MIU - Issue 132 - November 2021

ASIC successful in Federal Court against GetSwift and its directors Bane Hunter, Joel Macdonald and Brett Eagle

The Federal Court has found technology and services company GetSwift Limited (GetSwift) made misleading statements and breached its continuous disclosure obligations when making statements to ASX between February and December 2017.

The Court also found GetSwift directors Mr Bane Hunter and Mr Joel Macdonald failed to meet their obligations as directors due to their involvement in the announcements made to ASX, and that they were both knowingly concerned in multiple continuous disclosure breaches made by GetSwift. Former GetSwift director Mr Brett Eagle was also found by the Court to have been knowingly concerned in a more limited number of continuous disclosure breaches made by GetSwift.

GetSwift (former ASX code: GSW) announced to the market a series of agreements with enterprise clients for the use of GetSwift’s company software-as-a-service (or SaaS) platform, including agreements with Amazon, the Commonwealth Bank of Australia and Yum Brands. However, these clients were only trialling, or contemplating a trial, of the GetSwift platform and the agreements, when announced, were not ongoing or revenue generating.

The Court found these announcements were misleading and, by failing to notify the market of material information regarding the agreements, GetSwift breached its continuous disclosure obligations.

Over the period of the announcements, GetSwift’s share price rose almost 800%. GetSwift also raised $100 million in capital from institutional investors, including $75 million in December 2017 when the company’s share price was close to its peak.

We’ll now seek pecuniary penalty orders against GetSwift, Mr Hunter, Mr Macdonald and Mr Eagle. We’ll also seek orders disqualifying Mr Hunter, Mr Macdonald and Mr Eagle from managing corporations.

• Read the media release

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Former Quantum Resources director convicted of insider trading and market manipulation offences

After being convicted of insider trading and market manipulation offences, Avrohom Mordechai Kimelman has been sentenced to 18-months imprisonment, to be released immediately upon entering into a $5,000 recognisance and an undertaking to be of good behaviour for two years.

Mr Kimelman is a former director of Quantum Resources Ltd, now known as Nova Minerals Limited.

On 16 November 2015, Mr Kimelman conspired to manipulate Quantum’s share price.

Mr Kimelman also procured the acquisition of 1,990,963 Quantum shares between 27 April 2016 and 5 May 2016, while possessing inside information concerning Quantum’s intention to acquire Manitoba Minerals Pty Ltd, which had agreed to acquire an interest in a lithium resource in Canada.

• Read the media release

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Guidance on crypto-asset related investment products released

We’ve released information for product issuers and market operators on how they can meet their regulatory obligations in relation to crypto-asset exchange traded (ETPs) products and other investment products.

The information covers good practices for market operators in how they admit and supervise these products, and good practices for product issuers in how they establish and operate these products. Key matters covered by our good-practice guide include admission and monitoring standards, custody of crypto-assets, pricing methodologies, disclosure and risk management.

Our good practices are set out in Information Sheet 225 Crypto-assets (INFO 225) and Information Sheet 230 Exchange traded products: Admission guidelines.

Responsible entities that intend to hold underlying assets that comprise crypto-assets will need to hold an authorisation in relation to crypto-assets. We have introduced a new ‘crypto-asset’ category in the licensing application for responsible entities. Details of this are set out in INFO 225, with updates to relevant forms and regulatory guides to be made in due course.

The good practices and licensing changes follow our public consultation in Consultation Paper 343 Crypto-assets as underlying assets for ETPs and other investment products (CP 343) in June 2021. In CP 343, we consulted on proposals to establish good practices for these products within the existing regulatory regime and changes to our licensing regime.

We received 32 non-confidential submissions in response to CP 343. Most of the submissions received were generally supportive of our proposals in CP 343. Some submissions raised comments, questions or suggestions for ASIC to consider. Our consideration of these submissions is detailed in Report 705 Response to submissions on CP 343 Crypto-assets as underlying assets for ETPs and other investment products.

• Read the media release

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Guidance on reporting suspicious activity in FICC markets released

We’ve published Information Sheet 265 Reports of suspicious activity in FICC markets (INFO 265), which provides guidance about reporting suspicious activity to ASIC in fixed income, currencies and commodities (FICC) markets.

INFO 265 covers:

• reporting suspicious activity
• examples of suspicious activity to report to ASIC
• AUSTRAC suspicious matter reports
• lodging FICC SARs with ASIC.

Misconduct in these markets can occur due to relatively low transparency, a high proportion of over-the-counter trading, the use of multiple trading platforms and data sources, and reliance on benchmarks (such as BBSW) for pricing and valuation. Market intermediaries who observe suspicious activity in FICC markets can lodge a suspicious activity report with ASIC.

Reporting suspicious activity in FICC markets is in the interests of all market intermediaries. We remain focused on ensuring that FICC markets operate with fairness and integrity and these reports provide a valuable source of market intelligence for our work.

• Read INFO 265

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Information on pump and dump activity for market participants released

We’ve released more information on pump and dump activity that we’ve observed in the Australian market (see Gatekeeper expectations and pump and dump activity). It also outlines our expectations for market participants to identify and report this activity promptly.

Pump and dump activity impacts market integrity and can harm investors who buy a security just before the promoters sell out and the price falls, resulting in significant losses and reducing confidence in the market. This may amount to market manipulation in breach of the Corporations Act 2001.

Participants should:

• consider the circumstances of all orders as required under the manipulative trading provisions in Rule 5.7.2 of the ASIC Market Integrity Rules (Securities Markets) 2017
• be aware of the indicators of manipulative trading
• report suspicious activity to ASIC.

We expect participants to take active steps to identify and stop potential market misconduct (including pump and dump activity), and to promptly report misconduct to ASIC.

• Read Gatekeeper expectations and pump and dump activity
• Read Social media led pump and dump stocks

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Stockbroker ROA example released

We’ve released information on records of advice (ROA), including a stockbroker ROA example, to provide clarity to financial advisers and advice licensees on their obligations when using ROAs to provide personal advice to retail clients.

Information Sheet 266 FAQs: Records of Advice answers frequently asked questions about ROAs, including questions about their use, preparation and recordkeeping.

Financial advisers in the stockbroking industry frequently rely on the exemption from giving a statement of advice (SOA) to existing clients when providing personal advice. However, there are requirements that need to be met before relying on the SOA exemption and using ROAs.

Importantly for the stockbroking industry, our stockbroker ROA example has been prepared to help advisers and their licensee understand how we expect them to meet their obligations.

We encourage you to review the example and test it against your existing practices for ROAs.

• Read the media release

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Market surveillance system upgrade and enhancements

In collaboration with KX, part of the FD Technologies Group, we’ve upgraded our market surveillance system known as Market Analysis and Intelligence (MAI). It has improved our real-time and post-trade analytics capabilities, focusing on secure, flexible and scalable infrastructure.

Since MAI went live in 2013, it has enabled ASIC to interrogate large data sets and monitor market activity, consistent with the increased use of technology in day-to-day trading.

In line with the Federal Digital Transformation Agency’s Whole of Government Information and Communications strategy, we’ve now transitioned our updated production environment into the AWS cloud.

The upgrade includes the KX Analyst Technology, providing ASIC with an environment that delivers enhanced capabilities for post-trade analytics of listed and over the counter (OTC) markets, including securities and futures, as well as fixed interest, commodity and currency (FICC) markets.

We’re enhancing our FICC market capability by ingesting and interrogating a broader range of data across exchange and OTC market licensees, clearing and settlement facilities and OTC trade repositories, to keep ahead of changing market dynamics and seek indicators of poor conduct.

The upgraded system will ensure we’re able to continue to identify emerging harms and take action quickly when misconduct such as insider trading and market manipulation occurs.

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