Secret ban on Tricom boss lifted

In July 2009 the Australian Securities and Investments Commission banned Mr Rosenberg from the financial services industry for four years, telling him privately his trades to recover parcels of shares from Opes Prime for Tricom clients in March 2008 had created a false or misleading market in 12 stocks.

In the Administrative Appeals Tribunal, he successfully applied for a confidentiality order while it reviewed ASIC's ban.

Yesterday the tribunal overturned the ban, saying the market was not misled when Tricom failed to disclose that its counterparty in 12 off-market trades known as "special crossings" was its parent company, Tricom Holdings.

Mr Rosenberg had been well motivated and had not, as ASIC alleged, been "duplicitous" in conversations with executives of the Australian Securities Exchange, said a deputy president of the tribunal, Robin Handley, and a senior member, Stephen Frost.

They agreed Mr Rosenberg was "possibly" in breach of the ASX rules because Tricom Holdings was not an independent purchaser.

"However, this was not known by the market and, in our view, what was known by the market did not create a false or misleading appearance," they said.

The regulator has the right to appeal the tribunal's decision in the Federal Court.

Mr Handley and Mr Frost lifted the confidentiality order, which had prevented the Herald from identifying Mr Rosenberg, and suppressed details of the conduct that ASIC considered warranted a ban.

Last year ASIC took the confidentiality issue to a full court of the Federal Court, which dismissed the claim that the tribunal had no power to stop ASIC publicising its ban - and criticised the suppression.

The tribunal's reasons "do not appear to grapple with ... the importance of the availability of information to the market generally and to existing and potential customers of [Mr Rosenberg], as a critical element in the public interest", the Full Court said.

The case centres on March 27 and 28, 2008, when it was unclear whether Tricom would be able to reclaim $67 million worth of its clients' securities, which had been on-lent to Opes Prime as collateral for borrowings of $43 million.

Mr Rosenberg gave evidence he was also concerned about a recapitalisation plan for Tricom involving Babcock and Brown Ltd.

His solution was for Tricom Equities to sell 12 stocks to Tricom Holdings at prices set by lending agreements between Tricom and Opes, which were steep discounts to the prevailing market prices. These sales triggered an obligation for Opes Prime to deliver shares to Tricom and for Tricom to repay money it had borrowed from Opes Prime.

Mr Handley and Mr Frost said the trading benefited Tricoms clients and noted that Mr Rosenberg was in regular contact with the ASX and had consulted internal and external advisers. They said special crossings often had little impact on the market because the price often bore no relation to the market price.

A special crossing is not the same as an ordinary trade on the market, they said.

ASIC had argued that Mr Rosenberg should have disclosed a contrived transaction done in-house. It said Mr Rosenberg, who owned 87.5 per cent of Tricom, was motivated not only by the interests of Tricoms clients but also by Tricoms interests and therefore his own interests.

It also said Mr Rosenberg was reckless because he could not be sure Tricom would be in a position to settle the trades.

Yesterday a spokesman for Mr Rosenbergs solicitors, Freehills, said if ASICs view had prevailed there would be serious negative implications for the market because special crossings away from the market price were accepted practice. ASIC had not notified the market of its view that such crossings led to false markets, he said.

ASIC declined to comment.