Tricom's run in with the bulls

The record $1.35 million in ASX fines against Tricom Securities provides a timely reminder of just how wild the cowboys were when the bull market was in full swing.

But it also highlights a significant flaw in regulatory powers of the ASX, which can only move against corporate entities and not individuals.

Tricom founder Lance Rosenberg ran a broker that failed to meet its payment obligations, failed to maintain its records, failed to keep sufficient liquid capital, and failed to have an appropriate management structure to ensure its operations and processes were compliant.

He was also in charge when Tricom was involved in two cases of market manipulation, one of which resulted in one of Tricom's employees, Peter Gordon Cameron, being banned from providing financial services for six years.

The ASX Disciplinary Tribunal said that in the most blatant of the market manipulation cases, Tricom management ignored alerts containing clear indications of stock price window dressing.

When confronted with the allegations by ASX investigators, Tricom management was "arrogant and unhelpful”. The ASX said that this exacerbated the seriousness of the contraventions.

Despite all this Rosenberg remains a director of Tricom. ASX has no power to take action against him. The ASX has to leave that to the Australian Securities and Investments Commission

The fines will be paid by the new owner of the firm Rob Topfer, who has recapitalised the business and renamed it StoneBridge Securities. Topfer, who used to run Babcock & Brown Capital, said today marked the closure of the final chapter of the firm's restructure.

Topfer is full of praise for the role played by Rosenberg in the resolution of all the problems that beset Tricom: from the unwinding of its $1.5 billion securities lending book to the rebuilding of its compliance systems.

Rosenberg has relinquished his position as the sole responsible executive under the Tricom securities license. Topfer has put in place six responsible executives including himself.

But he sees no problem with Roseneberg continuing to sit on the StoneBridge board of directors.

The firm's culture has been transformed under the heavy involvement of the ASX, ATSC, ASIC and independent auditor PwC and tough rules and guidelines imposed by the ASX and ASIC.

StoneBridge probably has the strictest risk management framework and compliance processes of any broker in Australia.

But as long as Rosenberg remains on the StoneBridge board there will always be some doubt about the firm's commitment to wholeheartedly rebuilding the damage Tricom caused to the market's reputation and integrity.

The other unfortunate aspect of the Tricom incident is that others have not learned any lesson from the market manipulation episodes.

Eric Mayne, who is the ASX chief supervision officer, says there have been about 20 to 30 prima facie market manipulation matters referred to ASIC by the ASX since the Tricom market manipulation cases.

It seems that bull or bear market, the cowboys never learn.