ASX pair quit over US scandal

ASX chairman Rick Holliday-Smith insists the exchange operator's governance remains intact despite two directors resigning amid a share trading scandal in the United States.

ASX chairman Rick Holliday-Smith insists the exchange operator's governance remains intact despite two directors resigning amid a share trading scandal in the United States.

Mr Holliday-Smith's comments follow the exit on Thursday of Russell Aboud and Shane Finemore after their hedge fund Manikay Partners was caught up in a US regulatory sting.

The ASX chairman said the board had accepted their resignations "with regret".

"They made their decision after careful consideration of the best interests of the company," Mr Holliday-Smith said.

It is understood the two made the decision on their own to stand down from the ASX board.

"With regret, I have accepted their resignations. Mr Aboud and Mr Finemore have ... made significant contributions to the company. We wish them well."

Mr Aboud and Mr Finemore resigned from the ASX board on Thursday - just one week before the ASX's annual general meeting - after their US-based hedge fund was fined by US regulators following a nationwide investigation of illegal short-selling practices.

The US Securities Exchange Commission this week announced enforcement actions against some 23 US-based investment funds for improperly participating in public stock offerings after selling short those same stocks.

As part of the round-up, the SEC fined Manikay Partners $US2.5 million for short-selling of Citigroup shares in 2009.

The hedge fund had made a profit of $US1.65 million from the violation.

While the fine does not mean there has been an admission of guilt by the pair, the men brought the news to the attention of the ASX board on Wednesday, and the board met that evening to consider potential governance implications.

Mr Aboud did not return calls. Mr Finemore is believed to be in the US and could not be contacted.