THE former head of broking firm Lonsec has been charged with 14 counts of insider trading over alleged transactions in shares of Clean Seas Tuna just before the release of figures that showed a slump in the company's prospects.
Norman John Graham, 52, of Barwon Heads, appeared yesterday in the Melbourne Magistrates Court on charges that he sold shares in Clean Seas when he was aware of information about the death of bluefin fingerlings and the prospects of Clean Seas' kingfish stocks.
Lonsec underwrote Clean Seas Tuna's float on the Australian stock exchange in December 2005, and it assisted the fish-farming company in subsequent capital raisings.
Graham resigned as a director of Lonsec in October 2010.
The 14 counts of insider trading against Graham have been brought by the Australian Securities and Investments Commission, which said it had launched an investigation after a referral from the Australian Securities Exchange.
ASIC alleges that Graham received information about the growth in Clean Seas' kingfish stocks and the company's financial results in early February 2010.
The regulator alleges that Graham sold a total of 286,407 Clean Seas shares, held by various related accounts, on February 1 and February 23 in 2010.
It further alleges he sold 400,000 Clean Seas shares for a client's account between February 12 and 23, and that on February 26, just before the company released its half-year results, he sold 200,000 shares from the accounts of two of his clients.
ASIC alleges that during all these trades Graham was in possession of inside information about Clean Seas.
Clean Seas shares traded around 23? and 24.5? between February 1 and 23, 2010.
On February 26, Clean Seas released its half-year figures showing that interim losses had increased from $6.7 million to $14.2 million, prompting a plunge in the price to 9.1?.
Lonsec told BusinessDay that the firm became aware of ASIC's investigation in August 2010, when it received formal notices requesting it to provide information.
"While we do not comment on the relationship we have had with former employees, we can say that Graham resigned from Lonsec effective October 13, 2010, after more than 10 years employment," Lonsec director Jason Clarke said. "It is our understanding that Lonsec Ltd is not the object of the investigation conducted by ASIC. It is also our understanding that apart from the former managing director, no current or former Lonsec employees or officer is the subject of ASIC's investigation.
"Lonsec has a strong compliance culture, and we are co-operating fully with ASIC. We expect our clients will understand this." Graham was not required to enter a plea.
If found guilty, he faces as much as five years in jail, or a fine of $220,000 for each instance of the offence.
The matter has been adjourned until August 6.