Financial adviser banned for price manipulation of MINI warrants issued by Credit Suisse 

On 8 September 2016, ASIC banned Michael Spencer, formerly a financial adviser, from providing financial services for three years.

ASIC found that Mr Spencer engaged in manipulation of the price of three types of MINI warrants issued by Credit Suisse, commonly called “MINIs”. MINIs are a type of derivative product traded on the ASX.

ASIC found that on four separate days in May 2013, Mr Spencer took part in back-to-back buy and sell trades in MINIs on ASX with a former employee of Credit Suisse after the pair had pre-arranged the MINI series, the price, the volume and the approximate timing of the trades. On each occasion, the MINI series chosen, the volume and the prices at which the trades were conducted did not reflect the earlier trading by Credit Suisse in the underlying on behalf of Mr Spencer.

ASIC found that the prices at which Mr Spencer and the former employee of Credit Suisse arranged to trade MINIs were designed to transfer the agreed profits from all the preceding trading. This was likely to have the effect of creating an artificial price for trading in the affected MINIs on ASX.

Appeal to AAT

On 14 September 2016 Mr Spencer filed an application for review of ASIC’s decision in the AAT. Mr Spencer also applied for a stay of ASIC’s decision. On 2 November 2016 the AAT made orders staying the operation and implementation of ASIC’s decision until the review application is heard and determined. Mr Spencer has given undertakings to the AAT that he will not:

(a) deal in the derivatives market;

(b) make a market for a financial product; or

(c) seek or obtain employment as a trader;

whilst the stay is in effect.

Background

A MINI is a type of ‘derivative’ in that it derives its value from another ‘thing’ which is commonly referred to as the ‘underlying instrument’ or ‘reference asset’. The underlying instrument of a MINI may be, among other things, a share, a share price index (including the S&P/ASX 200 Index), a pair of currencies or a commodity.

ASX SPI 200 Index Futures (SPI Futures) are a derivative product which tracks the value of the S&P/ASX 200 Index.

Credit Suisse ceased issuing MINIs on ASX in October 2013.

Source: ASIC – AAT stays the ASIC banning of former financial adviser for misconduct in warrants market pending review

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