NEWSLETTER

SEC CHARGES MORGAN STANLEY AND FORMER EXECUTIVE PAWAN

PASSI WITH FRAUD IN BLOCK TRADING BUSINESS (USA)

HTTPS://WWW.SEC.GOV/NEWS/PRESS-RELEASE/2024-6

Firm agrees to pay more than $249 million to settle fraud charges and for failing to enforce
information barriers
Washington D.C., Jan. 12, 2024 —
The Securities and Exchange Commission today charged investment banking giant Morgan
Stanley & Co. LLC and the former head of its equity syndicate desk, Pawan Passi, with a
multi-year fraud involving the disclosure of confidential information about the sale of large
quantities of stock known as “block trades.” The SEC also charged Morgan Stanley with
failing to enforce its policies concerning the misuse of material non-public information
related to block trades.

“Sellers entrusted Morgan Stanley and Passi with material non-public information concerning
upcoming block trades with the full expectation and understanding that they would keep it
confidential,” said SEC Chair Gary Gensler. “Instead, Morgan Stanley and Passi abused that
trust by leaking that same information and using it to position themselves ahead of those
trades. While their conduct may have earned them tens of millions of dollars on low-risk
trades, it violated the federal securities laws. Thanks to the hard work of the SEC staff, they
are being held accountable.”
“Despite assuring selling shareholders that they would keep their efforts to sell large blocks
of stock confidential, Morgan Stanley and Pawan Passi instead leaked that material non-
public information to mitigate their own risk, win more block trade business, and generate
over a hundred million dollars in illicit profits,” said Gurbir S. Grewal, Director of the SEC’s
Division of Enforcement. “When market participants game the system for personal gain in
this way, it erodes investor confidence and undermines market integrity. Today’s fraud
charges underscore our commitment to holding wrongdoers accountable, no matter how
complicated the fraud or sophisticated the perpetrators.”
A block trade generally involves the sale of a large quantity of shares of an issuer’s stock,
privately arranged and executed outside of the public markets. According to the SEC’s
orders, from at least June 2018 through August 2021, Passi and a subordinate on Morgan
Stanley’s equity syndicate desk disclosed non-public, potentially market-moving information
concerning impending block trades to select buy-side investors despite the sellers’
confidentiality requests and Morgan Stanley’s own policies regarding the treatment of
confidential information. The SEC’s orders find that Morgan Stanley and Passi disclosed the
block trade information with the understanding that those buy-side investors would use the
information to “pre-position” by taking a significant short position in the stock that was the
subject of the upcoming block trade. According to the SEC orders, if Morgan Stanley
eventually purchased the block trade, the buy-side investors would then request and receive
allocations from the block trade from Morgan Stanley to cover their short positions. This pre-
positioning reduced Morgan Stanley’s risk in purchasing block trades.
The SEC’s order further finds that Morgan Stanley failed to enforce information barriers to
prevent material non-public information involving certain block trades from being conveyed
by the equity syndicate desk, which sits on the private side of Morgan Stanley, to a trading
division on the public side of the firm. As a result, the firm was unable to sufficiently
scrutinize whether trades by that division, placed while the equity syndicate desk was in
discussions with selling shareholders regarding potential block trades, were based on such
confidential discussions.
The SEC’s order concerning Morgan Stanley finds that the firm willfully violated Sections
10(b) and 15(g) of the Securities Exchange Act of 1934 and Rule 10b-5(b) thereunder,
censures the firm, and orders it to pay approximately $138 million in disgorgement,
approximately $28 million in prejudgment interest, and an $83 million civil penalty. The
SEC’s order concerning Passi finds that he willfully violated Section 10(b) of the Exchange
Act and Rule 10b-5 thereunder, orders him to pay a $250,000 civil penalty, and imposes
associational, penny stock, and supervisory bars.
In a parallel action, the U.S. Attorney’s Office for the Southern District of New York today
announced criminal resolutions with Morgan Stanley and Passi. The SEC’s ordered
disgorgement and prejudgment interest for Morgan Stanley will be deemed partially satisfied
by the forfeiture and restitution paid by the firm, which totals $136,531,223, pursuant to its
criminal resolution.
The SEC’s investigation was conducted by David Bennett and Colby Steele in the
Enforcement Division’s Market Abuse Unit with the assistance of John Marino, Darren
Boerner, and Matthew Koop of the Market Abuse Unit’s Analysis and Detection Center and
trial counsel Suzanne Romajas and James Connor, and Carmen Taveras, Frank Brown, and
Adam Yonce in the Division of Economic and Risk Analysis. The case was supervised by
Paul Kim and Joseph Sansone.

SEC CHARGES FUTURE FINTECH CEO SHANCHUN HUANG WITH FRAUD

AND DISCLOSURE FAILURES (USA)

HTTPS://WWW.SEC.GOV/NEWS/PRESS-RELEASE/2024-5

Washington D.C., Jan. 11, 2024 —

The Securities and Exchange Commission today charged Shanchun Huang with manipulative
trading in the stock of Future FinTech Group Inc., using an offshore account shortly before
he became Future FinTech’s CEO in 2020. The SEC also charged Huang with failing to
disclose his beneficial ownership of Future FinTech stock as well as transactions in such
stock.
According to the SEC’s complaint, in late 2019 or early 2020, Huang was approached by
Future FinTech’s founder and former CEO about the possibility of Huang becoming CEO of
Future FinTech. Huang allegedly used an account in Hong Kong to place trades in Future
FinTech stock beginning in January 2020, at a time when Future FinTech was at risk of being
delisted from NASDAQ because its stock price had fallen below NASDAQ’s minimum bid
price requirement of $1.00 per share. Huang allegedly bought more than 530,000 shares of
Future FinTech over a two-month period and repeatedly traded at a volume so large that his
trades constituted a high percentage of the daily volume of Future FinTech stock transactions.
Huang also allegedly placed multiple buy orders in short timeframes, placed limit buy orders
with escalating limit prices from one order to the next, and made trades that generally would
not make economic sense for an investor seeking to buy the stock at the lowest available
price. The SEC’s complaint alleges that Huang’s trades were intended to, and at times did,
push the Future FinTech stock price up. For example, on February 6, 2020, when Huang’s
trading constituted 60 percent of the daily trading volume, he placed multiple buy orders
within nine minutes, driving the price up from $0.89 to $1.05, at which point his trading
stopped.
Huang was named Future FinTech’s CEO in March 2020. Upon becoming CEO of Future
FinTech, Huang was required to file initial, annual, and change of ownership forms about his
holdings of Future FinTech stock, but he failed to do so for the year after he became CEO. As
alleged in the complaint, in March 2021, after he no longer owned any Future FinTech stock,
Huang belatedly filed a misleading initial form representing that he owned no Future FinTech
stock.
“Timely disclosure of insider stock transactions is a fundamental component of the federal
securities laws that ensures the fair operation of our securities markets,” said Sheldon L.
Pollock, Associate Regional Director of the SEC’s New York Regional Office. “CEOs should
assume that the use of an offshore account will not prevent the staff of the SEC from
identifying manipulative trading.”
The SEC’s complaint, filed in the U.S. District Court for the Southern District of New York,
charges Huang with violating the antifraud and beneficial ownership disclosure provisions of
the Securities Exchange Act of 1934 and seeks permanent injunctive relief, a civil penalty,
and an officer-and-director bar.

SEC CHARGES NEW YORK BUSINESSMAN WITH FRAUD AND

UNREGISTERED SALES OF SECURITIES TO INVESTORS SEEKING
PERMANENT RESIDENCY IN THE U.S.

HTTPS://WWW.SEC.GOV/NEWS/PRESS-RELEASE/2023-238
Washington D.C., Nov. 21, 2023 —
The Securities and Exchange Commission today charged Nadim Ahmed, a New York-based
businessman and his companies, NuRide Transportation Group, LLC and NYC Green
Transportation Group, LLC, with making fraudulent misrepresentations in securities
offerings to investors seeking permanent residency through the EB-5 Immigrant Investor
Program. The SEC also charged Ahmed along with Mehreen Shah a/k/a Mona Shah, a New
York-based immigration attorney, and her law firm with offering unregistered securities to
investors in offerings that raised more than $66 million from more than 100 investors.
Under the EB-5 Immigrant Investor Program, investors are eligible for permanent residency
status in the U.S. if they make a qualifying investment in a new commercial enterprise in the
U.S. that creates a certain number of permanent full-time jobs for qualified U.S. workers.
According to the SEC’s complaint, from approximately June 2014 through December 2018,
Ahmed, NuRide and NYC Green falsely told NYC Green investors that NYC Green would
be operated in a manner consistent with the requirements of the EB-5 visa program and that
NYC Green’s principals had contributed $11 million to the company. Further, Ahmed,
NuRide, and NYC Green allegedly put key revenue-generating contracts in NuRide’s name
despite telling investors that NYC Green would be the operating transportation business.
Ahmed also allegedly used one investor’s funds to pay a portion of a prior settlement
between another one of his companies and the SEC.
In addition, from June 2014 through November 2022, Ahmed, NuRide, and NYC Green,
along with Shah, her law firm, and three other entities associated with Ahmed and/or Shah,
allegedly offered or sold unregistered securities, including to individuals residing in the
United States, in three offerings, for which no exemption to the registration requirements was
available.
According to the complaint, to date, none of the investors in the offerings has received
unconditional permanent residency status or a return of their investment.
“All offering materials, including those provided to investors seeking residency under the
EB-5 program, must contain accurate disclosures about the securities being issued,” said
Thomas P. Smith, Jr., Associate Regional Director in the New York Regional Office. “And
all securities offerings must comply with the registration requirements or the exemptions to
those requirements.”
The SEC’s Office of Investor Education and Advocacy issued an Investor Alert warning of
fraudulent securities offerings made through the EB-5 program.
The SEC’s complaint, filed in the U.S. District Court in the Southern District of New York,
charges Ahmed, NYC Green, and NuRide with violating the antifraud provisions and, along
with Shah, her law firm, and three other entities associated with Ahmed and/or Shah, the
registration provisions of the federal securities laws. The complaint seeks permanent and
conduct-based injunctions, disgorgement, prejudgment interest, and civil penalties.

SEC CHARGES ROYAL BANK OF CANADA WITH INTERNAL

ACCOUNTING CONTROLS VIOLATIONS
HTTPS://WWW.SEC.GOV/NEWS/PRESS-RELEASE/2023-232

Washington D.C., Nov. 2, 2023 —

The Securities and Exchange Commission today announced that Canada’s largest bank,
Royal Bank of Canada, will pay a $6 million penalty to settle charges that it violated the
books and records and internal accounting controls provisions of the securities laws relating
to its accounting for its costs of internally developed software.
The SEC’s order finds that, from 2008 through 2020, Royal Bank of Canada’s accounting
controls failed to ensure that the firm accurately accounted for its internally developed
software project costs. The order finds that, for a portion of its internally developed software
projects, Royal Bank of Canada applied a single rate to determine how much of those
projects’ costs to capitalize, but it lacked a reliable method for determining the appropriate
rate to apply, in part because it could not adequately differentiate between capitalizable and
noncapitalizable costs. This resulted in, among other things, the bank using the same
capitalization rate each year without a sufficient basis and capitalizing certain costs that were
ineligible under the appropriate accounting methodology.
“Royal Bank of Canada had longstanding internal accounting control deficiencies that it
failed to adequately address,” said Nicholas P. Grippo, Regional Director of the Philadelphia
Regional Office. “Properly functioning internal accounting controls are a front-line defense
and help ensure accurate financial disclosures—the backbone of our capital markets.”
The SEC’s order finds that Royal Bank of Canada violated the internal accounting controls
and books and records provisions of the Securities Exchange Act of 1934. Without admitting
or denying the findings, Royal Bank of Canada has agreed to cease and desist from
committing or causing any violations or any future violations of these provisions. Royal Bank
of Canada also agreed to pay a $6 million civil penalty, offset by amounts paid to Canadian
regulatory authorities as a result of the same conduct. The SEC considered Royal Bank of
Canada’s remedial acts in determining to accept the settlement.
The SEC's investigation was conducted by Norman P. Ostrove and was supervised by Julia
C. Green, Scott A. Thompson, and Mr. Grippo, all with the Philadelphia Regional Office.
The SEC appreciates the assistance of the Ontario Securities Commission and Quebec’s
Autorité des Marchés Financiers.

SAP TO PAY OVER $220M TO RESOLVE FOREIGN BRIBERY

INVESTIGATIONS (USA)

HTTPS://WWW.JUSTICE.GOV/USAO-EDVA/PR/SAP-PAY-OVER-220M-
RESOLVE-FOREIGN-BRIBERY-INVESTIGATIONS#:~:TEXT=–%20SAP
%20SE%20(SAP)%2C,CORRUPT%20PRACTICES%20ACT%20(FCPA) .
January 10, 2024: SAP SE (SAP), a publicly traded global software company based in
Germany, will pay over $220 million to resolve investigations by the U.S. Justice Department
and the Securities and Exchange Commission (SEC) into violations of the Foreign Corrupt
Practices Act (FCPA).

SAP’s resolution with the department stems from schemes to pay bribes to government
officials in South Africa and Indonesia. The department’s resolution is coordinated with
prosecutorial authorities in South Africa, as well as with the SEC.

According to court documents, SAP entered into a three-year deferred prosecution agreement
(DPA) with the department in connection with a criminal information filed in the Eastern
District of Virginia charging the company with two counts: conspiracy to violate the anti-
bribery and books and records provisions of the FCPA relating to its scheme to pay bribes to
South African officials, and conspiracy to violate the anti-bribery provision of the FCPA for
its scheme to pay bribes to Indonesian officials.

“SAP has accepted responsibility for corrupt practices that hurt honest businesses engaging in
global commerce,” said U.S. Attorney Jessica D. Aber for the Eastern District of Virginia.
“We will continue to vigorously prosecute bribery cases to protect domestic companies that
follow the law while participating in the international marketplace.”

“SAP paid bribes to officials at state-owned enterprises in South Africa and Indonesia to
obtain valuable government business,” said Acting Assistant Attorney General Nicole M.
Argentieri of the Justice Department’s Criminal Division. “Today’s resolution—our second
coordinated resolution with South African authorities in just over a year—marks an important
moment in our ongoing fight against foreign bribery and corruption. We look forward to
continuing to strengthen our relationship with South African authorities and others around the
world. This case demonstrates not only the critical importance of coordinated international
efforts to combat corruption, but also how our corporate enforcement policies incentivize
companies to be good corporate citizens, by cooperating with our investigations and
appropriately remediating, so that we can take strong action to address misconduct.”

According to court documents, SAP and its co-conspirators made bribe payments and
provided other things of value intended for the benefit of South African and Indonesian
foreign officials, delivering money in the form of cash payments, political contributions, and
wire and other electronic transfers, along with luxury goods purchased during shopping trips.
Specifically, with respect to South Africa, between approximately 2013 and 2017, SAP,
through certain of its agents, engaged in a scheme to bribe South African officials and to
falsify SAP’s books, records, and accounts, all with the goal of obtaining improper
advantages for SAP in connection with various contracts with South African departments,
agencies, and instrumentalities, including the City of Johannesburg, the City of Tshwane, the
Department of Water and Sanitation (a South African state-owned and state-controlled
custodian of water services), and Eskom Holdings Limited (a South African state-owned and
state-controlled energy company).
“This successful resolution against SAP is another example of the power of relationships and
persistence,” said Assistant Director in Charge Donald Always of the FBI’s Los Angeles
Field Office. “The sustained diligence by the prosecution team and continuous collaboration
with South African law enforcement, regulators, and prosecutors identified corrupt activity in
multiple countries. The FBI will continue our nonstop efforts to identify, investigate, and
prosecute companies willfully engaging in corrupt activities around the world.”

In addition, between approximately 2015 and 2018, SAP, through certain of its agents,
engaged in a scheme to bribe Indonesian officials to obtain improper business advantages for
SAP in connection with various contracts between and among SAP and Indonesian
departments, agencies, and instrumentalities, including the Kementerian Kelautan dan
Perikanan (the Indonesian Ministry of Maritime Affairs and Fisheries) and Balai Penyedia
dan Pengelola Pembiayaan Telekomunikasi dan Informatika (an Indonesian state-owned and
state-controlled Telecommunications and Information Accessibility Agency).

“When the mails are used in furtherance of a fraud or corruption scheme, borders are not an
obstacle for U.S. Postal Inspectors,” said Postal Inspector in Charge of Criminal
Investigations Eric Shen. “Postal inspectors, with our FBI law enforcement partners and
Justice Department prosecutors, followed the wide-spread trail of bribes and corruption from
South Africa to Indonesia. This joint effort resulted in the defendant company paying a
significant criminal penalty and agreeing to long-term remedial measures.”

Pursuant to the DPA, SAP will pay a criminal penalty of $118.8 million and administrative
forfeiture of $103,396,765. SAP will also continue cooperating with the department in any
ongoing or future criminal investigation arising during the term of the DPA. In addition, the
department will credit up to $55.1 million of the criminal penalty against amounts that SAP
pays to resolve an investigation by law enforcement authorities in South Africa for related
conduct. The department will credit up to the full forfeiture amount against disgorgement that
SAP pays to the SEC or South African authorities.

Under Part I of the Criminal Division’s March 2023 Compensation Incentives and Clawbacks
Pilot Program, SAP’s compliance obligations include a commitment to implementing criteria
relating to compliance in the company’s compensation and bonus system, subject to local
labor laws. Under Part II of the Pilot Program, the department reduced the criminal penalty
by $109,141 for compensation that SAP withheld from qualifying employees, which action
the company defended in substantial litigation.

The department reached this resolution with SAP based on a number of factors, including,
among others, the nature and seriousness of the offense. SAP received credit for its
cooperation with the department’s investigation, which included (i) immediately beginning to
cooperate after South African investigative reports made public allegations of the South
Africa-related misconduct in 2017 and providing regular, prompt, and detailed updates to the
department regarding factual information obtained through its own internal investigation,
which allowed the government to preserve and obtain evidence as part of its independent
investigation; (ii) expeditiously producing relevant documents and other information to the
department from multiple foreign countries, while navigating foreign data privacy and related
laws; (iii) at the request of the department, voluntarily making company officers and
employees available for interviews; (iv) taking significant affirmative steps to facilitate
interviews while addressing witness security concerns; (v) raising and resolving potential
deconfliction issues between SAP’s internal investigation and the investigation being
conducted by the department; (vi) promptly collecting, analyzing, and organizing voluminous
information, including complex financial information, at the request of the department;
(vii) translating voluminous foreign language documents to facilitate and expedite review by
the department; and (viii) imaging the phones of relevant custodians at the beginning of
SAP’s internal investigation, thus preserving relevant and highly probative business
communications sent on mobile messaging applications.

SAP also engaged in timely remedial measures, including: (i) conducting an analysis of the
root causes of the underlying conduct and gap analysis, and undertaking appropriate
remediation to address those root causes and enhance its compliance program; (ii)
undertaking a comprehensive risk assessment focusing on high risk areas and controls around
payment processes and enhancing its regular compliance risk assessment process, including
by incorporating comprehensive operational and compliance data into its risk assessments;
(iii) eliminating its third-party sales commission model globally, and prohibiting all sales
commissions for public sector contracts in high-risk markets; (iv) significantly increasing the
budget, resources, and expertise devoted to compliance and restructuring its Offices of Ethics
and Compliance to ensure adequate stature, independence, autonomy, and access to executive
leadership; (v) enhancing its code of conduct and policies and procedures regarding gifts,
hospitality, and the use of third parties; (vi) enhancing its reporting, investigations, and
consequence management processes; (vii) adjusting compensation incentives to align with
compliance objectives and reduce corruption risk; (viii) enhancing and expanding compliance
monitoring and audit programs, planning, and resources, including developing a well-
resourced team devoted to audits of third-party partners and suppliers; (ix) expanding its data
analytics capabilities to cover over 150 countries, including all high-risk countries globally;
and (x) promptly disciplining any and all employees involved in the misconduct.

In light of these considerations as well as SAP’s prior history, which include a non-
prosecution agreement from 2021 with the department’s National Security Division, as well
as administrative agreements with the Departments of Commerce and the Treasury relating to
export law violations, and a resolution in 2016 with the SEC concerning alleged FCPA
violations in Panama, the criminal penalty calculated under the U.S. Sentencing Guidelines
reflects a 40% reduction off the tenth percentile above the low end of the otherwise
applicable guidelines fine range.

The FBI’s International Corruption Unit and the U.S. Postal Inspection Service are
investigating the case.
Assistant U.S. Attorney Heidi B. Gesch for the Eastern District of Virginia and Trial
Attorneys William E. Schurmann, Anthony Scarpelli, and Gwendolyn A. Stamper and
Assistant Chief Jonathan P. Robell of the Criminal Division’s Fraud Section and are
prosecuting the case.

The Justice Department’s Office of International Affairs and authorities in South Africa
provided assistance in this matter.

The Criminal Division’s Fraud Section is responsible for investigating and prosecuting FCPA
matters. Additional information about the Justice Department’s FCPA enforcement efforts
can be found at www.justice.gov/criminal/fraud/fcpa.

A copy of this press release is located on the website of the U.S. Attorney’s Office for the
Eastern District of Virginia.

FEDERAL COURT HANDS DOWN $390,000 IN DIRECTORS’ DUTIES

PENALTIES (AU)

Published 10 January 2024

HTTPS://ASIC.GOV.AU/ABOUT-ASIC/NEWS-CENTRE/FIND-A-MEDIA-
RELEASE/2024-RELEASES/24-002MR-FEDERAL-COURT-HANDS-DOWN-
390-000-IN-DIRECTORS-DUTIES-PENALTIES/

The Federal Court has ordered four current and former directors of Endeavour Securities
(Australia) Ltd (in liquidation) and Linchpin Capital Group Ltd (in liquidation) to pay
$390,000 in penalties.

The Federal Court had previously found Endeavour directors Ian Williams, Paul Raftery,
Paul Nielsen and Peter Daly (who was found to have acted as an officer of Endeavour)
breached their duties as officers of a responsible entity of a registered managed investment
scheme and did not act in the best interests of members (23-089MR).

ASIC Deputy Chair Sarah Court said, ‘ASIC took this case because we believed reasonable
steps were not being taken by the directors to comply with their own compliance plan and
obtain member approval for loans.

‘Today’s penalties are significant and should act as a reminder to directors of responsible
entities that operate managed investment schemes that they must act in the best interests of
members.’
Mr Nielson, Mr Williams and Mr Rafterty did not contest ASIC’s case at trial and agreed to
ASIC’s penalty submissions.

Mr Nielson and Mr Williams will each pay a $100,000 penalty and be banned from managing
corporations for four years.

Mr Raftery will pay a $40,000 penalty and be banned from managing a corporation for three
years.

Mr Daly, who contested ASIC’s case, will pay a $150,000 penalty and be banned from
managing corporations for five years.

In reaching her penalty decision with respect to Mr Daly, Justice Cheeseman said, ‘Mr Daly
has only superficially accepted responsibility for his actions.’ Her Honour noted that ‘The
lack of remorse or contrition demonstrated by Mr Daly […] is relevant in that it suggests a
higher penalty is warranted for the penalty to achieve the objective of specific deterrence.’

The Court previously found that between 2015 and 2018, Mr Nielsen, Mr Raftery and Mr
Williams, together with Mr Daly:

 did not take all reasonable steps to ensure that Endeavour complied with its
compliance plan, obtain member approval for related party loans and issue Product
Disclosure Statements that complied with the law;
 failed to exercise care and diligence;
 did not act in the best interests of members of the Investport Income Opportunity
Fund.

The Court found Mr Daly and Mr Raftery improperly used their positions by receiving
unsecured loans from the unregistered Investport Income Opportunity Fund for their personal
use. Mr Daly received loans totalling $130,000 and Mr Raftery took a $40,000 loan.

Mr Nielsen, Mr Raftery and Mr Williams agreed to each pay $175,000 towards ASIC’s costs.
Mr Daly has also been ordered to pay $175,000 in addition to a further proportion of ASIC’s
costs associated with the contested hearings.

BACKGROUND

At the time of the misconduct, breaches of officers’ duties (under s601FD of the Corporations
Act) attracted maximum penalties of $200,000 per contravention for individuals.

In November 2019, ASIC banned Mr Williams, Mr Nielsen, Mr Daly and Mr Raftery from
providing any financial services each for a period of five years (19-320MR and 20-122MR).

Endeavour was the responsible entity of a registered managed investment scheme called the
Investport Income Opportunity Fund. Linchpin operated an unregistered managed investment
scheme, which was also called the Investport Income Opportunity Fund. Both funds were
placed into liquidation in 2019 (19-065MR).

Linchpin operated through various subsidiaries (including Endeavour) and provided a range
of financial products and funds management and investment advisory services.

ASIC TAKES CIVIL ACTION AGAINST OPEN4SALE GLOBAL LTD AND

TWO OF ITS DIRECTORS (AU)

Published 20 December 2023

HTTPS://ASIC.GOV.AU/ABOUT-ASIC/NEWS-CENTRE/FIND-A-MEDIA-
RELEASE/2023-RELEASES/23-348MR-ASIC-TAKES-CIVIL-ACTION-
AGAINST-OPEN4SALE-GLOBAL-LTD-AND-TWO-OF-ITS-DIRECTORS/

ASIC has commenced civil penalty proceedings in the Federal Court against Open4Sale
Global Ltd (Open4Sale Global) and two of its directors, Simeon La Barrie and Ewald Hafer,
for allegedly offering shares in the company and distributing application forms without the
required disclosure document.

ASIC alleges that over a four-year period between March 2019 and July 2023, Open4Sale
Global raised approximately $1.3 million from more than 80 investors, without lodging any
disclosure document with ASIC, nor distributing the document to those investors when it
offered them shares.

ASIC claims Open4Sale Global was required to lodge a disclosure document with ASIC and
provide the document to these investors when it made the offers, because they were retail
investors. ASIC claims they were not sophisticated investors or otherwise in a category of
investor to whom exceptions to the disclosure requirements may apply.

ASIC Deputy Chair Sarah Court said, 'ASIC is concerned that investors have been
encouraged to buy shares in Open4Sale Global without the company allegedly having
provided sufficient information about its operations and financials. Disclosure documents
help protect retail investors by showing them the risks and letting them make informed
decisions about whether to invest.

‘Disclosure is fundamental to protecting Australian investors and ASIC will take action
where these protections are being ignored,’ concluded Deputy Chair Court.
Mr La Barrie is based in the United States of America. He is the founder and an executive
director of Open4Sale Global. ASIC alleges that Mr La Barrie caused the making of share
offers and the distribution of application forms in Open4Sale Global.

Mr Hafer is an Australian director of Open4Sale Global who is alleged to have met with
investors to distribute application forms for offers of shares in Open4Sale Global.

ASIC is seeking declarations of contraventions, pecuniary penalties, disqualification orders,

and injunctions restraining Open4Sale, Mr La Barrie and Mr Hafer from raising funds for the
company without having lodged a disclosure document.

The date for the first case management hearing is yet to be scheduled by the Court.

DOWNLOAD

Concise Statement

Originating Process

BACKGROUND

Open4Sale is an Australian unlisted public company, incorporated in 2012, that has sought to
develop an e-commerce platform with the intention to licence it to international online
shopping vendors.

Under section 727 of the Corporations Act, a person must not make an offer of securities or
distribute an application form for an offer of securities, that needs disclosure to investors
under Part 6D.2, unless a disclosure document for the offer has been lodged with ASIC and
without the offer or application form being included in, or accompanied by, a disclosure
document.

ANZ TO PAY $900,000 PENALTY FOR CONTINUOUS DISCLOSURE

FAILURE

Published 8 December 2023

HTTPS://ASIC.GOV.AU/ABOUT-ASIC/NEWS-CENTRE/FIND-A-MEDIA-
RELEASE/2023-RELEASES/23-332MR-ANZ-TO-PAY-900-000-PENALTY-FOR-
CONTINUOUS-DISCLOSURE-FAILURE#!PAGE=2
The Federal Court has today ordered Australia and New Zealand Banking Group Limited
(ANZ) to pay a penalty of $900,000 for breaching its continuous disclosure obligation during
a $2.5 billion institutional share placement in 2015.

The Court declared that ANZ contravened section 674(2) of the Corporations Act by failing
to notify the Australian Securities Exchange (ASX) that ANZ shares, with a value of between
approximately $754 million and $790 million of the $2.5 billion of ANZ shares offered in an
Institutional Placement, were to be acquired by its underwriters.

ASIC Deputy Chair Karen Chester said, ‘This is a landmark case for ASIC. Today’s decision
confirms the paramount importance of continuous disclosure. The penalty and remarks from
the Judge today are a clear and resolute message to ANZ and the market that this conduct was
very serious. It also confirms that a significant take-up of shares by underwriters (in a share
placement) must be disclosed to the market and investors.

‘If such a contravention occurred today, the maximum penalty could be anywhere between
$15 million to $780 million. Listed entities should see today’s penalty decision as a strong
and purposeful warning to fully meet their continuous disclosure obligations.

‘ASIC will continue to enforce the continuous disclosure regime to ensure investors are
provided material information to make informed investment decisions. Continuous disclosure
is key to maintaining market integrity,’ concluded Ms Chester.

When delivering his reasons, Justice Moshinsky stated that the contravention is very serious,
and a large penalty is required to achieve deterrence.

ANZ was also ordered to pay ASIC’s costs of and incidental to the proceedings.

DOWNLOAD

Reasons for judgment (PDF 259 KB)

BACKGROUND

The maximum penalty for a single breach of continuous disclosure laws (sub-section 674(2)
of the Corporations Act) by a body corporate in 2015 was $1 million.

The maximum penalty increased in 2019 to the greatest of:

 50,000 penalty units (currently $15.65 million),

 three times the benefit obtained and detriment avoided, or
 10% of annual turnover, capped at 2.5 million penalty units (currently $782.5
million).
The value of a penalty unit is prescribed by the CRIMES ACT 1914 and is currently $313
for offences committed on or after 1 July 2023.

On 6 August 2015, ANZ issued a release to the ASX, “ANZ announces Institutional
Placement (fully underwritten) and Share Purchase Plan to raise a total of $3 billion”.

On 7 August 2015, ANZ issued a release to the ASX in respect of the placement stating
among other things, “ANZ today announced that it had raised $2.5 billion in new equity
capital through the placement of approximately 80.8 million ANZ ordinary shares at the price
of $30.95 per share”. ANZ was aware, prior to this statement, that underwriters had allocated
to themselves between $754 million and $790 million of placement shares.

On 21 June 2019, the Court ordered that ASIC’s proceedings be stayed until the hearing and
final determination of the criminal proceedings brought by the Australian Competition and
Consumer Commission against ANZ and Mr Richard Moscati. These criminal charges were
later dropped, and the stay of ASIC’s proceeding was lifted in February 2022.

On 13 October 2023, Justice Moshinsky delivered his reasons for liability (23-277MR). His
Honour’s reasons on penalty are yet to be published.

DIRECTOR CHARGED WITH BREACH OF DIRECTOR DUTY OFFENCES

(AU)

Published 30 November 2023

HTTPS://ASIC.GOV.AU/ABOUT-ASIC/NEWS-CENTRE/FIND-A-MEDIA-
RELEASE/2023-RELEASES/23-322MR-DIRECTOR-CHARGED-WITH-
BREACH-OF-DIRECTOR-DUTY-OFFENCES#!PAGE=3

Sole director of Equitable Financial Solutions Pty Ltd, Usman Siddiqui, of Brighton-Le-
Sands, NSW has appeared in the Downing Centre Local Court charged with breaches of
director duties.

Mr Siddiqui has been charged with four counts of dishonestly using his position as a director
of Equitable Financial Solutions to gain an advantage by allegedly causing $1.75 million of
company funds to be diverted away from Equitable Financial Solutions for his own benefit.

Mr Siddiqui was arrested by NSW Police on 2 November 2023 after ASIC charged him with
offences for contravening section 184(2)(a) of the Corporations Act 2001 and sought a
warrant for his arrest.

Mr Siddiqui was granted bail on the date of his arrest with conditions imposed preventing
him from leaving Australia.
The charges have been listed for a further mention before the Downing Centre Local Court
on 20 February 2024.

The matter is being prosecuted by the Commonwealth Director of Public Prosecutions

following a referral from ASIC.

BACKGROUND

ASIC alleges that Equitable Financial Solutions and other companies controlled by Mr
Siddiqui purported to provide Sharia-compliant investment and lending products to members
of the Australian Muslim community.

The maximum penalty for an offence against section 184(2) of the Corporations Act is 15
years’ imprisonment.

On 8 November 2022, the Federal Court made travel restraint orders against Mr Siddiqui (22-
317MR).

FONG FINANCIAL PLANNERS SENTENCED FOR DISHONEST CONDUCT

(AU) - 29 T H NOV 23

HTTPS://ASIC.GOV.AU/ABOUT-ASIC/NEWS-CENTRE/FIND-A-MEDIA-
RELEASE/2023-RELEASES/23-319MR-FONG-FINANCIAL-PLANNERS-
SENTENCED-FOR-DISHONEST-CONDUCT#!PAGE=3

Fong Financial Planners Pty Ltd has been convicted and sentenced in the District Court of
Western Australia for three counts of dishonest conduct while carrying on a financial services
business.

Fong Financial Planners was sentenced to a fine of $100,000.

Between 24 September 2014 and 18 December 2014, Fong Financial Planners, an authorised
representative of AMP, acted dishonestly by recording information it knew to be false on
forms submitted to AMP as part of client insurance applications.

Fong Financial Planners intentionally failed to disclose all relevant information relating to the
personal circumstances of the clients, including details of their health and medical history.
The incomplete disclosure of the information by Fong Financial Planners meant the duty of
disclosure owed by the clients to the insurer had not been met and they risked not being
covered by AMP policies.

In sentencing, her Honour Judge Zempilas noted that there was a degree of persistence in the
conduct, which had occurred over a three-month period, and that the offending involved
repeated breaches of trust in relation to separate clients who had relied on Fong Financial
Planners. Judge Zempilas stated that ‘members of the public necessarily place their faith and
trust in financial advisors and services and any breach of trust in those circumstances is
therefore serious’.

Judge Zempilas also considered the significant and unjustifiable risks to the clients had they
been required to make a claim under their insurance policies, and the particular relevance of
general deterrence for offences of this nature.

Mitigating factors, including Fong Financial Planners’ early guilty pleas, other financial
consequences to the company as a result of the conduct, and the low risk of reoffending given
ASIC banning orders in place against its sole director, were also taken into account by Judge
Zempilas when handing down the sentence.

Fong Financial Planners had previously pleaded guilty to the three charges on 24 March 2023
(23-081MR).

The matter was prosecuted by the Commonwealth Director of Public Prosecutions after a
referral from ASIC.

BACKGROUND

Fong Financial Planners and its director, former financial adviser Mr David Fong, were
initially each charged with 11 offences contrary to s1041G of the Corporations Act (21-
311MR). The charges against Mr Fong and eight of the charges against Fong Financial
Planners were discontinued following Fong Financial Planners’ pleas of guilty to three
charges.

In 2017, ASIC permanently banned Mr Fong from providing financial services or engaging in
credit activities (17-204MR). Mr Fong appealed ASIC’s decision to the Administrative
Appeals Tribunal and the appeal process was stayed pending the outcome of the criminal
proceedings, before being withdrawn on 4 September 2023.

MAS IMPOSES CIVIL PENALTY OF $3.9 MILLION ON CREDIT SUISSE AG

FOR MISCONDUCT BY ITS RELATIONSHIP MANAGERS (SINGAPORE)
HTTPS://WWW.MAS.GOV.SG/REGULATION/ENFORCEMENT/
ENFORCEMENT-ACTIONS/2023/MAS-IMPOSES-CIVIL-PENALTY-ON-
CREDIT-SUISSE-FOR-MISCONDUCT-BY-ITS-RELATIONSHIP-MANAGERS
Singapore, 28 December 2023… The Monetary Authority of Singapore (MAS) has imposed
a civil penalty of $3.9 million on Credit Suisse AG (Credit Suisse), for its failure to prevent
or detect misconduct by its relationship managers [1] (RMs) in the Singapore branch. The
RMs had provided clients with inaccurate or incomplete post-trade disclosures, resulting in
clients being charged spreads which were above bilaterally agreed rates for 39 over-the-
counter (OTC) bond transactions.
2 When Credit Suisse executes OTC transactions requested by its clients, it charges a
spread over the price obtained from the relevant interbank counterparties. For the 39
transactions, the RMs had, in contravention of sections 201(c) and 201(d) of the Securities
and Futures Act 2001 (SFA):
a. made false statements to their clients regarding the executed interbank prices and/or
spreads charged; and/or
b. omitted material information that the spreads charged were above the agreed rates.
3 This enforcement action on Credit Suisse follows MAS’ review of pricing and
disclosure practices in the private banking industry. Investigations revealed that the bank had
failed to put in place adequate controls, such as post-trade monitoring, to prevent or detect the
RMs’ misconduct. Credit Suisse has since strengthened its internal controls to prevent the
recurrence of such misconduct.
4 The bank has admitted liability under section 236C of the SFA for its failure to
prevent or detect the misconduct by its RMs, and paid MAS the civil penalty [2] . As part of
the civil penalty settlement, Credit Suisse has also separately compensated its affected clients.
5 Ms Ho Hern Shin, Deputy Managing Director (Financial Supervision), MAS, said,
“Financial institutions should implement robust governance frameworks and processes to
ensure fair and transparent pricing to their customers. We will continue to engage the banks
to improve their controls in this area and will not hesitate to take firm enforcement action
against financial institutions found to have breached our laws.”

***

[1]
1. Relationship managers here refer to relationship managers, assistant relationship
managers, investment consultants or execution desk personnel.

[2]
1. Credit Suisse paid MAS the civil penalty immediately after the imposition of the
civil penalty.

Additional information
(A) The civil penalty regime

A civil penalty action is not a criminal action and does not attract criminal sanctions. The
civil penalty regime, designed to complement criminal sanctions and provide a nuanced
approach to combat market misconduct, became operational at the beginning of 2004.
Under section 232 of the SFA , MAS may enter into an agreement with any person for that
person to pay, with or without admission of liability, a civil penalty for contravening any
provision of Part 12 of the SFA. The civil penalty may be up to three times the amount of the
profit gained or loss avoided by that person as a result of the contravention, subject to a
minimum of $50,000 (if the person is not a corporation) or $100,000 (if the person is a
corporation).
(B) Section 201(c) of the SFA

Under section 201(c) of the SFA, no person shall, directly or indirectly, in connection with
the subscription, purchase or sale of any capital market products, make any statement he
knows to be false in a material particular.

(C) Section 201(d) of the SFA

Under section 201(d) of the SFA, no person shall, directly or indirectly, in connection with
the subscription, purchase or sale of any capital market products, omit to state a material fact
necessary in order to make the statements made, in the light of the circumstances under which
they were made, not misleading.

(D) Section 236C of the SFA

Under section 236C of the SFA, a corporation which fails to prevent or detect a contravention
of any provision in Part 12 of the SFA that is committed by an employee or officer for its
benefit and attributable to its negligence, commits a contravention and shall be liable to an
order for a civil penalty.

ASIC SUSPENDS AFS LICENCE OF FIRST CITY CORPORATE ADVISORY

SERVICES

Published 16 November 2023

HTTPS://ASIC.GOV.AU/ABOUT-ASIC/NEWS-CENTRE/FIND-A-MEDIA-
RELEASE/2023-RELEASES/23-305MR-ASIC-SUSPENDS-AFS-LICENCE-OF-
FIRST-CITY-CORPORATE-ADVISORY-SERVICES#!PAGE=5

ASIC has suspended the Australian financial services (AFS) licence of First City Corporate
Advisory Services Pty Limited (First City) for failing to lodge its annual financial statements
and audit reports.

The suspension, in place until 27 March 2024, provides First City with an opportunity to
meet its outstanding compliance obligations.

If First City has not complied with its outstanding obligations by the end of the suspension
period, ASIC will consider cancelling its AFS licence. The suspension took effect on 3
October 2023.
BACKGROUND

First City has held AFS licence number 225858 since 15 April 2003. The licence authorises
First City to provide financial product advice and deal in securities for wholesale clients.

Timely lodgement of financial statements and audit reports promotes confidence in our
markets by demonstrating an AFS licensee’s capacity to meet its financial requirements.