed of research findings. The
shareholder has lodged a separate complaint, and in particular, is disappointed that ASIC will not
properly investigate trading on August 18, 2010 where high levels of confusion about CuDecos
Rocklands resource were used to camouflage highly manipulative trading behaviours.
August 18 trading remains a very major issue. The approach with research knowing the closed view
adopted by ASIC on all matters presented, was to demonstrate that trading is compromised on a daily
basis and that it has been that way for over 3.5 years. That task is almost completed with ASIC Complaint
2013-4 <LINK> which focusses on recent selling by a major shareholder resulting in half a billion dollars
being stripped from the market capitalization of the company. The selling can be viewed as being non-
genuine as it didnt appear to try and achieve the best returns for the holding. Non genuine selling was
mentioned in a recent High Court ruling that dealt with market manipulation <LINK>.
A formal complaint focussing on share price manipulation associated with August 18, 2010 trading will be
forwarded to ASIC as soon as all trading issues have been brought to attention.
Comment about the system regarding the submitting of complaints
A complainant shouldnt have to gather information, do the research, and present the findings to
encourage ASIC to act. Alerting the problem is all that should be required. However having done all the
research in an attempt to clearly delineate dubious practices and how they affect share value, ASIC still
hasnt followed-up, yet the matters are all supported by empirical data unable to be explained in terms
other than manipulation.
It means that complaints that are put without much evidence are likely to be dismissed immediately.
Recent Complaints
Revised complaints have recently been submitted to ASIC in the face of new findings and disturbing
trends in long term. Data based evidence strongly suggests that trading in CuDeco Limited has been
severely compromised on a daily basis. Trading anomalies are unable to be explained through
legitimate market activity which means that share price manipulation is likely to be responsible.
Recent complaints forwarded to ASIC are summarized below and are available from the links provided.
Additional Information 1.4: ASIC Complaint 2013-1 Aug 16, 2013 <Click: 2013-1>
Additional Information 1.5: ASIC Complaint 2013-2 Sep 16, 2013 < Click: 2013-2>
Additional Information 1.6: ASIC Complaint 2013-3 Oct 14, 2013 < Click: 2013-3>
Additional Information 1.7: ASIC Complaint 2013-4 Nov 4, 2013 < Click: 2013-4>
An additional complaint covering anomalous levels of short selling on August 21, 2013 was also
forwarded on August 22, 2013.
Additional Information 1.8: CuDeco Trading Complaint Re-Short Selling on Aug 22, 2013 <LINK>
ASIC response to recent complaints (From Aug 16, 2013)
It has been extremely difficult to obtain responses from ASIC, either to enquiries about whether
complaints have been received, or in regard to legitimate questions that have been presented. It is
disappointing because the data trends revealed by research are extremely persuasive and suggest that
share price manipulation is taking place on a daily basis with nothing being actioned.
9

Email Transcripts:
The following link provides access to summaries of email converations with three ASIC Officials. They
provide some background into the way complaints are dealt with by ASIC.
Additional Information 1.9: Email Transcripts <LINK>

Other Research
Research Chapters detailing both CuDeco trading data (Chapter 6) and trading data related to other
companies (Chapter 7) provide further evidence to support the issues identified and reported.
Refer www.scribd.com/cudeco_research
Chapter 6 <Click on the Chapters> 6.1 6.2 6.3 6.4 6.5
Chapter 7 <Click on the Chapters> 7.1 7.2 7.3 7.4

Other Initiatives
In addition to the complaints forwarded to ASIC there are other related matters that need to be taken
into account in assessing ASICs responses to the trading issues presented .
They include:
o The Company itself has forwarded research material and has requested that ASIC look into matters.
o The Company has requested of ASIC that it be removed from the short selling list of stocks because
of manipulative practices taking place.
o At least one broker has submitted a formal complaint about issues conerning Cudeco trading.
o Several shareholders have complained about CuDeco issues and one in particular has provided an
independent submission to the Senate enquiry.
Despite all of the representations to ASIC over a very long period of time by several parties, nothing has
been done to address concerns. Additionlly, ASIC has confirmed to at least one shareholder that it doesnt
find anything in the shareholder research that requires following up, yet it hasnt communicated that
information to the person conducting the research and who has filed several complaints. It is a strange and
unprofessional way to operate. Also, it hasnt provided any evidence to demonstrate why anomalous
trading behaviours and dubious trading issues are acceptable, when share price manipulation appears to
be the only plausible explanation.
To use an analogy the situation is like the policeman on the beat not seeing anything wrong with drug
pushing, or even worse. If ASIC cant see a problem when it is staring them in the face what hope does any
shareholder have of their investments being trashed through manipulative short selling, algorithms tuned
to target lower prices and collusive interests looking to seize ownership of unfairly devalued assets?
While ASIC cannot disclose what specific actions it takes on matters referred to them until such time that
fines are announced or a court action is initiated, it is obvious that nothing has been done as the
anomalous trading trends are still evident in daily trading. Also, the company has not been removed from
the list of companies that can be short sold so their request was ovbviously turned down.

10

Inaction by ASIC has coincided with the market capitalization of the Company being recently stripped of
around around half a billion dollars between June and August. The share price slump was largely the result
of dubious levels of short selling coinciding with a major shareholder departing the register under
extremely odd circumstances which are addressed in ASIC Complaint 2013-4. It is also of note that despite
the exit from the register of that particular shareholder, daily manipulative trends are still firmly in place.



The system is heavily reliant on ASIC attending to all concerns that impact the health of our financial markets,
however the time has arrived when the question as to Who regulates the regulator? needs to be asked. The
Senate Enquiry provides an excellent opportunity to address that very important question.

11

APPENDIX 1 - CONTEXT
Background Information Concerning World Markets and the Australian Market
In attempting to comprehend the current economic landscape and the effectiveness or otherwise of the
regulatory system governing Australias financial markets, it is helpful to review where we have come from
over the last several decades.
GLOBAL FINANCIAL SCANDALS
Quote: Corporate malfeasance has earned a place among the defining themes of the last decade-and-a-
half, helping to give birth to the present global recession and the occupy Wall Street movement. Some of
the worst corporate accounting scandals include.<Reference Link>
Waste Management Co 1998 $1.7 Billion in fake earnings
Enron Corporation 2001 $74 Billion loses for shareholders
Worldcom 2002 Inflated their assets by $11 billion
Tyco 2002 Stole $140 million and inflated earnings by $550 million
Health South 2003 Inflated earnings by $1.4 billion
Freddie Mac 2003 $5 Billion in earnings mis-stated
AIG 2005 $3.9 billion accounting fraud
Lehman Brothers 2008 Hid over $50 billion in loans sales
Bernie Madoff 2008 Ran a $68.5 billion Ponzi scheme
Bear Stearns 2008 A $133 per share company bought out for $10 per share

The list is by no means exclusive but draws attention to companies misleading shareholders and
repatriating large amounts of money into Directors pockets. In recent times you can add to the mix the
Libor Interest rate fixing scandal, the sub-prime scandal largely responsible for the GFC, energy trading
scandals and the likes of the London Whale scandal where trades by JP Morgan went wrong to the tune of
$6 billion.
At the core of these scandals and many others are the activities of the large investment banks led by the
likes of Goldman Sachs, JP Morgan, Deutsche Bank, HSBC, Barclays, Citi Group etc. These goliaths run the
world of finances and in many respects dictate to governments given their too-big-to-fail-status acquired
through massive leverage. The corruption throughout these organizations is widely acknowledged and
some of the enormous fines levied for indiscretions are provided as Appendix 2.
Importantly, the majority of these immensely discredited trading houses have divisions around the world
that operate on local exchanges such as the ASX. They have been granted licenses to run their high
frequency algorithmic trading systems (HFT)after paying very substantial fees to the local exchange
owners. Neither the ASX or ASIC, by their own admission, know much about how trading algorithms work
and what effect they have on the market. The fact that they have been accepted without question is
possibly testament to the ASX looking to generate additional revenues for themselves, regardless of the
consequences for the markets integrity. ASICs inability to see the dangers with them even when
presented with damning information, is quite another matter.
HFT firms have become significant lobbyists of US Congress looking for concessions from regulators to
allow unfettered access to the markets. <LINK>. HFT systems generally get accepted on Wall Street and are
then are exported to exchanges around the globe in a franchise like arrangement. Shah Gilani, a seasoned
veteran of Wall Street and former hedge fund manager regards HFT trading as a scam and in an article
12

<Refer: High-Frequency Trading: A Market Destroying Scam> provides some rare insights into what is
occurring in exchanges around the globe. It provides a chilling wake-up call for the dangers faced by our
markets.
Shareholder research into CuDeco Limited has identified some of the impact of HFT algorithms which
includes:
o collusion taking place between brokers;
o cartel-like activity;
o absolute control over prices both in active trading and during auctions; and
o the large volumes of wash trades taking place where there is no change to beneficial ownership.
All activities are illegal however no attempt is made to audit accounts to determine who is responsible for
the trades. While some attempt is being made to address obvious problems such as HFT front running
orders, and rules concerning dark pools which have initially been successful according to recent reports
however nowhere near enough effort is being made. The elephant in the room is a complete lack of
transparency where it is not possible to quickly establish the identities responsible for trading anomalies and
to make them responsible for their trading actions. Importantly, systemic share price manipulation simply
couldnt occur if the market was truly transparent, and given the extent of rorts reported on an almost daily
basis, it is surprising that the regulator tolerates such high levels of opaque activity as it relates to trading, to
settlements and to securities lending.
It doesnt help attempts to address trading concerns when the regulator itself appears completely
disinterested in all matters presented. If the information was incorrect it would be an easy matter to
explain why, and dismiss the issues, however that hasnt happened.
The situation draws attention to a culture of making money by stripping wealth from others, a behaviour
that is entrenched in modern markets and which is exemplified by manipulative short selling practices and
with algorithms continuously able to control prices. The system of index investing provides further
flexibility to control prices of targeted stocks as well. Long gone are the days of generating wealth through
productive enterprise like, for example, discovering a major minerals deposit and developing it into a
significant long life mine, thereby offering returns for investors, growth and jobs for regional Australia and
tax receipts for the Australian Government. Companies that attempt to do that are hampered at every
turn. Usually what happens is that prices are manipulated to severely undervalued levels, the company is
forced to excessively dilute the register through cheap placements in order to raise funds to advance the
project, and ultimately, ownership is generally secured by the entity behind the manipulation through an
opportunistic takeover. The ASX is littered with companies that have been taken over cheaply, and
unfairly, by such an approach.
THE AUSTRALIAN MARKET
Australia too has had its share of corporate malfeasance and in recent times we have seen bribery and
kickback scandals associated with the Australian Wheat Board, Leighton Mining, the Reserve Bank and the
ASX itself. Bribery allegations concerning a major corporate entity like Leighton is one thing, but to have
scandals associated with notable industry groups like the Australian Wheat Board, and indeed the leading
banking entity in the nation itself, the Reserve Bank, is quite another. It is actually quite disastrous. It is
disastrous for Australias reputation on the global stage and disastrous for Australian business and the long
term prospects of the Australian economy.
13

What is even more disastrous is for two Directors of the Australian Stock Exchange (ASX) being charged
with illegal short selling through a hedge fund under their control back in 2009. The activity would
necessarily have involved insider trading as well. One wonders what activities the two Directors, or the
rest of the ASX board for that matter, have been up to since 2009 and what they have approved in running
the ASX that have been detrimental to small retail investors.
Certainly the ASX was criticised for being extremely self-serving back in 2009, and since, as per the
following articles.
o The naked truth: short selling must be banned - Apr 2008
o The ASX needs to clean up its act on short selling naked and covered
o High-frequency trading is cuckoo Apr 11, 2012 Business Spectator
o For dark pools, just wade into the ASX Nov 24, 2012, The Age
The really confidence-sapping issue about the two ASX Directors being involved in illegal behaviour, is that
if it wasnt for the SEC they would be still sitting on the board plying their trade from privileged positions.
Their actions have tainted the entire board and have seriously damaged market integrity.
Confidence in the system is vitally important for the effective functioning of financial markets and the
administration and regulation of markets needs to be beyond reproach at all levels. It also doesnt help
when there is a perceived bias by ASIC in favouring the Big End of Town or that there appears to be one set
of laws for one class of investors and another set for others. Media commentary contains many examples
which suggest that favouritism and double standards are entrenched within the system of regulation.
o ASIC boss rubs shoulders with the business elites
o ASIC says hedge funds not a problem
o ASIC throws support behind short selling
o ASIC spares banks short-term volatility
It also doesnt help when there are perceptions that the head of market regulation may be too close to
certain sectors of the industry to be able to impartially implement the laws that govern how markets are
meant to function. ASIC Chairman, Mr Greg Medcraft was certainly well connected back in his time with
Societe Generale, as global head of securitisation and responsible for a trillion dollar industry.
Securitization was intricately involved with the sub-prime disaster where the securitization procedures
worked on by Mr Medcraft and his team provided the mechanism for toxic mortgages to be packaged as
income producing financial instruments, and sold to unsuspecting investors all over the world. The
products eventually were proven worthless. The banks that provided insurance for the securitized products
which enabled them to achieve acceptable ratings by credit rating agencies, and therefore enabled them to
be marketed, were given billions of dollars of bail-out money by governments as they couldnt pay for the
losses they were meant to insure. Taxpayers are now responsible for the bailout monies. Where the
bailout money actually went has never been adequately explained. While Mr Medcraft wasnt responsible
for the sub-prime mortgages his background does give some indication as to which sector his sympathies
may lie. <Questions being asked over ASIC chief's previous role>.There is also the question of his
appointment by the Gillard labour Government that short circuited the usual selection processes for
Government appointments.
Background issues are exceedingly important as they can help put into perspective why situations are
allowed to become out of hand. The CBA issues are a comparatively recent case in point and going back to
14

the GFC wash-up when Tony D'Aloisio was ASIC Chairman, there are disasters such as Storm Financial, Opus
Prime, ABC learning, Lift Capital, Babcock and Brown etc. that all raise questions about the effectiveness of
our regulatory system. It is of note that before joining ASIC, Mr D'Aloisio held the position of Managing
Director and Chief Executive Officer at the Australian Securities Exchange (ASX).
Poor regulation might be attributed to incompetence or lack of resources but it may also be linked to
relationships between those who have prominent positions within the system, including the leaders of the
ASX, ASIC, the Banks and powerful corporations. Perhaps some of the decision making, or lack of decision
making in the case of the CBA, is due to strategic affiliations between power players. i.e., a degree of elitism
entrenched within the system.
The laxity in the system requires addressing in the strongest possible terms and so does the situation
where systemic trading issues have been demonstrated using empirical data over long periods of time yet
the regulator has shown no interest. It is essential to fix the problems immediately, particularly in the
interests of Australian workers whose superannuation funds are vulnerable in the market as it currently
operates.
The industry is expected to grow from the current $1.3 trillion to $3 trillion by 2019 <LINK>. It represents an
enormous amount of money to be put at risk, especially given the questionable activities by custodians in
making other peoples money available for dubious securities lending activity. The increased contributions
regarding superannuation introduced by the former Labour Government coinciding with a newly elected
Liberal Coalition, represents an opportune time to clean up the financial markets. Reforms to address
systemic problems and to ensure that ASIC effectively performs the job entrusted to it are an imperative.

15

APPENDIX 2 AN INDICATION OF THE EXTENT OF CORRUPTION IMPACTING FINANCIAL MARKETS
Fines Incurred by the Major Investment Banks in Recent Years

The following links either summarize the fines levied against the major investment banks in recent years
for engaging in illegal behaviours or they draw attention to issues concerning their operations. The list is
provided as a sample to demonstrate the extent of problems and is by no means inclusive of all
wrongdoingas or all fines levied to this sector.
o Goldman Sachs fined $1.5 million for trading glitch
o Goldman Sachs Receives Fine That Will Take It 24 Minutes To Pay Off
o Goldman Fined for Failing to Block Trader's $8.3 Billion Bet ...
o Goldman Sachs handed record $550m fine over Sub-Prime transaction
o How Corrupt is Goldman Sachs?
o Goldman Sachs Fined $22 Million For Favouring Select Clients
o JPMorgan set for record $13b settlement with US Justice Department
o JPMorgan Chase Gambles Away $6B, Gets "Slap on the Wrist
o JP Morgan Chase fined $20m for mishandling Lehman Brothers.
o JPMorgan faces action on laundering controls
o JPMorgan Chase Fined 154 million in Goldman-Like Case.
o JP Morgan Chase Fine: Another Slap on the Wrist for Wall Street
o JPMorgan Chase ordered to fix poor risk management - CBS News
o Wall Street Looting: Will JPMorgan Chase Be Held Accountable
o Treasury Department Fines JPMorgan Chase $88.3 Million
o JPMorgan Chase CEO - 'We Actually Benefit From Crises
o JPMorgan Chase to pay $88M fine for Iran, Cuba dealings
o JP Morgan Chase fined $20 Million
o JP Morgan Chase Fined $19 Billion for Fraud
o Citigroup, Goldman Sachs, Merrill Lynch fined $4.85 mill for paying lobbyist
o Libor Scandal - Barclays fined 290m as bid to manipulate interest rates is exposed
o Trading House Swift Trade fined 8m for market abuse
o JPMorgan Pays $410 million Fine For Manipulating Electricity Prices
o JPMorgan woes deepen as US demands $6bn penalty
o $11 Billion Fine? Just a Cost of Doing Business for JPMorgan
o SEC charges Morgan Stanley with securities fraud
o Massachusetts fines Deutsche Bank $17.5 million over CDO
o Deutsche Bank Unit Fined Over Mortgage Security Conflicts
o Deutsche Bank Fined 1.7 million Over Energy Trading Scheme
o US Stock Broker Fraud Lawyer :: Deutsche Bank - Alex Brown ...
o Deutsche Bank Fined $1.25 Million By U.S. For Overstating Trades
o LIBOR Probe Could Cause Deutsche Bank Billions of Euros.
o Deutsche Bank fined for 'irresponsible' mortgages
o Citi fined $30 million for leaking information to Hedge Funds and Institutional investors
o Citi Fined $590 Million; Is This the End of the Financial Crisis
o Fed Hits Citi Over Money Laundering Problems
o Citi fined $2 million over Facebook IPO
o Citigroup to pay $700 million to settle subprime mortgage lawsuit
o Citigroup Manipulated Libor More Than Any Other Bank.
o Libor scandal engulfs RBS, UBS, Deutsche, Citi, BoA, JPMorgan
o London Whale scandal to cost JP Morgan $920m in penalties
16

o Deutsche May Face $105 million In Fine Over Option Trading
o Banks shiver as UBS swallows $885 million U.S. fine
o Japanese UBS unit fined $100 million for Libor rate rigging
o UBS to Pay Fined $60 million Over Mortgage-Bond Deal
o BBC News - UBS fined $1.5bn for Libor rigging
o UBS fined 9.45m for mis-selling to wealthy clients
o US' SEC Fines UBS $50m For CDO Securities Fraud
o UBS bank slapped with $885 million fine
o SEC Fines UBS $50 Million for Undisclosed Fees
o UBS fined $50 million over rogue trading case
o HSBC pays $4.2bn for fines and mis-selling in 2012
o HSBC's $1.9 Billion Money Laundering Fine
o HSBC may face more severe penalty for money laundering failures
o Finra Fines Merrill Lynch $1.05 Million
o Merrill Lynch Used Same Alleged CDO Fraud as Goldman
o Merrill Lynch Settles S.E.C. Fraud Case for $10 million
o SEC Charges Merrill Lynch, $80 million in Enron Related Dealings